Patna High Court Exempts Solid Waste Removal from Tax under BGST Act

Case Name:

Civil Writ Jurisdiction Case No. 7635 of 2023 - Mahavir Sharmik and Nirman Swalambi Sahkari Samiti Limited v. State of Bihar

Key Takeaways:

1. The petitioner, a Cooperative Society, challenged an assessment order under the BGST Act, claiming that their solid waste removal activity was exempt from tax.
2. The High Court examined the specific work order issued to the petitioner and the exemptions granted by the Central Board of Indirect Taxes and Customs.
3. The court concluded that the petitioner’s activity fell under the exemptions and there was no supply of goods in the solid waste management disposal work.
4. The assessment orders were set aside, and the petitioner was directed to provide evidence of tax deductions and consideration for the solid waste disposal work.
5. The Assessing Officer was instructed to consider the evidence and pass orders accordingly, taking into account the non-exigibility of tax on solid waste management activities.

Case Synopsis:

The petitioner challenges an assessment order dated 11.01.2021, as confirmed by the first Appellate Authority under the Bihar Goods and Services Tax Act, 2017 (BGST Act) vide orders dated 10.01.2023. The petitioner argues that the levy is not sustainable based on a specific notification that exempts the activity carried out by the petitioner, which is the removal of solid waste.

The petitioner is a Cooperative Society registered under the BGST Act and was issued a notice under Section 74, quantifying the demand of tax and penalty for the Assessment Year 2019-20. The tax levy has been proposed based on deductions made by the Nagar Parishad, Jamalpur, under the Income Tax Act. The petitioner argues that the deduction of tax on income, a direct tax, cannot lead to the levy under the BGST Act, which is an indirect tax.

The petitioner did not respond to the notices, and orders were passed demanding the tax under the BGST Act. The petitioner filed an appeal pointing out a notification issued by the Government of India granting exemption from payment of tax in relation to a function entrusted to a Municipality under Article 243W of the Constitution of India. However, the appeal was dismissed despite a similar appeal filed by another assessee being allowed by the same Appellate Authority.

The petitioner’s counsel argued that the work carried out by the petitioner is exempt from payment of tax under the BGST Act based on the exemptions granted by the Central Board of Indirect Taxes and Customs of the Ministry of Finance, Government of India. The specific work order issued to the petitioner by the Nagar Parishad, Jamalpur, indicates that the petitioner has been given the work of collection and disposal of waste materials from each household, shop, and commercial centers, as well as sanitation work of drainages/road in the specified seventeen wards of the Municipality.

The High Court examined the exemptions granted between the period 01.07.2012 to 10.07.2014 and 11.07.2014 to 30.06.2017 and concluded that the work carried out by the petitioner is exempt from payment of tax under the BGST Act. The definition of works contract under the BGST Act also supports this conclusion, as there is no supply of goods in the solid waste management disposal work awarded to the petitioner.

Based on these findings, the High Court set aside the assessment orders and directed the petitioner to produce details of the tax deduction at source made by the Municipality under the Income Tax Act and provide evidence of the consideration made by the Municipality for the solid waste disposal work. The Assessing Officer was instructed to consider the evidence and pass orders in accordance with the law, taking note of the declaration made regarding the non-exigibility of tax on solid waste management activities and sanitation work carried out at the instance of the State or the local authorities.

In conclusion, the High Court allowed the writ petition with the above directions.

FAQ:

Q1: What was the petitioner’s argument in the case?

A1: The petitioner argued that their solid waste removal activity was exempt from tax under the BGST Act based on a specific notification and the exemptions granted by the Central Board of Indirect Taxes and Customs. Q2: What did the High Court conclude?

A2: The High Court concluded that the petitioner’s activity fell under the exemptions and there was no supply of goods in the solid waste management disposal work, thereby exempting it from tax. Q3: What were the key directions given by the High Court?

A3: The High Court set aside the assessment orders, directed the petitioner to provide evidence of tax deductions and consideration for the solid waste disposal work, and instructed the Assessing Officer to consider the evidence and pass orders accordingly.