Facts of the Case

M/S Ram Kamal Healthcare Pvt. Ltd. was allotted Institutional Plot H-02, Sector 22-A, Yamuna Expressway Industrial Development Authority (YEIDA), on 28.04.2015, to set up a hospital, with the premium of Rs.3.80 crores payable in 12 instalments. After the Central Goods and Services Tax Act, 2017 came into force, YEIDA had earlier applied for an Advance Ruling under Section 97 on whether GST was applicable on such upfront premium for hospital plots; the Authority for Advance Ruling held on 06.06.2018 that the amount was exempt under Notification No.12/2017 as amended by Notification No.32/2017, and that ruling attained finality. Nevertheless, YEIDA issued a letter dated 24.08.2018 demanding that the petitioner deposit GST at 18% on the Rs.3.80 crore premium, prompting the present writ petition.

Issues Involved

  1. Whether the upfront premium payable for a long-term lease of an institutional plot granted for a hospital is exempt from GST under Notification No.12/2017 as amended by Notification No.32/2017.
  2. Whether YEIDA could disregard a final Advance Ruling on the same question and demand GST unilaterally.

Petitioner's Arguments

  • The transaction is squarely covered by the exemption under Section 11 of the CGST Act read with Notification No.12/2017 and its amending Notification No.32/2017.
  • The Authority for Advance Ruling had already answered the identical question raised by YEIDA itself and held the premium exempt; that ruling had attained finality and was never challenged.
  • No demand of tax had in fact been raised by any Revenue Authority against either YEIDA or the petitioner; YEIDA's demand letter was without legal authority.

Respondent's Arguments

  • YEIDA contended the petitioner did not fulfil the conditions of the exemption Notification, though it could not identify any specific unmet condition.
  • It was submitted that the demand was only provisional and the petitioner could seek a refund from the revenue authorities after paying.
  • The State's Standing Counsel fairly conceded that the Exemption Notifications existed and that the Advance Ruling order had attained finality.

Court Order / Findings

  • Entry 41 of Notification No.12/2017, both in its original and amended form, exempted the upfront premium for long-term leases of industrial plots without prescribing any condition; the column for conditions read 'Nil'.
  • Once an Authority for Advance Ruling answers a specific question and that ruling attains finality unchallenged, the exemption it recognises is unconditional and binding, and a body such as YEIDA cannot unilaterally reopen or disregard it by demanding tax.
  • The demand letter dated 24.08.2018 was found wholly unfounded in law and in fact, since no condition of the exemption had been shown to be violated.
  • The writ petition was allowed, the impugned communication quashed, and any amount deposited pursuant to it directed to be refunded within one month, failing which to carry 8% interest.

Important Clarification

  • The GST exemption on upfront lease premium for industrial or institutional plots under Notification No.12/2017 (as amended by Notification No.32/2017) is unconditional; once an Advance Ruling under Section 97 conclusively answers the applicability question and attains finality, neither the lessor nor any authority can revisit or override it by demanding tax outside adjudication.

Sections Involved

  • Section 11, CGST Act, 2017 - power of Government to grant exemption from tax by notification.
  • Section 97, CGST Act, 2017 - application for Advance Ruling on classification, applicability of notifications and tax liability.
  • Section 95, CGST Act, 2017 - defines 'advance ruling' and its binding scope.

Decision – In Favour of

The writ petition was allowed in favour of the Assessee, with the demand quashed and refund with 8% interest directed if amounts had been deposited.

Case Details

Court: Allahabad High Court
Case No.: Writ Tax No. 1435 of 2018 (Neutral Citation 2023:AHC:191485-DB)
Coram: Justice Saumitra Dayal Singh and Justice Vinod Diwakar
Date of Order: 05.10.2023

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