Punjab-Haryana High Court

M/S Flemingo Duty Free Shop Private ... vs Union Of India And Anr on 25 January, 2024

Author: G. S. Sandhawalia

Bench: G. S. Sandhawalia

               CWP No.20 of 2018 (O&M)                   2024:PHHC:010897-DB

                          IN THE HIGH COURT OF PUNJAB AND HARYANA AT
                                       CHANDIGARH

                                                       CWP NO. 20 OF 2018 (O&M)
                                                       RESERVED ON : 15.12.2023
                                                       PRONOUNCED ON: 25.01.2024


               M/s Flemingo Duty Free Shop Private Limited ....Petitioner
                               Versus
               Union of India and others                           ....Respondents


               CORAM : HON'BLE MR. JUSTICE G. S. SANDHAWALIA
                               HON'BLE MS. JUSTICE LAPITA BANERJI
               Present :       Mr. V. Sridharan, Senior Advocate with
                               Mr. Prakash Shah, Advocate and
                               Mr. Pawan Kumar Pahwa, Advocate and
                               Mr. Hrithik Chaudhary, Advocate,
                               For the petitioner.

                               Mr. Sourabh Goel, Senior Standing Counsel,
                               For respondents No.1, 5 and 8.

                               Mr. Chetan Mittal, Senior Advocate with
                               Mr. Vivek Singla, Advocate and
                               Mr. Himanshu Gupta, Advocate,
                               For respondents No.3 and 4.

               LAPITA BANERJI, J.

1. The petitioner is a company engaged in the business of

operation of Duty Free Shops (hereinafter referred to as "DFS") at various

airports including Sri Guru Ram Dass Jee International Airport at

Amritsar. The petitioner entered into a Concession Agreement dated

April 18, 2016 with Airports Authority of India/respondent No.3

(hereinafter referred to as "AAI"), for operation of DFSs, both at the

arrival and departure zones of Amritsar airport.

2. Under the agreement, Airport Director, AAI/respondent No.4

on behalf of respondent No.3/AAI was to raise monthly invoices towards

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the minimum guarantee/revenue share at the DFS which respondent No.4

duly did under the nomenclature of "Licence Fee". The petitioner was

granted a special warehouse license by the jurisdictional Commissioner of

Customs under 58-A of the Customs Act, 1962 (hereinafter referred to as

"the Custom Act) for storage of duty free goods to be sold from DFS. It is

the petitioner's case that no goods and/or service tax under The Central

Goods and Service Tax Act. 2017 (hereinafter referred to as "CGST Act")

or The Punjab Goods and Service Tax, 2017 (hereinafter referred to as

"PGST Act") could be recovered from the petitioner. The petitioner, inter-

alia, claimed for refund of Rs.40,71,047.79 (Rupees Forty Lakh Seventy

One Thousand Forty Seven and Seventy Nine Paise only) collected by

respondents No.3 and 4 on wrongful application of CGST Act, the

Integrated Goods and Service Tax Act, 2017 (hereinafter referred to as

"the IGST Act") and PGST Act. The petitioner also prayed for a writ of

Mandamus declaring that the aforesaid taxes could not be claimed by the

authorities/respondents either on account of 'Goods' or on account of

'Services'. The petitioner was not required to pay anything over and

above the sum stipulated in the Concession Agreement. Respondents

No.3 and 4 contended that the amount that has been paid by the said

respondents to respondent No.1 has to be reimbursed to respondent No.3

by the petitioner and thereafter refund may be claimed from Union of

India/respondent No.1 by the petitioner in accordance with law.

3. It is the case of Union of India/respondent No.1 that refund,

if any, should be claimed by the petitioner company from Respondent

No.1, since Respondents No.3 and 4 deposited the CGST and SGST on

behalf of the petitioner, the same could not be refunded directly to

respondents No.3 and 4.

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4. Mr. Mittal, learned Senior Advocate appearing for

respondents No.3 and 4 argued that a sum of Rs.3,83,38,993/- has been

paid by the said respondents to the respondent No.1 on account of GST

for the bills raised between November 2017 and September 30, 2021. The

said facts will appear from a perusal of statements made in CM-4399-

CWP-2021 dated 07.03.2023.

5. The petitioner stopped paying the GST amount for 'services'

to respondent No.1 from November 2017. Despite the fact that

respondents No.3 and 4 paid the said amount the petitioner is refusing to

reimburse them causing continuous loss to the public exchequer.

6. By an interim order dated January 04, 2018 the Hon'ble Co-

ordinate Bench directed as under :

"xxx We find that the aforementioned argument of the petitioner, prima facie, has force and substance. In view of the matter, the respondents are restrained from interfering with the functioning of petitioner's Arrival and Departure Duty Free Shops operated at Sri Guru Ram Dass Jee International Airport, Amritsar and levying any tax under the Central Goods and Service Tax Act, 2017, Integrated Goods and Services Tax Act, 2017, Punjab Goods and Service Tax Act, 2017 and the Rules framed thereunder but in order to protect the interest of affected respondents, we impose the following conditions :

1. The petitioner shall undertake to submit an

equivalent of the amount of the guarantee viz-a-viz the sales (GST) portion of every month;

2. The petitioner shall also furnish 25% of the aforementioned amount (GST) as Bank Guarantee within a period of 15 days of the receipt of invoices every month.

Needless to state that if the aforementioned conditions are not fulfilled, the interim stay granted in the aforementioned terms shall stand automatically vacated."

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7. By a subsequent order dated April 30, 2018 another Hon'ble

co-ordinate Bench did not vary the interim order for the reason that the

protection was only towards the petitioner's GST liability and the

respondents were free to take any action on any other score including the

termination of licence/arrangement. It was, inter-alia, recorded as under :

" Counter affidavit filed on behalf of respondents No.3 and 4 is taken on record.

Learned counsel appearing on behalf of respondents state that the interim order passed on 04.01.2018 is causing the respondents considerable prejudice. They further allege that the interim order leaves the respondents without any substantial protection in the event of the petitioner's losing the writ petition and not paying the amount.

Their further grievance is that they did not get any opportunity of being heard before the drastic interim order was passed during the vacation and only a few days before the term reopened. They therefore oppose any application for adjournment.

We agree that the interim order does not protect the revenue totally. We however intend granting the petitioner's an opportunity of atleast filing an affidavit in reply.

The apprehension that the petitioner would wrongly contend that the interim order protects them against any coercive action for any amount due and payable is not well founded. The interim order only concerns the GST portion. Even the learned counsel appearing on behalf of the petitioner rightly does not contend otherwise. It is clear to us that the protection is only regarding the petitioner's liability towards GST. The respondents or any of them are entitled to take any other action including for termination of the licence/agreement for any other claims that they may have.

The grievance that in the event of this order being vacated or in the event of petitioner losing the matter finally, the respondents would be adversely affected inter-alia on account of loss of interest can always be taken care of by the Court in the further or final order. In fact in the event of the order being vacated or the petition being dismissed an order for interest would normally follow.

The application in so far as it seeks the impleadment of certain authorities/parties is allowed. Notice shall be issued to the newly added respondents as well.

Adjourned to 21.05.2018.

It is agreed that even if the petition is not decided the application qua vacation or modification of the interim order will be decided on the next date.

Copy of the order be given under the signatures of Bench Secretary."

CWP No.20 of 2018 (O&M) 2024:PHHC:010897-DB

8. By orders dated July 24, 2018, two Hon'ble Judges of the

Division Bench differed and it was Rajesh Bindal, J. who had opined as

under:

"xxx

Learned counsel for respondents No.3 and 4 submitted that the Airports Authority of India (in short 'the Authority') is depositing GST on the licence fee with the Department regularly, whereas the petitioner has been given concession of merely furnishing bank guarantee to the extent of 25% of the amount and indemnity bond of the total amount of GST.

He further submitted that the agreement with the concessionaire clearly provided that any tax leviable shall be the responsibility of the licensee. After application of GST, the licensee had the option to renegotiate or to exit the agreement. The proposal of the petitioner to renegotiate the revenue share was not accepted by the Authority.

Learned counsel for respondents No.1, 5 and 6/Department submitted that the Central Board of Indirect Taxes and Customs has taken a decision on July 20, 2018 clarifying that GST is leviable on the licence fee of the Duty Free Shops situated on the Airports. He seeks time to file affidavit.

After hearing learned counsel for the parties and keeping in view the aforesaid developments, we modify the earlier interim orders, while directing the petitioner to deposit the amount of GST with the Authority and the amount so deposited shall be retained by the Authority in a separate account so as to be appropriated in terms of the final decision in the writ petition. In case the petitioner is held liable to pay the amount, the same shall be deposited with the Department, whereas in case the transaction is not found to be taxable, the amount will be refunded by the Authority to the petitioner.

Xxx"

9. Therefore, Bindal, J., was of the opinion that earlier interim

orders should be modified and the petitioner should be directed to deposit

the amount of GST with respondents No.3 and 4 which should be retained

in a separate account and the same would be appropriated in accordance

with final decision in the writ petition. In case the petitioner was liable to

pay the amount, the same would be deposited with the department

CWP No.20 of 2018 (O&M) 2024:PHHC:010897-DB

whereas in case the transaction was found to be not taxable, the same was

to be refunded to the petitioner.

10. A divergent view was taken by Amit Rawal, J. by an order of

the even date. He referred to the Hon'ble Supreme Court's decision in

SLP No.8614 of 2018 to come to the conclusion that the SLP containing

similar issues were dismissed on the ground that the same were filed

against the interim orders. He held as under :

"xxx During all this period, the matter remained pending and only an application under Article 226 (3) of the Constitution of India has been preferred by respondents No.1 and 2, but not by respondent No.3. There is no change in the circumstances from the date of passing of the interim order and during the pendency of the writ petition when taken up from time to time.

I also cannot remain unmindful of the fact that vide C.M No.8816-CWP of 2018, prayer was made for disposal of the writ petition but during the course of hearing of the same, learned counsel confined prayer only for a direction to the Board to decide with regard to payment of GST as vide letter dated 27.03.2018 (Annexure A-7), Assistant Commissioner of State Tax Local Goods & Service Tax 260-Mangalore, sanctioned refund of GST on 'Licence Fee'.

In such circumstances, with all humility, I beg to differ with the view expressed by my brother Judge for modifying the interim order as it would tantamount to overreaching the order of the Hon'ble Supreme Court and as well as reviewing of the order in the absence of any application."

11. Due to said divergence of opinions, the matter was referred

to the Hon'ble Third Judge. The Hon'ble Justice Jaswant Singh, third

Judge was of the view that as per the law cited by both the sides, the

petitioner was not liable to pay taxes on supply of goods, however, the

petitioner was liable to pay taxes on Services when availed from the

respondent/AAI. The petitioner was entitled to Input Tax Credit

(hereinafter referred to as "ITC") on the GST paid on Services availed.

The cumulative credit could be used for payment of tax or refund could be

applied for.

CWP No.20 of 2018 (O&M) 2024:PHHC:010897-DB

12. We observed that the petitioner was not willing to pay tax on

Services on the ground that it was entitled to refund on account of supply

of goods. Even though the petitioner was entitled to 'ITC' he would still

be liable to pay tax on the Services availed. The petitioner had not been

paying taxes to respondents No.3 and 4 due to interim orders passed by

the Court but respondents No.3 and 4 were depositing the same with the

department/ authorities being the service provider. Therefore, the Hon'ble

Third Judge did not modify the order dated January 04, 2018, but clarified

that the petitioner would be liable to pay interest on the withheld amounts

of GST on Services in terms of interim order dated April 30, 2018. The

relevant portion of said order dated July 16, 2021 is reproduced

hereinafter :

"xxx A Division Bench of this Court vide order dated 04.01.2018 granted ex-parte interim stay restraining the Respondents from collecting GST and further directed the Petitioner to furnish indemnity bond equivalent of the amount of the guarantee viz-a-viz the sales portion of every month and furnish 25% of GST as bank guarantee. As per Airport Authority, they have not collected GST on services from Petitioner on account of orders of this Court, however, have deposited with GST authorities. Deposit of tax without being collected from Petitioner is causing irreparable loss in terms of blocking of funds.

As per law cited by both sides, the Petitioner is not liable to pay tax on supply of goods, however, is liable to pay tax on services availed from Respondent/Airport Authority. The Petitioner is entitled to Input Tax Credit of GST paid on services availed and accumulated credit can be used for the payment of tax or refund may be applied, as the case may be. The Petitioner does not want to pay tax on the ground that they are entitled to refund on account of export of goods. As per judgments relied upon by both sides, the Petitioner though would be entitled to ITC still is liable to pay tax on services availed, however, the Petitioner on account of interim orders of this Court is not paying tax to Respondents No.3 and 4, who are depositing with officials Respondents being service provider.

10. Both sides concede the main controversy more or less stands settled by different High Courts, thus this Court is of the opinion that there seems no necessity to modify order

CWP No.20 of 2018 (O&M) 2024:PHHC:010897-DB

dated 4.1.2018 at this belated stage, and accordingly agree with the view expressed by Amit Rawal (J). However, in view of changed facts and circumstances and pendency of Petition for quite long time it would be appropriate that if main Petition itself is finally heard and disposed of at the earliest. Needless to point out that the petitioner company would be liable to pay interest on the withheld amounts of GST on Services in terms of interim order dated 30.04.2018. Xxx"

13. Thereafter, several adjournments have been granted to the

parties since the learned counsel on behalf of respondents No.1, 5 and 6

sought time to get necessary instructions as to whether the Union of India/

Respondents No.1 and 5 were ready to refund the amount deposited by

respondents No.3 and 4 directly to respondent No.3 which he finally

submitted that the respondent No.1 was unable to do.

14. By an order dated July 13, 2023 the Hon'ble Co-ordinate

Bench recorded that in Civil Appeal Diary No.24366 of 2022,

(Commissioner of CGST and Central Excise Mumbai East Vs.

Flemingo Travel Retail Ltd.) decided on 10.04.2023 the Hon'ble

Supreme Court held that no indirect tax could be imposed upon the duty

free shops at the airports. The Hon'ble Apex Court noticed the decision of

the Division Bench of Bombay High Court in Sandeep Patil and others v.

Union of India and others reported as 2019 (31) GSTL 398 and the

decision of Learned Single Judge of the Kerala High Court in CIAL Duty

Free and Retail Services Limited v. Union of India in CWP (C)

No.12274 of 2020 decided on 22.09.2020. Referring to the aforesaid

judgments and Article 286 of the Constitution of India, it reiterated the

fact that duty free shops whether in arrival or departure terminals were

outside the custom frontiers of indirect tax burden and any such levy

would be unconstitutional. Therefore, if any such tax is levied, the same

cannot be retained and the duty free shops would be entitled for refund of

CWP No.20 of 2018 (O&M) 2024:PHHC:010897-DB

the same without raising any technical objections including that of

limitation.

15. When the matter came up for hearing on December 15, 2023

it was vehemently argued by the learned counsel appearing on behalf of

the petitioner that when goods were brought from foreign countries by

any party and kept in bonded warehouses and transferred to duty free

shops at international airports it could not be contended that the goods

have crossed the custom frontiers. Reliance was placed on Hotel Ashoka

v. Assistant Commissioner of Commercial Taxes reported as 2012 (278)

ELT 433 (SC) by the Apex Court in its order dated 10.04.2023 and in the

case of A-1 Cuisines Private Limited v. Union of India reported as 2019

(22) GSTL 326 (Bombay) and Central Government order in the case of

Aarish Altaf Tinwala v. Commissioner of Customs (Airport), Mumbai

in Writ Petition (s) (Criminal) No.97 of 2019. There is no dispute with

regard to the said proposition.

16. Learned counsel for the petitioner also placed substantial

reliance on M/s Flemingo Duty Free Shop Private Limited v. Union of

India and another in WP No.4055 of 2018 and WP (MD) No.2129 of

2018, passed by the learned Single Judge of the Madras High Court to

contend that the refund of the GST should be paid directly by respondents

No.1 and 5 to respondents No. 3 and 4.

17. In WP No.4055 of 2018 also, it has been held that the

petitioner shall pay GST on input services including concession fee to the

respondent No.4 and claim ITC on the entire tax amount and thereafter

claim refund of the same by following the procedure as prescribed inter

alia under Sections 54 (3) of the CGST Act 2017 read with Rule 89 of

CWP No.20 of 2018 (O&M) 2024:PHHC:010897-DB

CGST Rules, 2017. Learned Single Judge in WP No.4055 of 2018 has

also relied on paragraph 37 of Sandeep Patil's case (supra).

18. It is pertinent to refer paragraph 37 of Sandeep Patil's case

(supra). In the said paragraph it was clearly held that the petitioners may

be entitled to refund of ITC and no prejudice will be caused to them if

they first pay GST on the Services provided to Duty Free Shops (DFSs)

by the Airport Authorities and then take ITC of the entire tax amount and

thereafter claim refund of the same by following the said procedure.

19. In this context, paragraph 37 of Sandip Patil's case (supra) is

reproduced hereinafter :

"xxx

37. Hence, writ petition bearing W.P No.1511 of 2019 succeeds. The impugned order dated 10th January, 2019 and the impugned show cause notices are quashed and set aside. So far as Writ Petition No.1535 of 2019 is concerned, we refrain from issuing any declaration since the Petitioner is held to be entitled for refund of ITC and as such no prejudice will be caused to them, if they would first pay GST on the services provided to DFSs by MIAL and take ITC of the entire tax amount, and thereafter claim refund of the same by following the procedure contained in Rule 89."

Xxx"

20. Three types of transactions were held to be issue in Sandeep

Patil's case:-

i) Sales by Duty Free Shops to departing passengers;

ii) Sales by Duty Free Shops to Arriving passengers and

iii) Receipt of input services by Duty Free Shops.

21. The first two issues were decided in favour of DFS and third

issue was not decided in favour of DFS. The writ petition dealing with

first two issues was pertaining to WP No.1181 of 2018 succeeded and the

impugned Show Cause Notices were quashed. However, as far as the

third issue was concerned, as raised in WP No.1535 of 2019, it was held

that no declaration was made since the petitioner was entitled to refund of

CWP No.20 of 2018 (O&M) 2024:PHHC:010897-DB

ITC and no prejudice would be caused to them if DFS first paid GST on

the Services provided to them by the Airport Authorities and then take the

benefit of ITC on the entire amount and thereafter claim refund for the

same.

22. It is also relevant to refer to paragraph 33 of CIAL's case

(supra) for clarification of the issues. The same is reproduced herein

below :

"xxx

33. In W.P (C) No.6850 of 2018, I refrain myself from giving any declaration as sought qua accessibility of GST at Calicut International Airport but since this Court had granted the stay, which is operational during the pendency of the present writ petition, no GST is payable by respondent No.4 Airport Authority and no useful purpose would be served in directing Respondents No.1 and 3 to recover any GST on concession fee till 30.06.2020, which Respondent No.4 will seek to recover from the petitioner since as per judgment dated 07.10.2019, the supply of goods by DFSs to outgoing passengers is export of goods under IGST and zero rated supply, it would entitle the petitioner (s) to claim 100% of ITC and refund thereof effective from 01.07.2020 onwards. As per the reasoning assigned in para 37 of the judgment referred to above in Sandeep Patil the petitioner shall pay the GST on input services including Concession Fee to Respondent No.4 and claim ITC of the entire tax amount and thereafter claim refund of the same by following the procedure prescribed under Section 54 (3)of the Central Goods and Services Tax Act, 2017 and Kerala Goods and Services Tax Act, 2017 read with Rule 89 of Central Goods and Services Tax Rules, 2017 and Kerala Goods and Services Tax Rules, 2017."

23. Before parting with the discussion, it is important to refer to

the relevant clauses in the Concession Agreement whereby the

petitioner/concessionaire has agreed to pay the concession fee, exclusive

of all the taxes as per the following clauses of the Agreement:-

"10.4 Taxes The Concession Fee paid by the Concessionaire to the Authority shall be exclusive of Taxes and all Taxes shall be paid over and above the Concession Fee. The payment of Taxes in respect of the Concession Fee, the usage of the location, operations of the Duty Free Retail Outlets shall be

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the obligations of the Concessionaire and shall be borne by the Concessionaire at its own risk and costs. The Concessionaire shall remit the amount of Service Tax in respect of the use of the Locations to the Authority. It is clarified that the Concessionaire shall pay the Taxes, except the Service Tax in respect of the use of the Locations, directly to the relevant Governmental Authorities which shall be over and above the Concession Fee. Direct taxes including withholding tax on respective income shall be borne by the respective Parties.

10.5 Payment of Concession Fee 10.5.1 The Concession Fee (along with any applicable service tax which may be payable) payable under the provisions of this Article 10 shall be due and payable as set out in Clauses 10.5.2, 10.5.3 and 10.5.4. 10.5.2 The payment of Concession Fee shall commence from the Rent commencement Date.

10.5.3 Irrespective of the Authority raising an invoice, the Monthly Concession Fee (MCF) (along with any applicable service tax which may be payable) in respect of the Location shall be paid in advance on the 20th (twentieth) day of every Month during the Concession Term. 10.5.4 All payments towards Concession Fee, payable by the Concessionaire to the Authority, shall be by way of electronic fund transfer through Real Time Gross Settlement (RTGS) system to provide for real time inter-bank payment in favour of such account as may be prescribed by the Authority from time to time.

10.5.5 All payments towards Concession Fee, payable by the Concessionaire to the Authority, shall be in Indian Rupees."

24. In the light of observations made hereinabove and the interim

orders dated January 04, 2018 and April 30, 2018 passed by Hon'ble

Third Judge and the terms of the concession agreement we are of the

considered opinion that the petitioner should first pay the respondents

No.3 and 4 and then claim ITC and/or subsequent refund, if any, from

respondents No.1, 5 and 6.

25. Therefore, the petitioner is bound to pay the GST on the

Services provided by the respondents No.3 not only in accordance with

the case laws discussed hereinabove but also due to the binding

concession agreement between the petitioner and the respondents No.3

and 4.