The Madras High Court held that the Railway is liable to pay service tax to the GST Department by collecting from the contractors in respect of the license fee.
The petitioners are Contractors, who were granted license to run parking areas for vehicles in the Railway premises by the Southern Railway. All the writ petitioners participated in the tender process and were successful in the tender and entered into an agreement with the Southern Railway, agreeing certain terms and conditions stipulated.
The agreement for manning the vehicle parking stand in Railway Stations were admittedly signed by all the writ petitioners, who all are Contractors and all the writ petitioners could pay the license fee as per the terms and conditions.
The writ petitioners had agreed for the terms and conditions stipulated in the agreement and as per the said agreement, the licensee shall pay during the continuance of the license all cesses, rates, water charges, taxes and other charges or taxes in respect of the said premises. Thus, it is made clear and further admitted that they are liable to pay taxes as admissible.
The petitioners informed that the period of license already expired, except in few cases, in respect of all these writ petitions. However, in respect of expired license, the respondent-Southern Railways is not refunding the deposit amount and therefore, they are constrained to move the present writ petitions. The deposits are not refunded on the ground that they are liable to pay CGST/SGST at 18% as per the terms and conditions of the agreement.
The petitioner while relying on Section 32 of the CGST Act and sub-clause (2) to Section 32 which stipulates that “no registered person shall collect tax except in accordance with the provision of this Act or the Rules made thereunder” urged that when there is no provision to collect the GST from the contractors on the license fee, then the terms and conditions of the agreement become null and void and therefore, the conditions imposed in the agreement would not be binding on the contractors.
The petitioners questioned the demand made by the Southern Railway to pay 18% of GST in respect of the license fee granted to the Private Contractors to run parking of vehicles.
The single Judge bench of Justice S.M.Subramaniam said that the provisions of the CGST Act are crystal clear that the services rendered are liable for payment of service tax and more specifically, with reference to Section 7 r/w Schedule II, the services rendered by the Railways to the writ petitioners/contractors and the writ petitioners/contractors to the end-users, are falling within the scope of Section 7 read with Schedule II of the CGST Act and therefore, all the writ petitioners are liable to pay tax, as applicable and as demanded by the Southern Railways.
The court observed that the Southern Railways is liable to pay service tax for the license fee collected from the respective contractors and the respective contractors are liable to pay service tax for the collections made from the end users/customers in respect of the parking slot services. Such contractors are bound to register their name under the CGST Act, by following the procedures contemplated therein.
“It is to be reiterated that the Southern Railways is bound to pay service tax on the license fee collected from the contractors for whom the license is granted to run vehicle parking in the premises of the Southern Railways and such contractors, who all are the licensees, are bound to register their names under the CGST Act and on such registration, they are bound to pay service tax for the parking fee collected from the end-users,” the court said.
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