The State Of Karnataka vs. M/S Itd Cemindia Jv

Held

The Court dismissed the appeal on two grounds: delay and merits. Regarding the delay, the Court found the explanation provided by the Revenue for the 402-day delay to be insufficient and unreasonable, stating there were no grounds to countenance such a delay. On merits, the Court concurred with the learned Single Judge. It held that the respondent's activities were unequivocally covered under the definition of "works contract" as defined in Section 2(119) of the CGST Act. Both the Adjudicating Authority and the Appellate Authority acknowledged that the respondent provided works contract services. The Court found no doubt that these constituted "composite supplies" under Item 6 of Schedule II of the CGST Act. Consequently, the respondent's claim for refund could not be denied on the ground that its services fell within the scope of Sub-item (b) of Item 5 of Schedule II. The ratio is that a genuine "works contract" as defined under the CGST Act, even if it involves construction of civil structures, falls under Item 6 (composite supply) and not Item 5(b) (construction of a complex/building for sale) of Schedule II, thus allowing for refund of unutilised ITC in cases of inverted tax structure.

Facts

The State of Karnataka, through its tax authorities, filed a writ appeal challenging an order of the learned Single Judge that allowed the respondent's writ petition. The appeal was filed with an inordinate delay of 402 days, for which the Revenue provided a lengthy explanation involving internal procedures and seeking legal opinion. The respondent, M/s ITD CemIndia JV, a joint venture, was awarded a contract by BMRCL for constructing elevated structures. The respondent sought a refund of unutilised Input Tax Credit (ITC) amounting to ₹3,11,86,340/- for the tax period May 2020, claiming it was due to an inverted tax structure. The refund was rejected by the Assistant Commissioner, who held that the supply fell under Sub-item (b) of Item 5 of Schedule II of the CGST Act, precluding refund. This was upheld by the Appellate Authority.

Key Issues

1. Whether the delay of 402 days in filing the writ appeal is condonable, and if so, whether the grounds provided by the Revenue are sufficient to justify the delay? - The Revenue argued that the delay was due to internal procedural delays in obtaining legal opinion and authorization to file the appeal. - The Respondent did not file any submissions regarding the delay. 2. Whether the services rendered by the respondent, a works contract for the construction of metro structures, fall under Sub-item (b) of Item 5 of Schedule II of the CGST Act, thereby disentitling them from a refund of unutilised ITC under Section 54(3)(ii) of the CGST Act? - The Revenue contended that the learned Single Judge erred in holding that the works contract services did not fall within the scope of Sub-item (b) of Item 5 of Schedule II, arguing that the contract and nature of services needed further examination to ascertain if it was merely construction services or a works contract. - The Respondent argued that its services constituted a "composite supply" under Item 6 of Schedule II, as defined by "works contract" in Section 2(119) of the CGST Act, and therefore, the inverted tax structure entitled them to a refund.