Patna High Court
Bihar Rajya Pul Nirman Nigam Limited vs Union Of India on 9 May, 2025
Author: Rajeev Ranjan Prasad
Bench: Rajeev Ranjan Prasad
IN THE HIGH COURT OF JUDICATURE AT PATNA
Civil Writ Jurisdiction Case No.9979 of 2024
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Bihar Rajya Pul Nirman Nigam Limited a company registered under
Companies Act, 1956 having its office at 7, Sardar Patel Marg, Sachiwalaya,
District Patna - 800015, Bihar through its Managing Director Shri. Sunil
Kumar (Male, aged about 59 Years) son of Shri. Bhagwati Prasad, resident of
103, Shree Ganesh Apartment, Kavi Raman Path, Nageshwar Colony, Boring
Canal Road P.S Buddha Colony District Patna, Bihar - 800023.
... ... Petitioner/s
Versus
1. Union of India through the Secretary, Finance, North Block, New Delhi-
110001.
2. Commissioner, Central Tax, Audit Commissionerate, Patna having its office
at Central Revenue Building, (Annexe), Bir Chand Patel Path, Patna.
3. Addl. Director General, Directorate General of GST Intelligence, Patna
Zonal Unit having its office at Cybotech Tower, Near Pani Tanki, Patliputra
Road, Patna - 13.
... ... Respondent/s
======================================================
Appearance :
For the Petitioner/s : Mr.D.V.Pathy, Sr. Advocate
Mr. Sadashiv Tiwari, Advocate
Mr. Hiresh Karan, Advocate
Ms. Shivani Dewalla, Advocate
Mr. Prachi Pallavi, Advocate
For the Respondent/s : Dr.K. N. Singh, Sr. Advocate (ASGI)
Mr. Anshuman Singh, Sr. SC, CGST and CX
Mr. Shivaditya Dhari Sinha, Advocate
======================================================
CORAM: HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASAD
and
HONOURABLE MR. JUSTICE SOURENDRA PANDEY
CAV JUDGMENT
(Per: HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASAD)
Date : 09 -05-2025
The present writ application has been filed for
issuance of a writ in the nature of a writ of certiorari to quash and
cancel the order dated 28.03.2024 (as contained in Annexure P2
series) passed by the respondent no. 2 under Section 73(1) of the Act
charging tax, interest and penalty for the Period 2015-16, 2016-17 and
2017-18 (upto June 2017).
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
2/63
2. Petitioner has further prayed for granting any other
relief(s) to which the petitioner is otherwise found entitled to.
Brief facts of the case of the petitioner
3. The petitioner is a government company. It is
engaged in construction of bridges and roads in the State of Bihar.
One of the main objects for which the petitioner company has
been incorporated are inter-alia, to construct, execute, carryout,
improve, work, develop, administer, manage, control or maintain
in Bihar and elsewhere all types of bridges, roads and other
structures, works and conveniences pertaining to bridge including
approach roads to bridges and river training works. Further the
main object of the company is to levy and collect toll on
passengers and goods on the use of the bridges, bridge works,
roads and approach roads to bridges which are vested in the
corporation or are on lease, with the corporation for a period and
at the rates to be decided by the Corporation.
4. The other objects of the petitioner-company is to
invite tenders, enter into negotiations, contract for and in relation
to the construction, execution, carrying out, equipment,
improvement, management, administration or control of bridges,
bridge roads, approach road to bridges, other roads and other
works and conveniences and accessories and to undertake,
execute, carry out, dispose of, or otherwise turn to account the
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
3/63
same.
5. The objects incidental or ancillary to the attainment
of the main objects are provided under Article 1(III) of the
Memorandum of Association (in short 'MOA'). For the brevity
sake, we do not mention the ancillary objects as those are not
relevant to the issues involved in the present writ application.
6. The petitioner was served with a show cause notice
(SCN) under Section 73 of the Finance Act, 1994 (hereinafter
referred to as the 'Act of 1994' or Finance Act, as the case may
be), issued by the respondent no.3. The SCN was issued on the
grounds inter-alia that from the information available, the
petitioner was liable to pay service tax at the rate of 14-15% on
the amount of 'centage', the penalty and other charges collected
from the contractors amounting to Rs.262.70 crores and Rs.16.73
crores along with equivalent penalty and interest. The respondent
no.3 invoked the proviso appended to sub-section(1) of Section
73 of the Finance Act which provided for extended period of
limitation of five years in the cases falling under the proviso. A
copy of the SCN is Annexure-P1 series to the writ application.
7. The petitioner filed a response by way of the
written submission, a copy of the same has been made available
to the Court by learned A.S.G. which is kept on the record. In the
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
4/63
written submissions the following pleas were taken:-
(i) That the noticee is a company wholly-owned by the
State Government. It was formed pursuant to the resolution dated
05.11.1974
of the Public Works Department, Government of
Bihar.
(ii) That the aims and objects for which the company
was incorporated is inter-alia to construct, execute and carry out
in Bihar and elsewhere all types of bridges, roads and other
structures. It is the case of the petitioner that it has been
specifically constituted by the State government of Bihar for
construction of bridges and roads and also levy and collect toll.
(iii) That the modus operandi of its work relating to
the construction of bridges and roads is as under:-
(a) The noticee prepares and submits a detailed project
report to the State Government of Bihar.
(b) Thereafter, administrative approval is granted by
the State Government of Bihar with estimated cost of the project
and the duration by which the project is to be completed.
(c) Thereafter, tenders are invited from eligible
bidders for undertaking the construction of bridges and roads.
(d) Upon Selection, an agreement is entered into with
them to undertake construction of roads and bridges.
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
(e) Funds are granted by the State Government of
Bihar for the construction of roads and bridges.
(f) After the completion of the contract, the bridges
and roads, as the case may be, constructed is handed over to the
State Government of Bihar.
(iv) That Section 66 B of the Finance Act, 1994 inter-
alia provides that there shall be levied tax referred to as the
"Service Tax" on value of all services other than those specified
in the negative list, provided or agreed to be provided in the
taxable territory by one person to another and collected in such
manner as may be prescribed.
(v) That Section 66D of the Act provides for a
negative list of services. All other services other than the one
mentioned in the negative list of services are liable to Service Tax
unless exempt.
(vi) That Section 93 of the Finance Act empowers the
Central Government to grant exemption from Service Tax. In
exercise of that power under Section 93, the Central Government
issued a notification No.25/2012-ST dated 20.06.2012 (known as
Mega Exemption Notification). Clause 12, 12A and 13 of the
Mega Exemption Notification has been relied upon to submit that
the services provided to the government, a local authority or a
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
governmental authority by way of construction, erection,
commissioning, installation, completion or any other original
works meant predominantly for use other than for commerce,
industry, or any other business or profession is exempt from
payment of service tax.
8. It is the case of the petitioner that it has been
engaged in construction of the bridges and roads on the
instruction of the government and that the same constitute
services provided to the government only. The noticee has further
contended that after completion of the bridges and roads, as the
case may be, the same have been handed over to the Government
of Bihar only. The services rendered by the noticee would, thus,
qualify within the definition set out in clause 13 of the said
notification.
9. It is stated that upon receipt of the funds from the
State Government of Bihar, the noticee credits the same under the
head "funds received from the Government of Bihar" in the
liability side of the balance sheet. The noticee, similarly, by a
corresponding debit entry accounts the same under the head of
"work in progress" inclusive of the element of cost of material,
labour etc. in the balance sheet. The same on completion are
handed over to the Government. According to petitioner, such
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
activity would fall under clause 13 of the Mega Exemption
Notification, therefore, it would be outside the purview of levy of
Service Tax.
10. It is the further case of the petitioner that the
petitioner is paid a 'centage' by the Government of Bihar on the
activity of construction carried out by it, in terms of resolution
dated 24.07.2006. Clause '7' and '8' of the resolution have been
quoted in the written submissions. According to this resolution,
earlier the petitioner was not being paid any centage on the
estimated amount, therefore, the petitioner was making
adjustment of 13.5% of the allocated amount for the present
works towards it's establishment cost as a result whereof the
petitioner-company was suffering loss. In such circumstance, the
cabinet took a decision that a centage charge of 12.5% would be
paid to the petitioner-company on account of the actual amount
spent on the construction work and on 100 crores or above turn
over. It is the case of the petitioner that it was paid a sum
equivalent to 13.5% of the cost of the work done, to meet the cost
of establishment. The centage in respect of cost of work done
above 100 crores would be 12.5%. It is to meet the cost of the
establishment, therefore, it would not fall within the ambit of
taxable service as defined in the Act. According to the petitioner,
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
reimbursement of expenditure is not service as provided in the
Act. In this regard, the petitioner relies upon the definition of
taxable service as provided in Section 65 (105) of the Act.
According to him, by no stretch of imagination, it would fall
within the meaning of word "service" as defined under Section
65B(44) of the Act.
11. As regards the issue of toll collection, it is the case
of the petitioner that it has been authorized to receive toll charges
on use of bridges and roads. Reliance is placed on the Rule 10(a)
of the Bihar Toll Rules, 1979, wherein it is provided that toll shall
be collected by the Corporation on behalf of the State
Government and shall be deposited with the scheduled bank or
banks by the Corporation under a separate and distinct head. The
amount lying in the fund will be utilized to meet the expenditures
such as :-
(a) direct expense connected with the toll collection.
(b) 15% of the gross amount of toll to meet overheads
of the headquarters establishment. This 'percentage' may
increased or decreased with the prior approval of the Government.
(c) cost of maintenance and repairs of bridges.
(d) cost of construction of new bridges approved by
the State Government.
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
(e) for any other purpose without prior approval of the
State Government.
12. It is the stand of the petitioner that 15% of the
gross amount of toll collected is given to the petitioner to meet the
overhead expenses of the headquarters establishment. It is for the
expenditure which are incurred for the purposes of collection of
toll, such as salary, wages etc. This collection is called "centage".
It is submitted that the amount of centage is only in the nature of
reimbursement of expenditure. According to the petitioner,
reimbursement of expenditure is not a service, therefore, the same
would fall outside the purview of service tax.
13. Relying upon Circular No.178/10/2022-GST dated
03.08.2022 issued by the Ministry of Finance, Department of
Revenue, Government of India, it is submitted that the Ministry of
Finance, Government of India has inter-alia clarified that liquid
damages, compensation and penalty arising out of breach of
contract or other provisions of law being merely flow of money
are not the consideration for the supply and are not taxable. It is
submitted that the stipulation or term in the service tax Act
"tolerate an act" are similarly used in the Goods and Services Tax
Act, 2017 (in short 'CGST/BGST Act'). It is submitted that with
effect from 1st of July, 2017 the service tax Act was subsumed in
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
the CGST Act, therefore, the use of term 'tolerate an act' being
common in both the legislation, the circular issued by the Central
Government to hold that compensation and penalty are mere flow
of money are not consideration for supply and are not taxable
would equally apply to the provisions of the Finance Act, 1994.
14. It is submitted that as per sub-section (zzzza) of
the Section 65(105) of the Act, works contracts in respect of
roads, bridges, tunnels, etc. are excluded from the meaning of
taxable service. As per Section 66D(a) of the Act which
comprises negative list, services by Government or a local
authority is exempt from Service Tax. Further, as per sub-section
(26A) of Section 65B of the Act, the word "Government" has
been interpreted. As per the said provision, the word
"Government" means by purposive interpretation to include those
entities whether created by statute or otherwise, the accounts of
which are required to be kept in accordance with Article 150 of
the Constitution of India.
15. It is submitted that in absence of any willful
attempt to evade tax, the imputation of allegation of evasion of
tax with the willful attempt does not seem to be justified. It is
submitted that the noticee being a constituent of the government,
cannot be expected to have been any attempt, much less
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
deliberately or willfully to evade tax.
The Order-in-Original dated 28.03.2024 (Annexure-P2)
16. It appears on going through Annexure-P2 that the
respondent no.2 verified the available records of the noticee,
perused the balance-sheet and ledger vis-a-vis relevant
agreements in relation to construction of bridge and found that the
noticee functioned as an executing agency in respect of work
awarded to the Corporation (the petitioner) including the flagship
project 'MMSNY' to get constructed the bridges by further
awarding contracts to various contractors/vendors after bidding.
In this regard, the findings of the respondent no.2 are as under:-
"Further, it has been alleged that it appears that the
noticee did not construct bridges themselves.
Rather they functioned as an executing agency to
get the bridges constructed by awarding contracts
and also render technical assistance through their
professionally qualified engineer and for which
they were paid with remuneration in the name of
'Centage" of the total cost of the project. The
contention of the noticee that their services are
exempted as per the provisions of Mega Exemption
Notification No. 25/2012-ST dated 20.06.2012
does not appear justified as the services being
provided by them to Government of Bihar are not
covered under Mega Exemption Notification No.
25/2012-ST dated 20.06.2012 as noticee has not
provided any services of construction of
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
roads/bridges to Government of Bihar. Further,
none of the books of accounts of the noticee reflect
any amount under WCT or VAT payment on goods
purchased by them. The contractors have executed
the work by using their goods/material and
thereafter transferred the same to M/s BRPNNL.
In the light of facts mentioned above i.e, essential
nature of activities performed, objectives declared
in sankalp (resolution) and official website,
standard contract documents, memorandum of
association, an statement of MD, BRPNNL (reply
to Q.No. 14, 16, 22 & 23) and in light of definition
of services; it appears that the activities mentioned
above are 'service' as defined under Section
65B(44) and are taxable in terms of section 65B
(51) of Finance Act, 1994 (as amended)."
17. As regards the toll collection, the respondent no.2
has found that the petitioner is engaging vendors/contractors for
collection of toll. They themselves are not collecting the toll. As
per Rule 10 of the Bihar Toll Rules, 1979, the petitioner is
authorized to collect the tolls and they received 15% of the gross
toll collection against the provisions of taxable service i.e.
provision of day to day technical/administrative support regarding
collection of toll charges. The amounts received by the petitioner
has been held to be in the nature of taxable value towards
rendering of services related to engaging vendors/contractors for
toll collection and associated activities. The respondent no.2 has
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
taken a view that the petitioner had received 15% centage against
the collection of toll but has not paid any service tax on the
amount retained by the petitioner for rendering the said service.
Petitioner has not paid service tax on centage received for getting
the bridges/roads constructed by contractors.
18. Having said so, the respondent no.2 has recorded
its view with regard to levy of service tax on toll collection by
any agency which is being reproduced hereunder:-
"In so far as levy of service tax on service by
way of access to a road or bridge on payment of
toll charges was concerned, same was covered
under negative list [Sub section (h) of section
66D of Finance Act 1994] and accordingly not
chargeable to service tax. However, toll
collection by any agency on behalf of an agency
authorized to levy toll was a taxable service, on
which service tax was required to be paid by the
agency collecting the toll. This has also been
clarified by the Central Board of Excise and
Customs (now Central Board of Indirect Taxes
and Customs) vide Circular No. 152/3/2012-ST
dated 22.02.2012 and in the Guidance Note 4 of
"Taxation of Services: An Education Guide"
issued on 20th June 2012."
19. The respondent no.2 has relied upon Circular
No.152/3/2012-ST dated 22.02.2022 issued by the Central Board
of Indirect Taxes and Customs and the Guidance Note-4-Negative
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
List of Services.
20. Referring to the Circular and Guidance Note-4, the
respondent no.2 has taken a view that the noticee/petitioner in this
case provided required technical assistance to Government of
Bihar etc. in relation to construction of roads/bridges and toll
collection during the relevant period 2015-16, 2016-17 and 2017-
18 (upto June, 2017) and received service charge/centage on
which service tax is liable under the head "taxable services" as
defined in clause (51) read with clause (44) of Section 65(B) of
the Finance Act, 1994. Further, these services are neither excluded
under the negative list, nor are these covered under any
exemption. It has been held that the petitioner/noticee appears to
have not paid applicable service tax on these receipts which
appear to be towards rendering of taxable services.
21. The respondent no.2 has further observed in
Annexure-P2 that "Regarding clarification sought for (a) figures
shown under Revenue from operation (i) Toll collection (i.e., 15%
of the gross toll collection retained for Hqrs expenses) (ii)
Construction of Bridge (iii) Construction of Bridge/others. (b)
Penalty deducted from Contractors (c) Other deduction from
contractors (d) Miscellaneous receipt (e) Adjustment relating of
earlier year (f) Service Tax (g) Remittances from BAPEPS
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
(discussed in para 3.4.8), the noticee did not furnish any
satisfactory clarification on the above cited issues. Respondent
no.2 has recorded that "It was again requested to Shri Surendra
Yadav, Managing Director, M/s BRPNNL to clarify these issues
in course of recording of his statement on 14/15.10.2020. It was
also apprised to him that as per the provisions of Section 66E (e)
of Finance Act, 1994, Penalty deducted from Contractors fall
under the purview of service tax liability. To this, he submitted
that penalty is the result of the breach of agreement by the
contractors and its arrangement is to ensure timely completion of
work. In most of the cases, penalty deducted is waived or
refunded on extension of contract completion period. However,
no supporting documents were furnished in respect of the same."
22. From perusal of contracts of M/s BRPNNL, it is
found that in respect of above, provision has been made under the
head Liquidated Damages for delay' wherein it has been
mentioned that in case of delay in completion of services, a
liquidated damages not amounting to penalty equal to 0.05% of
the contract price per day subject to a maximum 5% of the
contract value will be imposed and shall be recovered from
payments due/performance security. Section 66E (e) of the
Finance Act, 2012 states that the following shall constitute
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
declared services, namely:-
(e) agreeing to the obligation to refrain from an act, or
to tolerate an act or a situation, or to do an act;"
Whether the petitioner/BRPNNL is a
government or governmental authority.
23. The contention of the petitioner that they are
government/governmental authority has been rejected by the
respondent no.2 and upon scrutiny of balance-sheet, copy of
agreement and documents submitted during investigation, the
respondent no.2 has held as under:-
"I have also to examine the noticee's claim that
they being the Government/Local
Authority/Governmental Authority are entitled for
exemption under clause 12, 12A, 13 of Mega
Exemption Notification, as amended.
First and foremost, I have to check whether the
noticee i.e. Bihar Rajya Pul Nirman Nigam Ltd.
falls under the definition of Government, a local
authority or a governmental authority; whether the
noticee have provided any evidence that they fall
under the definition of Government, a local
authority or a governmental authority to get the
exemption under above clause.
The noticee could not produce any evidence
proving that Bihar Rajya Pul Nirman Nigam, Ltd.
is a Government, a local authority or a
governmental authority. Now, I have gone through
the definition of Government/Local
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
Authority/Governmental Authority; which are
being re-produced below:
The definition of Government is prescribed in
Section 658 (26A) of Finance Act, 1994 as under:
(26A) "Government" means the Departments of
the Central Government, a State Government and
its Departments and a Union territory and its
Departments, but shall not include any entity,
whether created by a statute or otherwise, the
accounts of which are not required to be kept in
accordance with article 150 of the Constitution or
the rules made thereunder;
The definition of Local Authority is prescribed in
Section 658(31) of Finance Act, 1994 as under:
(31) "local authority" means - (a) a Panchayat as
referred to in clause (d) of article 243 of the
Constitution; (b) a Municipality as referred to in
clause (e) of article 243P of the Constitution; (c) a
Municipal Committee and a District Board, legally
entitled to, or entrusted by the Government with,
the control or management of a municipal or local
fund; (d) a Cantonment Board as defined in section
3 of the Cantonments Act, 2006 (41 of 2006); (e) a
regional council or a district council constituted
under the Sixth Schedule to the Constitution; (f) a
development board constituted under article 371 of
the Constitution; or (g) a regional council
constituted under article 371A of the Constitution;
The definition of Governmental authority are
prescribed in Mega Exemption Notification No.
25/2012-Service Tax dated 20.06.2012 as under:
(s) "governmental authority" means a board, or an
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
authority or any other body established with 90%
or more participation by way of equity or control
by Government and set up by an Act of the
Parliament or a State Legislature to carry out any
function entrusted to a municipality under article
243W of the Constitution.
On the above issue, it is also relevant to point out
here the guidelines issued by the Chairman,
CBEC, Department of Revenue, Ministry of
Finance, New Delhi in the "Taxation of Service:
An Education Guide". It is pertinent to mention
here that the objectives of this Guide are to
mitigate the litigations. The relevant guidelines
mentioned in the Guide are as under:
2.4.8 What is a local authority?
Local authority is defined in clause (31) of section
65B and means the following:-
A Panchayat as referred to in clause (d) of article
243 of the Constitution.
A Municipality as referred to in clause (e) of
article 243P of the Constitution.
A Municipal Committee and a District Board,
legally entitled to, or entrusted by the Government
with, the control or management of a municipal or
local fund.
A Cantonment Board as defined in section 3 of the
Cantonments Act, 2006.
A regional council or a district council constituted
under the Sixth Schedule to the Constitution.
A development board constituted under article 371
of the Constitution, or.
A regional council constituted under article 371A
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
of the Constitution.
2.4.10 Would various entities like a statutory body,
corporation or an authority constituted under an
Act passed by the Parliament or any of the State
Legislatures be 'Government' or "local authority"?
A statutory body, corporation or an authority
created by the Parliament or a State Legislature is
neither 'Government' nor a 'local authority' as
would be evident from the meaning of these terms
explained in point nos. 2.4.7 and 2.4.8 above
respectively. Such statutory body, corporation or
an authority are normally created by the
Parliament or a State Legislature in exercise of the
powers conferred under article 53(3)(b) and article
154(2)(b) of the Constitution respectively. It is a
settled position of law Government (Agarwal Vs.
Hindustan Steel AIR 1970 Supreme Court 1150)
that the manpower of such statutory authorities or
bodies do not become officers subordinate to the
President under article 53(1) of the Constitution
and similarly to the Governor under article 154(1).
Such a statutory body, corporation or an authority
as a juristic entity is separate from the state and
cannot be regarded as Central or State Government
and also do not fall in the definition of 'local
authority'. Thus regulatory bodies and other
autonomous entities which attain their entity under
an act would not comprise either government or
local authority.
7.3.1 Are various corporations formed under
Central Acts or State Acts or various government
companies registered under the Companies Act,
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
1956 or autonomous Institutions set up by special
acts covered under the definition of 'governmental
authority?
No. In terms of its definition in mega notification
25/2012-ST, following conditions should be
satisfied for a board, body or an authority to be
eligible for exemptions as a governmental
authority:
set up by an act of the Parliament or a State
Legislature;
established with 90% or more participation by way
of equity or control by Government; and
carries out any of the functions entrusted to a
municipality under article 243W of the
Constitution.
The noticee produced a Sankalp letter dated
05.11.1974 Issued by the order of Governor of
Bihar vide which it has been decided to establish
Bihar Rajya Pul Nirman Nigam Ltd. as a Public
Limited Company. Furthermore,
MEMORANDUM AND ARTICLES OF
ASSOCIATION produced by the noticee states
that it has been incorporated under the Companies
Act, 1986. Further, in Books of Accounts, it has
been mentioned that 100% share is owned by State
Government.
In the Profit & Loss Accounts of the noticee, they
have shown Revenue from Operation from
Centage from Toll collection; Centage from
Construction of roads & bridges. Now I have to
examine here whether the main work of Bihar
Rajya Pul Nirman Nigam Limited from which they
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
receive Centage; "To Levy and collect toll on
passengers and goods on the use of bridges, bridge
works, roads and approach roads to bridges which
are vested in the corporation or are on lease, with
the Corporation for a period and at the rates to be
decided by the Corporation" & "to act as technical
advisers, consultants, market surveyors,
procurement agency and to render technical know-
how, management, financial and legal consultancy
and other services to any firm, company, body
corporate, ...etc." fall the under article 243W or
not.
Article 243W of the Constitution is as under:
'Subject to the provisions of this Constitution, the
Legislature of a State may, by law, endow-
(a) the Municipalities with such powers and
authority as may be necessary to enable them to
function as institutions of self-government and
such law may contain provisions for the devolution
of powers and responsibilities upon Municipalities,
subject to such conditions as may be specified
therein, with respect to-
(i) the preparation of plans for economic
development and social justice,
(ii) the performance of functions and the
implementation of schemes as may be entrusted to
them Including those in relation to the matters
listed in the Twelfth Schedule; (b) the Committees
with such powers and authority as may be
necessary to enable them to carry out the
responsibilities conferred upon them including
those in relation to the matters listed in the Twelfth
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
Schedule."
Matters listed in twelfth schedule are:
1. Urban planning including town planning.
2. Regulation of land-use and construction of
buildings.
3. Planning for economic and social development.
4. Roads and bridges.
5. Water supply for domestic, industrial and
commercial purposes.
6. Public health, sanitation conservancy and solid
waste management.
7. Fire services.
8. Urban forestry, protection of the environment
and promotion of ecological aspects.
9. Safeguarding the interests of weaker sections of
society, including the handicapped and mentally
retarded.
10. Slum improvement and upgradation.
11. Urban poverty alleviation.
12. Provision of urban amenities and facilities such
as parks, gardens, playgrounds.
13. Promotion of cultural, educational and
aesthetic aspects.
14. Burials and burial grounds; cremations,
cremation grounds; and electric crematoriums.
15. Cattle pounds; prevention of cruelty to
animals.
16. Vital statistics including registration of births
and deaths.
17. Public amenities including street lighting,
parking lots, bus stops and public conveniences.
18. Regulation of slaughter houses and tanneries.
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
On going through the Article 243W, I find that
the main work of the noticee from which are sole
source of their income; which are reflected in their
Profit & Loss Accounts do not fall under Article
243W.
Hence, in view of the above, I find that Bihar
Rajya Pul Nirman Nigam Ltd. do not fulfil the
criteria laid down in the definition of
Governmental Authority and hence I find that the
noticee do not fall under the definition of
Government/Local Authority/Governmental
Authority for claiming exemption from service tax.
Liability of service tax on the services provided in
lieu of fee
24. The respondent no.2 further proceeded to consider
the issue of liability of service tax on the services provided in
lieu of fee charged by government or a local authority. In this
regard, the views of the respondent no.2 are as under:-
"8. Services provided by way of
construction, erection, commissioning,
Installation, completion, fitting out, repair,
maintenance, renovation, or alteration of,-
(a) a road, bridge, tunnel, or terminal for road
transportation for use by general public; are
exempted in clause 13(a) of Mega Exemption
Notification, as amended, but the one and only
source of income is Centage and penalty
deducted from customers which do not come
under the purview of Mega Exemption
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
Notification.
9. Service by way of access to a road or a bridge
on payment of toll charges are exempted in terms
of Section 660 (h) of Finance Act, 1994
(Negative list of services). Further, Section 66 F
(1) of Finance Act, 1994 prescribes that "Unless
otherwise specified, reference to a service (herein
referred to as main service) shall not include
reference to a service which is used for providing
main service.
10. On the above issue, it is relevant to point out here
the clarifications issued by the Ministry vide Circular
No. 152/3/2012-ST dated 22.02.2012; which are
being re-produced below:
"2. Service tax is not leviable on toll paid by the
users of roads, including those roads constructed
by a Special Purpose Vehicle (SPV) created
under an agreement between National Highway
Authority of India (NHN) or a State Authority
and the concessionaire (Public Private
Partnership Model, Build Own/Operate-Transfer
arrangement). "Tolls' is a matter enumerated
(serial number 59) in List-II (State List), in the
Seventh Schedule of the Constitution of India
and the same is not covered by any of the taxable
services ar present. Tolls collected under the PPP
model by the SPV is collection on own account
and not on behalf of the person who has made the
land available for construction of the road.
3. However, if the SPV engages an independent
entity to collect toll from users on its behalf and a
part of toll collection is retained by that
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
Independent entity as commission or is
compensated In any other manner. service tax
liability arises on such commission or charges,
under the Business Auxiliary Service [section
65(105) (zzb) read with section 65(19) of the
Finance Act, 1994]."
11. On the above Issue, I have gone through the
relevant guidelines mentioned in Education
Guide Issued by the Ministry; which are being
re-produced below:
"4.8 Access to a road or a bridge on payment of
toll charges.
4.8.1 Is access to national highways or state
highways also covered in this entry?
Yes. National highways or state highways are
also roads and hence covered in this entry.
4.8.2 Are collection charges or service charges
paid to any toll collecting agency also covered?
No. The negative list entry only covers access to
a road or a bridge on payment of toll charges.
Services of toll collection on behalf of an agency
authorized to levy toll are in the nature of
services used for providing the negative list
services. As per the principle laid down in sub
section (1) of section 66F of the Act the reference
to a service by nature or description in the Act
will not include reference to a service used for
providing such service."
9.1.1 What is the scope of the clause (1) of
section 66F: 'Unless otherwise specified,
reference to a service (hereinafter referred to as
the "main service") shall not include reference to
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
a service which is used for providing the main
service"
This rule can be best understood with a few
illustrations which are given below
Provision of access to any road or bridge on
payment of toll' is a specified entry in the
negative list in section 66D of the Act. Any
service provided in relation to collection of tolls
or for security of a toll road would be In the
nature of service used for providing such
specified service and will not be entitled to the
benefit of the negative list entry.
Transportation of goods on an inland waterway
is a specified entry in the negative list in section
66D of the Act. Services provided by an agent to
book such transportation of goods on Inland
waterways or to facilitate such transportation
would not be entitled to the negative list entry."
12. In addition to above, it is also relevant to
point out here the clarifications issued by the
Ministry vide Circular No. 192/02/2016-Service
Tax dated 13.04.2016 on the issue of liability of
service tax on the services provided in lieu of fee
charged by Government or a local authority as
under:
SI No Issue Clarification
5 Services It is clarified Government
provided in lieu consideration that any or a local
of fee charged constitutes a activity undertaken by
by Government authority against a service and the
or a local amount charged by charged for
authority performing such activities is liable to
Government Service Tax. It is
Immaterial whether such activities or
a authority local are undertaken as a
statutory or mandatory requirement
under the law and irrespective of
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
whether the amount charged for such
service is laid down in a statute or not.
As long as the payment is made (or
fee charged) for getting a service in
return (i.e., as a quid pro quo for the
service received), It has to be regarded
as a consideration for that service and
taxable Irrespective of by what name
such payment is called. It is also
clarified that Service Tax is leviable
on any payment, In lieu of any
permission or license granted by the
Government or a local authority.
On going through the provisions of above
Circular, it is clear that the Government/Local
Authority too is liable to pay service tax, if they
receive fee, consideration for performing such
activities. It is immaterial whether such activities are
undertaken as a statutory or mandatory requirement
under the law irrespective of whether the amount
charged for such service is laid down in a statute or
not.
13. In view of above, I find that the Centage, which is
received for service charge/technical assistance or for
any other purpose by the noticee does not fall under
the above clause of mega exemption notification, as
amended and also under the negative list under
Section 66D as claimed by the noticee. Consequently,
I find that centage charges received by the noticee are
not exempted under above clause of Mega Exemption
Notification and negative list.
14. In view of facts narrated supra, I find that the
noticee is liable to pay service tax of Rs.
38,79,23,782/- on consideration received in the form
of Centage for the period April, 2015 to June, 2017."
Payability of tax on the penalty
25. Regarding payability of tax on the penalty
deducted from the contractors for the period from April, 2015 to
June, 2017, the respondent no.2 has recorded his views as under:-
"15. Now I proceed to decide whether the
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
Penalty deducted from the Contracts for the
period from April, 2015 to June, 2017 is taxable
or not.
16. It has been alleged in the instant Show Cause
Notice that from perusal of contracts of M/s
BRPNNL, it is found that in respect of above,
provision has been made under the head
Liquidated Damages for delay' wherein it has
been mentioned that in case of delay in
completion of services, a liquidated damages not
amounting to penalty equal to 0.05% of the
contract price per day subject to a maximum 5%
of the contract value will be imposed and shall be
recovered from payments due/performance
security. Section 66E (e) of the Finance Act,
2012 states that the following shall constitute
declared services, namely:-
(e) agreeing to the obligation to refrain from an
act, or to tolerate an act or a situation, or to do an
act;
Services mentioned above are declared
services and attracts service tax @ applicable
rate during the period.
The noticee in reply dated 04.10.2023 has
submitted that "it has deducted penalty from the
payments made to the contractor on default of
the terms of the contract. The noticee further
states that in large number of cases upon the
contractor reaching a milestone in terms of the
contract the penalty deducted is eventually
returned. Further, the noticee stated that the
Ministry of Finance, Department of Revenue,
Government of India has issued a Circular No.
178/10/2022-GST dated 03.08.2022 has inter-
alia clarified that liquid damages, compensation
and penalty arising out of breach of contract or
other provisions of law being merely for of
money are not the consideration or the supply
and are not taxable. They have referred Circular
No. 178/10/2022-GST dated 03.08.2022."
I have gone through the above Circular wherein
it has been clarified that:
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
"7.1.3 It is argued that performance is the essence
of a contract. Liquidated damages cannot be said
to be a consideration received for tolerating the
breach or non-performance of contract. They are
rather payments for not tolerating the breach of
contract. Payment of liquidated damages is
stipulated in a contract to ensure performance
and to deter non-performance, unsatisfactory
performance or delayed performance. Liquidated
damages are a measure of loss and damage that
the parties agree would arise due to breach of
contract. They do not act as a remedy for the
breach of contract. They do not restitute the
aggrieved person. It is further argued that a
contract is entered Into for execution and not for
its breach. The liquidated damages or penalty are
not the desired outcome of the contract. By
accepting the liquidated damages, the party
aggrieved by breach of contract cannot be said to
have permitted or tolerated the deviation or non-
fulfilment of the promise by the other party.
7.1.4 In this background a reasonable view that
can be taken with regard to taxability of
liquidated damages Is that where the amount paid
as 'liquidated damages' is an amount paid only to
compensate for injury, loss or damage suffered
by the aggrieved party due to breach of the
contract and there is no agreement, express or
implied, by the aggrieved party receiving the
liquidated damages, to refrain from or tolerate an
act or to do anything for the party paying the
liquidated damages, in such cases liquidated
damages are mere a flow of money from the
party who causes breach of the contract to the
party who suffers loss or damage due to such
breach. Such payments do not constitute
consideration for a supply and are not taxable."
Further, I have also gone through the Final Order
No. 50898/2023 dated 06.07.2023 of CESTAT,
Principal Bench, New Delhi which is on the
similar issue in which the Hon'ble CESTAT held
that
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
"13. In view of the aforesaid decisions of the
Tribunal and the Circular, it is not possible to
sustain the view taken by the Commissioner that
since the task was not completed within the time
schedule, the appellant agreed to tolerate the
same for a consideration in the form of liquidated
damages, which would be subjected to service
tax under section 66E(e) of the Finance Act.
14. As service tax could not be levied, the
imposition of interest and penalty also cannot be
sustained."
In the above order, the Hon'ble CESTAT has
referred another Circular No. 214/1/2023-Service
Tax dated 28.02.2023 issued by the Board and
also different Orders of CESTAT on the similar
issue.
I have gone through the above Circulars and
above orders of Hon'ble CESTAT and on the
basis of guidelines issued by the Board and
orders of Hon'ble CESTAT, I find that penalty
deducted from contractors are not taxable under
Service Tax. Consequently, I find that the
demand of service tax of Rs. 2,48,40,450/- on
penalty deducted from the contractors for the
period from April, 2015 to June, 2017 is not
sustainable in eye of the Law."
On the plea of invocation of extended period of
limitation under proviso to Section 73(1) of the Act of 1994.
26. The respondent no.2 has given reasons for
invoking the extended period of limitation which we will consider
in later part of the judgment.
27. With regard to the interest liability under Section
75 and the proposed application of the penal provisions under
Section 78 of the Act of 1994, the respondent no.2 has held that
the demand for interest at appropriate rate under Section 75 of the
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
Act needs to be confirmed and recovered from the noticee.
Submissions on behalf of the petitioner
28. At the outset, learned senior counsel for the
petitioner submits that this writ application involves certain
questions of law, therefore, instead of availing remedy of
statutory appeal, the petitioner has moved this Court in its writ
jurisdiction. It is his submission that the impugned order
(Annexure-P2) suffers from jurisdictional error, hence this Court
may examine the issues raised in this case.
29. While assailing the impugned order (Annexure-
P2), Mr. D.V. Pathy, learned senior counsel representing the
petitioner has once again reiterated the submissions made before
the respondent no.2. Learned senior counsel relies upon the
judgment of this Court in the case of Shapoorji Paloonji and
Company Pvt. Ltd. VS. Commissioner, Customs Central
Excise and service Tax reported in (2016) 67 taxmann.com
2018 (Patna) to submit that an authority established by
government having 90% or more participation by way of equity
or control to carry out any function entrusted to a municipality
under Article 243W of the Constitution of India would be eligible
for exemption. It is submitted that in the case of Shapoorji
Paloonji (supra) construction activity undertaken by the
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
petitioner in respect of the academic block of the Institute
(respondent no.4 in the said case ) was taken as exempted from
payment of service tax in terms of notification dated 20 th June,
2012 as amended.
30. It is submitted that the judgment of this Court in
Shapoorji Paloonji (supra) was subject matter of challenge
before the Hon'ble Supreme Court in Civil Appeal. The judgment
of the Hon'ble Patna High Court has been upheld by the Hon'ble
Supreme Court. It has been held that a perusal of the exemption
notification would reveal that the exemption therein was only
extended to those entities, viz. board or authority or body, which
fulfilled the three requisite conditions, i.e. (a) having been
established with 90% or more participation by way of equity or
control by government, (b) set up by an Act of the parliament or a
State Legislature, and (c) carrying out any function entrusted to a
municipality under Article 243W of the Constitution. The scope
of the exemption was severely restricted to only a few entities.
31. It is submitted that though the reason for re-
defining "governmental authority" has not been made available,
but the Hon'ble Court assumed that unworkability of the scheme
for grant of exemption because of the restricted definition of
"governmental authority" was the trigger and the scope of the
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
exemption was expanded to cover a larger section of entities
answering the definition of "governmental authority". An
amendment by way of the clarification notification was, therefore,
introduced which expanded the definition of "governmental
authority" and widened the exemption base for service tax to be
provided even to an authority or a board or any other body set up
by an Act of Parliament or a State Legislature without the
condition of having been established with 90% or more
participation by way of equity or control by government to carry
out any function entrusted to a municipality under Article 243W
of the Constitution. The aforesaid interpretation of amended
clause 2(s) of the exemption notification has been upheld by the
Patna High Court.
32. Learned senior counsel has submitted that the
order of the respondent no.2 imposing penalty under Section 78
of the Act equivalent to the amount of tax payable on the ground
of misstatement and suppression of facts with a view to evade
payment of tax in view of the notification issued by the Central
Board of Indirect Taxes is wholly illegal and without jurisdiction.
Reliance has been placed on the judgment of the Hon'ble
Supreme Court in the case of Hindustan Steel Ltd. Vs. State of
Orissa reported in (1969) 2 SCC 627.
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
33. It is submitted that in absence of willful attempt to
evade tax the imputation of allegation of evasion of tax with the
willful attempt does not seem to be justified.
Submissions on behalf of the CGST & CX
34. Learned ASG assisted by Sr. S.C., CGST and CX
has opposed the writ application. It is submitted that the petitioner
(M/S BRPNNL) has provided "services" as defined under Section
65B(44) of the Finance Act, 1994 which is taxable in terms of
Section 65B(51) of the Finance Act, 1994. The petitioner claims
itself to be a "governmental authority" but as per the provisions of
Paragraph 2(s) of Mega Exemption Notification No.25/2012-ST
dated 20.06.2012 it will not qualify as a "Governmental
Authority". It is submitted that nature of services rendered by the
petitioner to Government of Bihar is not covered under scope of
Article 243W of the Constitution of India.
35. Learned ASG submits that the petitioner has not
assessed its due liability of service tax and did not deposit the
same on the relevant dates. The matter came to the knowledge of
the department of CGST and CX only when investigation against
the petitioner had been initiated on the basis of 3rd party data
shared by the Income Tax Department. The noticee also not filed
ST-3 return during the relevant period and hence not declared
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
actual taxable value and not paid the applicable Service Tax. In
these circumstances, the adjudicating authority found that the
noticee had willfully suppressed the facts of its taxable value from
the department with an intention to evade the payment of service
tax. The noticee never sought any clarification from the
department or entered into any correspondence regarding
taxibility or otherwise of the services rendered by them. The
noticee did not respond despite several letters issued by the
department for the documents/evidence during investigation. The
noticee concealed/suppressed the taxable value for the period
from April, 2015 to March, 2017 with malafide intent to evade the
payment of service tax thereon by not filing statutory ST-3 return
during the relevant period.
36. Learned ASG submits that if the 3 rd party
information had not been received by the department, the
petitioner could have escaped the assessment and that would have
resulted into non-payment of service tax. The petitioner has, thus,
willfully suppressed the facts from the department and
contravened the various provisions of the Act only with intent to
evade payment of service tax for the relevant period. It is
submitted that the extended period as envisaged under proviso to
Section 73(1) of the Finance Act, 1994 has been rightly invoked
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
in the present case.
37. It is submitted that the contention of the petitioner
that the services rendered by them are exempted as per the
provisions of the Mega Exemption Notification No.25/2012-ST
dated 20.06.2012 is not justified as the services being provided by
them to Government of Bihar are not covered under Mega
Exemption Notification because the petitioner has not provided
any services of construction of roads/bridges to Government of
Bihar. Further, none of the books of the accounts of the petitioner
reflect any amount under WCT or VAT payment on goods
purchased by them. The contractors have executed the work by
using their goods/materials and thereafter transferred the same to
M/S BRPNNL. Since the petitioner did not construct the bridges
themselves by using their resources like manpower, equipment,
stores, construction materials etc. and they get the same done by
contractors/vendors, they functioned as an executing agency to
get the bridges constructed by awarding contracts and for which
they were paid with remuneration in the name of centage of the
total cost of the project.
38. It is submitted that the main work of BRPNLL
from which they received 'centage' is the collection of toll from
the passengers and goods on the use of bridges. It is submitted
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
that the resolution letter dated 05.11.1974 issued by the order of
Governor of Bihar by which it has been decided to establish
BRPNNL as a public limited company nowhere stipulated that the
petitioner is entrusted with function of municipality or panchayat
for construction of roads and bridges in the State of Bihar.
39. Learned ASG submits that before adjudication, the
opportunity of personal hearing was given to the assessee and the
adjudicating authority has passed the impugned order after due
consideration of the submissions made on behalf of the petitioner.
The respondent no.2 has, in paragraph '3' of the impugned order
dated 28.03.2024, clearly recorded that the date of personal
hearing was given to the noticee to appear before the adjudicating
authority in person or through authorized representative on
19.01.2023, 09.01.2024 and 15.02.2024. The noticee appeared on
15.02.2024 and submitted their defence reply dated 04.01.2023.
They further submitted their reply dated 13.02.2024. Thus, the
adjudicating authority has passed the impugned order after giving
appropriate opportunity of hearing to the petitioner and the entire
submissions of the petitioner has been considered by the
adjudicating authority in detail. It is his submission that in this
case no jurisdictional error has been committed by the respondent
no.3, hence the present writ application is not fit to be entertained.
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
40. In course of hearing of the writ application,
learned ASG has placed before this Court a copy of the Form ST-
3 which is a return under Section 70 of the Finance Act, 1994 read
with Rule 7 of the Service Tax Rules, 1994 filed by the petitioner
for the Financial Year 2015-2016. It is pointed out that there is a
column under the heading 'Computation of service tax (to be
filled by a person liable to pay service tax/not to be filled by input
service distributor)'. In column 'A11' questions have been asked
regarding exemptions. In column 'A11.1' a question is asked "
Has the assessee availed benefit of any exemption notification
('Y/N'). The answer given by the petitioner in this case is 'N'. It
is submitted that the intention of the petitioner writs large from
the answer (N) provided in column 'A11.1'. If it is the contention
of the petitioner that the services rendered by the petitioner would
be falling in the Mega Exemption Notification and it would be
entitled for exemption by virtue of the same, the answer to the
question in column 'A11.1' should have been provided as 'Y'.
41. Learned ASG has pointed out that the submission
of the petitioner that centage charge of 15% is received towards
administrative expenses is not a correct submission. The
petitioner has earned a profit of Rs.150 crores before tax in the
financial year 2015-16. They did not file any return and did not
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
seek exemption on the amount of centage. They did not apply for
advance ruling on any of the questions as per Section 97 of the
CGST/BGST Act. It is submitted that the petitioner is not a
government or governmental authority. It is a company liable to
pay service tax. Reliance has been placed on a judgment of the
Hon'ble Supreme Court in the case of Union of India Vs.
Rajasthan Spinning and Weaving Mills reported in (2009) 13
SCC 448.
42. Learned ASG submits that the petitioner has an
alternative and equally efficacious remedy of statutory appeal in
terms of Section 86 of the Finance Act, 1994. The petitioner had
an opportunity to prefer an appeal before the Appellate Tribunal
within three months from the date of receipt of the impugned
order. In this case, instead of availing the statutory remedy of
appeal, the petitioner has presented this writ application invoking
the extraordinary writ jurisdiction of this Court on 24.06.2024.
The learned ASG has relied upon a judgment of the Hon'ble
Supreme Court in the case of State of Maharashtra and others
Vs. Greatship (India) Limited reported in (2022) 17 SCC 332.
In the said case, the Hon'ble Supreme Court has held that no valid
reasons have been shown by the assessee to bypass statutory
remedy of appeal. The Hon'ble Supreme Court has held that there
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
is a consistent view of the Hon'ble Supreme Court that when
there is an alternate remedy available, judicial prudence demands
that court refrains from exercising its jurisdiction under
constitutional provisions. The Hon'ble Supreme Court has
followed United Bank of India Vs. Satyawati Tondon reported
in (2010) 8 SCC 110; Titaghur Paper Mills Co. Ltd. Vs. State
of Orissa reported in (1983) 2 SCC 433; CCE Vs. Dunlop India
Ltd. reported in (1985) 1 SCC 260 and Punjab National Bank
Vs. O.C. Kirshnan reported in (2001) 6 SCC 569.
Consideration
Bihar Rajya Pul Nirman Nigam Limited (BRPNNL)
-A Public Limited Company incorporated under the
provisions of the Companies Act, 1956 does not fall within the
meaning of word "Government", "Local Authority" and
"Governmental Authority".
43. The respondent no.2 has considered the submissions
of the petitioner that the BRPNNL being a governmental authority
would be entitled for exemption under clause 12, 12A and 13 of
the Mega Exemption Notification, as amended. The elaborate
discussions on this topic may be found in the impugned order
(Annexure-2). On going through the definition of the word
"Government" within the meaning of clause 26A of Section 65B
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
of the Finance Act, it is crystal clear that the BRPNNL not being a
department of the State government and not created by a statute
or required to keep its account in accordance with Article 150 of
the Constitution of India would not be covered within the
meaning of the word "Government". In the writ application, there
is no averment that the BRPNNL is required to maintain its
account in accordance with Article 150 of the Constitution of
India. Article 150 of the Constitution of India reads as under:-
"150. Form of Accounts of the Union and
of the States -The Accounts of the Union and of the
States shall be kept in such form as the President may,
on the advice of the Comptroller and Auditor General
of India, prescribe."
44. The word "Local Authority" has been defined under
clause 31 of Section 65B which means - (a) a Panchayat as
referred to in clause (d) of article 243 of the Constitution; (b) a
Municipality as referred to in clause (e) of article 243P of the
Constitution; (c) a Municipal Committee and a District Board,
legally entitled to, or entrusted by the Government with, the
control or management of a municipal or local fund; (d) a
Cantonment Board as defined in section 3 of the Cantonments
Act, 2006 (41 of 2006); (e) a regional council or a district council
constituted under the Sixth Schedule to the Constitution; (f) a
development board constituted under article 371 of the
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
Constitution; or (g) a regional council constituted under article
371A of the Constitution.
45. On a bare reading of the aforementioned two
definitions, there is no iota of doubt that the petitioner-BRPNNL
would not be falling under any of the two definitions.
46. The word "Governmental Authority" is defined
under Mega Exemption Notification dated 20th June, 2012. In the
case of Shapoorji Pallonji, this Court had occasion to consider
the relevant clause 2(s) of the Exemption Notification defining
"Governmental Authority." Clause 2(s) defines the word
"Governmental Authority" means a board, or an authority or any
other body established with 90% or more participation by way of
equity or control by Government and set up by an Act of
Parliament or a State Legislature to carry out any function
entrusted to a municipality under Article 243-W of the
Constitution.
47. Clause 2(s) of the Exemption Notification
underwent an amendment vide Notification dated 30.01.2014
(hereinafter called 'Clarification Notification'). This amendment,
redefining "governmental authority", sought to broaden the scope
of the exemption. The amended definition of the "governmental
authority" in clause 2(s) reads as under:-
"2(s) "governmental authority" means an
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
authority or a board or any other body-
(i) set up by an Act of Parliament or a State
Legislature; or
(ii) established by Government,
with 90% or more participation by way of equity or
control by Government and set up by an Act of
Parliament or a State Legislature to carry out any
function entrusted to a municipality under Article
243-W of the Constitution."
48. The Hon'ble Division Bench of this Court in the
case of Shapoorji Pallonji (supra) has considered the amended
definition of the word "governmental authority" and held that as
per definition of "governmental authority" as amended on
30.01.2014, an authority or board or any other body set up by an
Act of Parliament or State Legislature is a "governmental
authority." The views expressed by the Hon'ble Division Bench
of this Court has been affirmed by the Hon'ble Supreme Court in
Commissioner, Customs, Central Excise and Service Tax,
Patna VS. Shapoorji Pallonji and Company Private Limited
and Others reported in (2024) 3 SCC 358. Paragraph '24' of the
judgment of the Hon'ble Supreme Court in the said case is quoted
hereunder for a ready reference:-
"24. Having read the two definitions, first and
foremost, it is necessary to ascertain the objective
behind the Clarification Notification which
amended the Exemption Notification and redefined
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
"governmental authority". A bare perusal of the
Exemption Notification reveals that the exemption
therein was only extended to those entities viz.
board or authority or body, which fulfilled the three
requisite conditions i.e.:
(a) having been established with 90% or more
participation by way of equity or control by
Government,
(b) set up by an Act of Parliament or a State
Legislature, and
(c) carrying out any function entrusted to a
municipality under Article 243-W of the
Constitution.
It is evident that the scope of the exemption was
severely restricted to only a few entities. Although
the reason for redefining "governmental authority"
has not been made available by the appellants, we
presume that unworkability of the scheme for grant
of exemption because of the restricted definition of
"governmental authority" was the trigger therefor
and hence, the scope of the exemption was
expanded to cover a larger section of entities
answering the definition of "governmental
authority". An amendment by way of the
Clarification Notification was, therefore,
introduced which expanded the definition of
"governmental authority" and widened the
exemption base for service tax to be provided even
to an authority or a board or any other body, set up
by an Act of Parliament or a State Legislature
without the condition of having been established
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
with 90% or more participation by way of equity or
control by Government to carry out any function
entrusted to a municipality under Article 243-W of
the Constitution."
49. Here it is worth mentioning that the definition of the
word "governmental authority" had fallen for consideration in the
following facts of the said case:-
(i) the petitioner in the said case being a Limited
Company was engaged in the business of works contract.
(ii) the Indian Institute of Technology -respondent no.4
being a body incorporated by the Institutes of Technology Act,
1961 appointed National Building Construction Corporation
Limited (respondent no.3) as a consultant for construction of its
academic building project at Bihta, Patna.
(iii) The petitioner Shapoorji Pallonji and Company
was appointed as contractor for construction of academic complex
of Indian Institute of Technology, Bihta, by NBCC vide letter of
award dated 20th December, 2012. In terms of the letter of award,
the petitioner registered itself with the service tax authority and
started payment of service tax.
(iv) The Indian Audit and Account Department raised
audit objection on 30th June, 2015 to the effect that service
provider undertaking construction activity of educational
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
institutions are not required to pay service tax. In terms of the
audit objection, the petitioner claimed that service tax is not
payable by the petitioner or by the Indian Institute of Technology
on the construction activity undertaken by the petitioner.
50. In the aforementioned backgrounds of the facts
when it was pleaded on behalf of the CGST and CX that the
Indian Institute of Technology would not fall within the meaning
of the word "governmental authority", hence there would be no
exemption on payment of service tax on the construction of the
building of the Indian Institute of Technology, this Court had
occasion to delve into the issue as to whether the Indian Institute
of Technology would fall within the meaning of the word
"governmental authority" as amended on 30th January, 2014.
Whether the activity of construction undertaken by the petitioner
in the said case would be exempted from payment of service tax
or not by virtue of the Mega Exemption Notification was
dependent upon the question as to whether the Indian Institute of
Technology is a "governmental authority". In the said context,
this Court held that the provisions contained in sub-clause (i) and
sub-clause (ii) of clause 2(s) are independent, dis-conjunctive
provisions and the expression "90% or more participation by way
of equity or control to carry out any function entrusted to a
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
municipality under Article 243W of the Constitution" is related to
sub-clause (ii) of clause 2(s) alone. It was held that the Indian
Institute of Technology, Bihta, Patna (in short 'IIT') has been
established by an Act of Parliament i.e. Indian Institutes of
Technology Act, 1961 as an institute of national importance under
Article 248 of the Constitution of India read with 7th Schedule
List I.
51. This Court held that since the IIT is falling within
the definition of governmental authority, the notification dated
20th June, 2012 (Mega Exemption Notification) would exempt the
activity of construction undertaken by the petitioner from
payment of service tax.
52. This Court is of the considered opinion that in the
present case, the facts are otherwise. The petitioner is a Body
Corporate incorporated under the provisions of the Companies
Act, 1956. It is not established by an Act of Parliament or the
State Legislatures. The respondent no.2 has recorded that the
Memorandum and Articles of Association produced by the noticee
shows that it has been incorporated under the Companies Act and
in the books of accounts it has been mentioned that 100% share is
owned by the State government. In paragraph '5' of the Order-in-
Original (Annexure-P2), the respondent no.2 has recorded as
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
under:-
"5. .......It is admitted fact that
* The noticee is having a dedicated work force of
technical/professional expertise as Senior Project
Engineer, Project Engineer & Junior Engineer in
Divisions for technical assistance to contractors
and supervise the concerned work and monitoring
for quality control and proper progress of the
project, as per guidelines of the approved DPR and
condition of agreement with the contractors.
(Reference: Reply to Q. 18 at the time of
investigation).
* The noticee is engaged in providing technical
assistance with the help of their professionally
qualified work force. Construction activities are
carried out by successful bidders/contractors and
their professionally qualified work force provide
technical assistance to contractors/vendors and
other authorities for successful execution of project
as per the guidelines/specification given in DPR.
(Reference: Reply to Q. 27 at the time of
investigation).
* The source of income of the noticee to maintain
the work force of technical expertise providing
technical assistance and other infrastructure for
execution of the project is Centage, which is
received against the execution of works and
collection of tolls. (Reply to Q. 39 at the time of
investigation).
* BRPNNL (Noticee) received a fresh lease of life
by way of fixation of "Centage" charge for every
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
work which the corporation executed. "Centage"
charges meant that BRPNNL (Noticee) got a
fixed % age of money in form of service charge
for the work done by them, (mentioned at
Official website)."
53. The respondent no.2 has found that the bridges and
roads are constructed by the contractors and the construction cost
of the bridges and roads are paid to the contractors. A fixed
percentage of construction cost i.e. 'centage' are paid to the
noticee for their service charge/technical assistance.
54. It has been further held that, likewise, tolls are
collected by the vendors assigned by the noticee and a fixed
percentage of tolls are paid to the noticee for their service
charge/technical assistance.
55. In the aforementioned background, the real question
which would be falling for consideration is as to whether the
activities carried on by the petitioner would be covered under the
Mega Exemption Notification. In order to consider it, we take
note of the relevant Entry No.12 of the Mega Exemption
Notification dated 20th June, 2012 as under:-
"12. Services provided to the Government, a local
authority or a governmental authority by way of
construction, erection, commissioning, installation,
completion, fitting out, repair, maintenance, renovation,
or alteration of -
(a) a civil structure or any other original works meant
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
predominantly for use other than for commerce, industry,
or any other business or profession;
(b) a historical monument, archaeological site or remains
of national importance, archaeological excavation, or
antiquity specified under the Ancient Monuments and
Archaeological Sites and Remains Act, 1958 (24 of
1958);
(c) a structure meant predominantly for use as (i) an
educational, (ii) a clinical, or (iii) an art or cultural
establishment;
(d) canal, dam or other irrigation works;
(e) pipeline, conduit or plant for (i) water supply (ii)
water treatment, or (iii) sewerage treatment or disposal;
or
(f) residential complex predominantly meant for self-use
or the use of their employees or other persons specified
in the Explanation 1 to clause 44 of section 65B of the
said Act."
56. In the case of Shapoorji Paloonji (supra), it has
been noticed by the Hon'ble Division Bench that vide
Notification No.6/2015 Service Tax, dated 1st March, 2015,
amending the Notification dated 20th June, 2012, item nos. (a), (c)
and (f) of Entry 12 as reproduced above, stands omitted. While in
the case of Shapoorji Paloonji (supra), the contract for
construction was granted to the petitioner on 20 th December, 2012
and prior to that the Notification dated 20th June, 2012 had been
issued and the same had taken effect from 1st July, 2012, in the
case of present petitioner, apart from the fact that the petitioner
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
does not come within the meaning of governmental authority, the
petitioner has not been awarded any contract by the government
during the relevant period which is financial year 2015-16, 2016-
17 and 2017-18 (upto June, 2017). The 'Modus Operandi' of the
petitioner which this Court has taken note of from the written
submissions of the petitioner clearly shows that the petitioner
invites tenders from the eligible bidders for undertaking
construction of roads and bridges. Upon selection, an agreement
is entered into with them to undertake the construction work.
57. A contention has been raised before this Court that
under under Entry 12A, services provided to the government, a
local authority or a governmental authority by way of
construction, erection, commissioning, installation, completion,
fitting out, repair, maintenance, renovation or alteration of a civil
structure would be exempted from service tax and in terms of
Entry No.13 the services provided by way of construction,
erection, commissioning, installation, completion, fitting out,
repair, maintenance, renovation or alteration of (a) a road, bridge,
tunnel or terminal for road transportation for use by general
public would also be liable to be exempted from service tax.
While there is no difficulty in appreciating the various entries of
the Mega Exemption Notification, this Court finds that, on facts,
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
the petitioner has not controverted the findings recorded by the
respondent no.2 in paragraph 5, 6 and 7 of the impugned order
(Annexure-P2).
58. We further find from the Circular No.192/02/2016-
Service Tax dated 13.04.2016 which clarifies the issue of liability
of service tax on the services provided in lieu of fee charged by
government or a local authority that any activity undertaken by
government or a local authority against a consideration constitutes
a service and the amount charged for performing such activities is
liable to service tax. According to this Circular No.192/02/2016-
Service Tax dated 13.04.2016, "....It is immaterial whether such
activities are undertaken as a statutory or mandatory requirement
under the law and irrespective of whether the amount charged for
such service is laid down in a statute or not. As long as the
payment is made (or fee charged) for getting a service in return
(i.e., as a quid pro quo for the service received), it has to be
regarded as a consideration for that service and taxable
irrespective of by what name such payment is called. It is also
clarified that Service Tax is leviable on any payment, in lieu of
any permission or license granted by the Government or a local
authority."
59. There is a finding recorded in paragraph '13' of the
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
impugned order (Annexure-P2) that the 'centage', which is
received for service charge/technical assistance or for any other
purpose by the noticee does not fall under the above clause of
Mega Exemption Notification, as amended and also under the
negative list under Section 66D as claimed by the noticee. In fact
a reading of the Circular No.192/02/2016-Service Tax dated
13.04.2016 would show that even the government/local authority
is liable to pay service tax, if they received fee, consideration for
performing such activities.
60. In our considered opinion, unless the petitioner is
able to demonstrate by cogent evidence that it is engaged in
providing services by way of construction, erection,
commissioning, installation, completion, fitting out, repair,
maintenance, renovation or alteration of a road or bridge for use
by the general public, it would not be possible to hold that its
activity would be exempted under clause 13(a) of the Mega
Exemption Notification. We cannot lose sight of the findings
recorded by the respondent no.3 that in the profit and loss
account, the petitioner has shown revenue from operation from
centage, from toll collection; centage from construction of roads
and bridges.
61. As regards the invocation of extended period of
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
limitation for demand in terms of proviso to Section 73(1) of the
Finance Act, 1994, we find that the respondent no.2 has given
reasons for arriving at such conclusion. Paragraph 17 (i) to 17 (vi)
are reproduced hereunder for a ready reference:-
"17. (i) I find that the SCN dated 28.12.2020 has been
issued invoking extended period of limitation for
demand under the proviso to Section 73(1) of the Act. In
other words, it can be said that charges of suppression of
facts and contravening the various provisions of the Act
with intent to evade Service Tax has been leveled
against the Noticee.
(ii) in this regard, I observe that the noticee have not
assessed their due liability of Service Tax and did not
deposit the same on its relevant dates. The matter came
to the knowledge of the department only when
investigation against the noticee had been initiated on
the basis of 3rd party data shared by the Income Tax
Department. On verification of the Service Tax portal, it
has been found that the noticee have not filed ST-3
returns for the relevant period and therefore, taxable
value had been intentionally suppressed and no Service
Tax liability and payment has been reflected/paid
therein.
(iii) I further observe that the noticee have willfully
suppressed the facts of their taxable value from the
department with an intention to evade the payment of
Service Tax. They also never sought any clarification
from the Department nor entered into any
correspondence regarding taxability or otherwise of the
services rendered by them. From the available records, it
is apparent that the noticee did not respond despite
several letters issued by the Range Superintendent
calling for the documents/evidence during investigation.
(iv) In this regard, I find that the noticee have
concealed/suppressed the taxable value for the period
from April, 2015 to March, 2017 with malafide Intent to
evade the payment of service tax thereon by not filing
statutory ST-3 returns during the relevant period.
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
Further, during the relevant period, they did not pay due
Service Tax from time to time, as provided under the
Finance Act, 1994 and rules made thereunder. The said
Noticee are required to discharge their Service Tax
liability in respect of the taxable value received in lieu
of providing such taxable Services. However, the
Noticee suppressed the taxable value by not paying
Service Tax due and by not filling the statutory ST-3
returns for the relevant period with intent to evade
Service Tax.
(v) I also find that the above discussed commission and
omission on the part of the Noticee would not have
come to the Notice of the Department if the department
had not initiated the investigation on the basis of 3rd
Party data shared by Income Tax Department against
them and the taxable amount received from various
clients in lieu of services would have escaped the
assessment and must have resulted into non-payment of
service tax. Thus, I find that the act of noticee
tantamount to suppression of facts. They have willfully
suppressed the facts from the department and
contravened the various provisions of the Act only with
intent to evade payment of Service Tax for the relevant
period. Thus, I am of the view that the extended period
as envisaged under proviso to Section 73(1) of the
Finance Act, 1994 is rightly invoked for their act of
suppression with sole intent to evade the Service Tax
payment which is liable to be recovered from them.
(vi) In this regard, it is pertinent to highlight here the
relevant Paras of the observations of the Hon'ble
Supreme Court of the judgment dated 12/05/2009 in
Civil Appeal No. 3527/2009 (UOI Vs Rajasthan
Spinning and Weaving Mills) regarding applicability of
extended period wherein the Hon'ble Court has held that
"in case the non-payment etc. of duty is intentional and
by adopting any means as indicated in the proviso then
the period of notice and a priory the period for which
duty can be demanded gets extended to five years."
Therefore, I am of the view that the extended period has
been correctly invoked in the instant case."
62. In addition, we think it just and proper to reproduce
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
the relevant paragraph and column of return in form ST-3, a copy
of which has been made available by learned ASG, wherein the
petitioner was required to answer as to whether he had availed the
benefit of any exemption notification. In answer to this question,
the petitioner has said 'N', meaning thereby that the petitioner
had not taken benefit of any exemption notification.
A11.1 Has the assessee availed benefit of any exemption N
Notification ('Y'/'N')
63. Mr. D.V. Pathy, learned senior counsel when
confronted with the answer present to the question no.11.1 in ST-
3 could only say that it should have been disclosed in ST-3 Form.
If this is the declaration of the petitioner in Form ST-3, the
allegation of the revenue that the petitioner had willfully
suppressed the facts of their taxable value from the department
with an intention to evade payment of service tax gains support. If
the petitioner was claiming exemption from payment of service
tax under the Mega Exemption Notification, it was obligatory
upon the petitioner to make a correct declaration in Form ST-3
which has not been done in the present case. Therefore, the
petitioner cannot succeed on this ground.
64. Learned senior counsel for the petitioner has relied
on the judgment of the Hon'ble Supreme Court in the case of
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
Doypack Systems Pvt. Ltd. Vs. Union of India & Others
reported in (1988) 2 SCC 299, C.C., C.E. & S.T.-Bangalore
(Adjudication) etc. Vs. Northern Operating Systems Pvt. Ltd.
reported in 2022 SCC OnLine SC 658; and Pushpam
Pharmaceuticals Company Vs. Collector of Central Excise,
Bombay reported in 1995 Supp (3) SCC 462.
65. In the case of Doypack Systems Pvt. Ltd. (supra),
the issue involved was as to whether equity shares in the two
companies i.e. 10,00,000 shares in Swadeshi Polytex Limited and
17,18,344 shares in Swadeshi Mining and Manufacturing
Company Limited, held by the Swadeshi Cotton Mills, vest in the
Central Government under Section 3 of the Swadeshi Cotton
Mills Company Limited (Acquisition and Transfer of
Undertakings) Act, 1986 (hereinafter referred to as "the said
Act"). The other subsidiary question was whether the immovable
properties, namely the bungalow No. 1 and the Administrative
Block, Civil Lines, Kanpur have also vested in the Government.
This Court finds that this judgment has no application to the issue
involved in this writ petition.
66. In the case of Northern Operating Systems Pvt.
Ltd. (supra), the facts of the case may be noticed in paragraph '2'
of the judgment as under:-
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
"2. The assessee was registered with the Revenue, as
a service provider under the categories of
"Manpower Recruitment Agency Service",
"Business Auxiliary Service", "Commercial Training
and Coaching Service", "TTSS",
"Telecommunication and Legal Consultancy
Service", etc. under the Finance Act, 1994 (hereafter
"the Act"). Following an audit of the records by the
Revenue's officials, proceedings were initiated
against the assessee alleging non-payment of service
tax concerning agreements entered into by it with its
group companies located in USA, UK, Dublin
(Ireland), Singapore, etc. to provide general back-
office and operational support to such group
companies."
67. The assessing officer justified the extended period
assessment and penalty but in Appeal the Commissioner,
Bangalore, dropped the proposals in the SCN for the period April
2012 to March 2013 and April 2013 to September 2014.
68. Aggrieved by the Commissioner's order dropping
the demand, the Revenue had filed an appeal challenging it, in
which the assessee too filed it's cross objection.
69. CESTAT allowed the cross appeals and rejected the
appeals of the Revenue. This order of CESTAT was challenged
before the Hon'ble Supreme Court.
70. In the facts of the said case, the Hon'ble Supreme
Court observed in paragraph '69' as under:-
"69. The Revenue's argument that the assessee had
indulged in wilful suppression, in this Court's
considered view, is insubstantial. The view of a
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
previous three-Judge ruling, in Cosmic Dye Chemical v.
CCE42 -- in the context of Section 11-A of the Central
Excise Act, 1944, which is in identical terms with
Section 73 of the Finance Act, 1994 was that : (SCC p.
119, para 6)
"6. Now so far as fraud and collusion are concerned, it
is evident that the requisite intent i.e. intent to evade
duty is built into these very words. So far as
misstatement or suppression of facts are concerned,
they are clearly qualified by the word "wilful"
preceding the words "misstatement or suppression of
facts" which means with intent to evade duty. The next
set of words 'contravention of any of the provisions of
this Act or rules' are again qualified by the immediately
following words 'with intent to evade payment of duty'.
It is, therefore, not correct to say that there can be a
suppression or misstatement of fact, which is not wilful
and yet constitutes a permissible ground for the purpose
of the proviso to Section 11-A. Misstatement or
suppression of fact must be wilful."
71. The above observations are required to be read in the
light of the following finding present in paragraph '72' of the judgment
as under:-
"72. It is held, for the foregoing reasons, that the assessee was
the service recipient for service (of manpower recruitment and
supply services) by the overseas entity, in regard to the
employees it seconded to the assessee, for the duration of their
deputation or secondment. Furthermore, in view of the
above discussion, the invocation of the extended period of
limitation in both cases, by the Revenue is not tenable."
42. (1995) 6 SCC 117
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
72. This Court finds that in the present case, the
petitioner has not preferred a statutory appeal. On facts also, the
present case stand on a completely different footing.
73. In the case of Pushpam Pharmaceuticals
Company (supra), the facts were as under:-
"2. The appellant manufactured an item falling under
Tariff Entry 14-E as well as another item under Item 68.
The item under Item 68 was fully exempt from payment
of duty. The value of items manufactured under Tariff
Item 14-E in each year was less than Rs 5 lakhs.
Notification No. 111 of 1978 was issued on 9-5-1978
exempting the turnover of goods manufactured under Item
14-E if it was below Rs 5 lakhs. Therefore, the appellant
surrendered its licence and it was cancelled. Notices were,
however, issued because if the turnover of the two items,
i.e., exempted under Item 68 for the years in dispute was
clubbed together with turnover of Item 14-E, then it
exceeded Rs 5 lakhs and the goods became liable to duty.
The Department invoked extended period of limitation of
five years as according to it the duty was short-levied due
to suppression of the fact that if the turnover was clubbed
then it exceeded Rupees Five lakhs."
74. The Court found that law about excisability of
exempted goods was settled by this Court in Wallace Flour Mills
Co. Ltd. v. CCE1 . Till then conflicting decisions were rendered by
different High Courts and Tribunals and it was not settled
whether the turnover of assessable and exempted goods were
liable to be clubbed for determining liability. Therefore, two
1. (1989) 4 SCC 592: 1990 SCC (Tax)10
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
questions arose, whether the appellant was bound in the state of
uncertainty in law to include the turnover of the two items and if
it failed to do so then it amounted to suppression of fact and
second whether it was the duty of appellant to keep the
Department informed about the turnover of the goods which were
not liable to any duty. No rule could be pointed out requiring a
manufacturer to disclose the turnover of exempted goods. It was
held that even assuming it was, the appellant could not be held
guilty of suppression when the law itself was not certain.
75. In the above facts, the Hon'ble Supreme Court
observed in paragraph '4' as under:-
"4. Section 11-A empowers the Department to
reopen proceedings if the levy has been short-levied
or not levied within six months from the relevant
date. But the proviso carves out an exception and
permits the authority to exercise this power within
five years from the relevant date in the
circumstances mentioned in the proviso, one of it
being suppression of facts. The meaning of the
word both in law and even otherwise is well known.
In normal understanding it is not different that what
is explained in various dictionaries unless of course
the context in which it has been used indicates
otherwise. A perusal of the proviso indicates that it
has been used in company of such strong words as
fraud, collusion or wilful default. In fact it is the
mildest expression used in the proviso. Yet the
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
surroundings in which it has been used it has to be
construed strictly. It does not mean any omission.
The act must be deliberate. In taxation, it can have
only one meaning that the correct information was
not disclosed deliberately to escape from payment
of duty. Where facts are known to both the parties
the omission by one to do what he might have done
and not that he must have done, does not render it
suppression."
76. The facts of Pushpam Pharmaceuticals Company
(supra) are completely different from the facts of the present case.
Here, we have noticed that petitioner is not engaged as a
contractor for construction of roads and bridges and in ST Form-3
while answering question no.11.1 the petitioner answered in
negative. The petitioner, therefore, did not declare that it is
seeking benefit of exemption notification. The present case is
clearly distinguishable.
77. In the light of the discussions made hereinabove,
the grounds raised by the petitioner would not succeed. We find
no jurisdictional error in the impugned order (Annexure-P2). No
interference is required.
78. No other or further ground has been raised on
behalf of the petitioner.
79. The petitioner has an alternative remedy of statutory
appeal under Section 86 of the Finance Act, 1994. If so advised,
Patna High Court CWJC No.9979 of 2024 dt. 09-05-2025
the petitioner may apply for the statutory remedy of appeal on any
other ground or grounds within a period of eight weeks from
today. If any such appeal is preferred and in case a question of
limitation arises for consideration, the same will be considered by
the appellate authority keeping in view the period spent by the
petitioner in pursuing this writ application under bonafide belief.
80. This writ application stands disposed off
accordingly.
(Rajeev Ranjan Prasad, J)
(Sourendra Pandey, J)
arvind/-
AFR/NAFR
CAV DATE 25.03.2025
Uploading Date 09.05.2025
Transmission Date
