M/S Environment Care And Solution Services vs. The State Of Bihar

Held

The Court held that the payment of GST by the petitioner was valid and legal. This finding was based on the categorical statement made by the 4th Respondent (Principal Secretary-cum-Commissioner, State Tax) in their counter affidavit. The affidavit clarified that the services provided by the petitioner, pertaining to the running and maintenance of the Bio-Medical Waste Treatment Facility, were covered by entry no. 25 of Heading 9987 under Notification No. 11/2017-State Tax (Rate) and also by entry no. 35 of Heading 9997. Furthermore, Notification No. 12/2017 – State Tax (Rate) at serial no. 75 under heading 9994 also covered services provided by operators of common bio-medical waste treatment facilities. Consequently, the contention of the respondents that the GST amount paid by the petitioner was not mandated by law and was wrongly paid was rejected as without substance. The impugned order passed by the Superintendent, PMCH, was quashed. The Court directed PMCH to process the pending bills of the petitioner and make payments expeditiously, preferably within six weeks. The ratio decidendi is that if a service is taxable under the GST Act and relevant notifications, the service provider is obligated to pay GST, and the recipient cannot demand a refund of GST paid by the provider on the premise that it was not payable, especially when the tax authority confirms its taxability.

Facts

The petitioner, M/s Environment Care and Solution Services, entered into an agreement with Patna Medical College and Hospital (PMCH) for running a Bio-Medical Waste Treatment Facility. The petitioner paid 18% GST on the services rendered. Subsequently, PMCH, citing a clarification from the GST authority, directed the petitioner to refund the GST amount of Rs. 28,11,726/-, alleging it was irregularly levied and not payable. PMCH also withheld legitimate dues of Rs. 15,34,000/- owed to the petitioner. The petitioner argued that they were legally obligated to pay GST and that PMCH should approach the GST authorities for any refund, rather than pressuring the petitioner. The High Court directed the Principal Secretary-cum-Commissioner, State Tax, to clarify the legal position regarding the GST payment.

Key Issues

1. Whether the order dated 14.11.2022 passed by the Superintendent, PMCH, directing the petitioner to deposit Rs. 28,11,726/- in lieu of alleged irregular levy of GST is bad in law and in fact, and in violation of the Principles of Natural Justice, as it was passed without affording an opportunity of hearing to the petitioner? (Question of law and fact, relying on principles of natural justice). 2. Whether the order dated 14.11.2022 passed by the Superintendent, PMCH, is non-est in law, illegal, and erroneous, as it failed to consider the extant provisions of law and the petitioner's explanation to the show cause notice, and suffers from malafide in law? (Question of law and fact, relying on statutory provisions and principles of natural justice). 3. Whether the Petitioner is entitled to the release of legitimate dues amounting to Rs. 15,34,000/- withheld by PMCH? (Question of fact). Petitioner's arguments: The petitioner contended that they paid GST as per the GST Act provisions and that the order demanding refund was passed without a hearing, violating natural justice. They also argued that their explanation was not considered and the order was illegal. They asserted that they are entitled to their withheld dues. Respondents' arguments: PMCH argued that a clarification from the GST authority indicated no GST was payable on the services rendered, and since the petitioner paid voluntarily, they were liable to refund the amount. The State Tax authority, in its affidavit, clarified that the services were taxable under specific entries of Notification No. 11/2017-State Tax (Rate) and Notification No. 12/2017 – State Tax (Rate).