Facts of the Case

The petitioner, M/s Environment Care and Solution Services, entered into an agreement dated 05.10.2016 with the Patna Medical College and Hospital (PMCH) for running and maintaining the Bio-Medical Waste Treatment Facility Plant at PMCH, including disposal of bio-medical waste. The petitioner paid Central and State GST at 18% on the services rendered. Subsequently, PMCH's Superintendent issued orders dated 14.11.2022 and 22.11.2022 (Memo Nos. 10621 and 10753) directing the petitioner to refund Rs.28,11,726/-, claiming the plant's services were exempt from GST based on a purported clarification from GST authorities, and simultaneously withheld the petitioner's pending bills of Rs.15,34,000/-. The petitioner challenged these orders before the Patna High Court, and the Court, finding confusion over the correct legal position, directed the Principal Secretary-cum-Commissioner, State Tax, Government of Bihar, to file a personal affidavit clarifying whether the GST payment was in accordance with law.

Issues Involved

  1. Whether the services rendered by the petitioner under the bio-medical waste treatment agreement with PMCH were exempt from GST or correctly taxable at 18%.
  2. Whether PMCH could unilaterally direct the petitioner to refund GST already paid to the exchequer, based on an internal clarification, without proper legal basis.
  3. Whether PMCH could withhold the petitioner's legitimate running bills pending resolution of the GST dispute.

Petitioner's Arguments

  • The petitioner, obligated under law to comply with the GST Act, had correctly paid 18% GST on the services rendered under the agreement with PMCH.
  • It was not a case of the petitioner usurping any GST amount; if PMCH had a grievance regarding the tax paid, its remedy was to seek a refund from the GST authorities directly, not to pressurise the petitioner.
  • PMCH's withholding of the petitioner's bills, including the GST component, while pressuring it to refund tax already paid to the department, was unjustified.

Respondent's Arguments

  • PMCH contended it had received a clarification from the GST authorities that the Bio-Medical Waste Treatment Facility Plant installed on its premises was not liable to GST on the services rendered by the petitioner.
  • On this basis, PMCH argued the petitioner had paid the GST amount on its own volition and was therefore liable to refund the amount to PMCH.

Court Order/Findings

  • Faced with conflicting positions, the Court directed the Principal Secretary-cum-Commissioner, State Tax, Government of Bihar, to file a personal affidavit clarifying the correct legal position on taxability.
  • The State Tax Commissioner's affidavit categorically stated that the running and maintenance of the Bio-Medical Waste Treatment Facility fell under Entry No. 25, Heading 9987 (Maintenance, repair and installation services) of Notification No. 11/2017-State Tax (Rate), and disposal of bio-medical waste fell under Entry No. 35, Heading 9997 (Other services) of the same Notification — both taxable at 18%.
  • The Court held that the GST payment made by the petitioner was valid and legal, and the respondents' contention that it was wrongly paid was without substance and rejected.
  • Consequently, the impugned order dated 14.11.2022 directing refund of the GST amount was quashed.
  • PMCH was directed to process the petitioner's pending bills and make payment expeditiously, preferably within six weeks from receipt of the order.
  • The writ petition was allowed to the extent indicated.

Important Clarification

  • A recipient of services cannot unilaterally direct a service provider to refund GST already paid to the exchequer based on an informal or internal “clarification”; the correct forum for a recipient disputing taxability is to seek refund directly from the tax authorities.
  • Services of running, maintaining and disposing bio-medical waste at a common bio-medical waste treatment facility are taxable at 18% under Entries 25 (Heading 9987) and 35 (Heading 9997) of Notification No. 11/2017-State Tax (Rate), and are distinct from the exemption for “services provided by operators of the common bio-medical waste treatment facility to a clinical establishment” under Notification No. 12/2017.

Sections Involved

  • Central Goods and Services Tax Act, 2017 and Bihar Goods and Services Tax Act, 2017 — the statutory framework governing levy of tax on the services in question.
  • Notification No. 11/2017-State Tax (Rate) — prescribes the rate of tax on maintenance, repair and installation services (Entry 25, Heading 9987) and other services (Entry 35, Heading 9997).
  • Notification No. 12/2017-State Tax (Rate) — exempts specified services of common bio-medical waste treatment facility operators to clinical establishments, held not applicable on the facts.

Decision – In Favour of

The decision is in favour of the Assessee. The Patna High Court quashed PMCH's order demanding refund of the GST already paid, holding the levy of 18% GST on the petitioner's bio-medical waste treatment and disposal services to be valid and legal, and directed release of the petitioner's withheld bills.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Judicature at Patna
  • Case No.: Civil Writ Jurisdiction Case No. 4274 of 2023
  • CNR: Not available
  • Coram: Hon'ble Mr. Justice A. Abhishek Reddy
  • Decision Date: 28 November 2023
  • Disposal Nature: Allowed to the extent indicated – order directing refund of GST quashed

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