Sri V. Veera Narayana vs. The Tsrtc

Held

The Court held that the parties are governed by the covenants within the written agreement, the Deed of License. The Court rejected the respondents' contention that GST, being a new levy introduced after the Deed of License, was not covered by Clause (52). The Court reasoned that GST replaced the erstwhile service tax and VAT, and it was not the respondents' case that they were fastened with a new levy in addition to service tax that the petitioners were required to discharge. Clause (52) clearly stipulated that the Corporation would bear the service tax applicable on the renting of immovable properties. Therefore, the liability to pay GST on the license fee, which is a successor to service tax, rests with the Corporation. The Court found the respondents' claim for additional GST payment from the petitioners to be unjustified. Consequently, the impugned Demand Notices in the form of 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 the terms of payment, and the demand for additional GST was contrary to these terms. The TSRTC, in its counter-affidavit, contended that with the introduction of the GST Act, they were entitled to claim GST from the petitioners as it was not explicitly provided for in the Deed of License. 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 (TSRTC) in levying Goods and Services Tax (GST) on the license fee payable by the petitioners for the premises granted for business is illegal, arbitrary, and in violation of the terms of the Deed of License. Petitioner's Arguments: The petitioners contended that the Deed of License governs the relationship between the parties. They argued that Clause (52) of the Deed of License in WP.No.15159 of 2018 (and corresponding clauses in other petitions) explicitly stated that any service tax applicable on the renting of immovable property would be borne by the Corporation (TSRTC). Since GST replaced service tax, this liability should continue to be borne by TSRTC, and they cannot claim it from the petitioners. Respondents' Arguments: The respondents argued that with the introduction of the GST Act effective from July 1, 2017, they are entitled to claim GST from the petitioners as it was not provided for under the Deed of License. They relied on Clauses (46) and (50) of the Deed of License (and corresponding clauses in other petitions) which state that the licensee is liable to pay all incidental charges, taxes, and other charges levied by the Statutory Authority.