Sri S. Mahaboob Basha vs. M.D., The Tsrtc.

Held

The Court held that the petitioners were liable to succeed. The Court found that the Deed of License, being a written agreement, governed the relationship between the parties. Clause (52) of the Deed of License clearly stipulated that the service tax, if any applicable on the renting of immovable properties, would be borne by the Corporation (TSRTC). The Court rejected TSRTC's argument that GST was a new levy not covered by Clause (52), reasoning that GST was a comprehensive enactment that replaced the previous levies of service tax and VAT. Since the Deed of License specifically placed the burden of service tax on TSRTC, and GST is a successor levy, the same principle should apply. Therefore, TSRTC could not claim GST from the petitioners in addition to the license fee. The impugned demand notices (GST Model Invoices) were set aside.

Facts

The petitioners, who were granted licenses by the Telangana State Road Transport Corporation (TSRTC) to operate businesses from TSRTC premises, challenged the demand for Goods and Services Tax (GST) on the license fee. The petitioners argued that the Deed of License stipulated that any service tax applicable on the renting of immovable property would be borne by TSRTC. They contended that GST, having replaced service tax, should also be borne by TSRTC as per the agreement. TSRTC, in its counter-affidavit, argued that GST was a new levy introduced after the Deed of License was executed and that clauses requiring the licensee to pay all incidental charges and taxes were applicable. The dispute arose from GST model invoices issued by TSRTC demanding GST in addition to the agreed license fee.

Key Issues

1. Whether the action of the respondents in levying Goods and Services Tax (GST) on the license fee payable by the petitioners for the license granted to carry on business, trade, and vocation is illegal, arbitrary, and in violation of the terms of the Deed of License. Petitioner's arguments: The petitioners contended that Clause (52) of the Deed of License explicitly stated that any service tax applicable on the renting of immovable property would be borne by TSRTC. They argued that since GST replaced the Finance Act, 1994, which levied service tax, the liability for GST should also fall on TSRTC. They relied on the principle that parties are bound by the covenants of a written agreement. Respondents' arguments: The respondents argued that GST was a new levy introduced after the Deed of License was executed and was not covered by Clause (52). They relied on Clauses (46) and (50) of the Deed of License, which stipulated that the licensee would be governed by all statutory provisions and would pay all taxes/fees and incidental charges levied by statutory authorities. They contended that the petitioners, as licensees, were liable to pay GST.