Smt. B. Ram Mohan Rao vs. The Tsrtc

Held

The Court held that the parties are governed by the covenants within the written Deed of Licence. It found that Clause (52) of the Deed of Licence, which stated that the service tax, if any applicable on the renting of immovable properties, would be borne by the Corporation, was applicable. The Court rejected the respondents' contention that GST, being a new levy, was not covered by Clause (52). It reasoned that GST replaced the erstwhile service tax and VAT, and it was not a case where the respondents were additionally fastened with a new levy beyond what was contemplated. Therefore, the claim of the respondents that GST was a new levy making petitioners liable to pay in addition to the license fee was not accepted. The Court allowed the writ petitions and set aside the impugned Demand Notices (GST Model Invoices).

Facts

The petitioners, who were granted licenses by the Telangana State Road Transport Corporation (TSRTC) to run businesses from TSRTC premises, challenged the demand of Goods and Services Tax (GST) on the license fee. The petitioners argued that their license agreements did not permit the levy of GST in addition to the agreed license fee. The TSRTC contended that under certain clauses of the license agreements, the licensees were liable to pay all incidental charges, taxes, and other charges levied by statutory authorities. The dispute arose after the introduction of GST, with TSRTC issuing GST Model Invoices demanding additional payment from the petitioners.

Key Issues

1. Whether the action of the respondents (TSRTC) in levying Goods and Services Tax (GST) on the license fee payable by the petitioners for the license granted to carry on business is illegal, arbitrary, and in violation of the terms of the license granted, as per Article 226 of the Constitution of India? Petitioner's Arguments: The petitioners contended that the Deed of Licence explicitly governed their relationship with TSRTC. They argued that Clause (52) of the Deed of Licence stipulated that any service tax applicable on the renting of immovable property would be borne by the Corporation. They asserted that since GST replaced the erstwhile service tax, this clause should apply, making TSRTC liable for the GST. They also claimed that the demand for GST was contrary to the agreed terms and that the GST Model Invoices were issued without legal authority. Respondents' Arguments: The respondents (TSRTC) argued that the introduction of GST from July 1, 2017, was a new levy not explicitly covered by the Deed of Licence. They relied on Clauses (46) and (50) of the Deed of Licence (or corresponding clauses in other petitions) which stated that licensees are governed by statutory provisions and are liable to pay all taxes/fees and incidental charges levied by statutory authorities. They contended that the petitioners, as licensees, were therefore liable to pay GST.