Facts of the Case

M/s Shankarampet Projects Ltd (formerly KNR Shankarampet Projects), a National Highways Authority of India (NHAI) concessionaire under the Hybrid Annuity Model (HAM), was assessed under Section 73 of the Telangana GST Act, 2017 for FY 2019-20, on the ground that turnover it had classified as exempt — reflecting the variation between its financial statements and GST returns during the construction phase — was, in the department's view, taxable annuity income. The petitioner explained it had not yet reached Commercial Operation Date (COD) during FY 2019-20 and had received only 'Construction Support', not annuity, relying on CBIC Circular No.22/15/2024 on time of supply for HAM road projects. Its appeal against the confirmed demand was summarily rejected by the Appellate Joint Commissioner on 20.06.2025 without discussing any of its detailed grounds.

Issues Involved

  1. Whether income received during the construction phase of a Hybrid Annuity Model road concession, before Commercial Operation Date, can be treated as taxable 'annuity' income for GST purposes.
  2. Whether the adjudicating authority correctly applied Section 31(2) instead of Section 31(5) of the CGST Act in determining the time of supply for a continuous supply of services.
  3. Whether an appellate order that fails to deal with any of the specific grounds raised in the memorandum of appeal can be sustained.

Petitioner's Arguments

  • Argued that services during the construction phase, prior to COD, fell under SAC 9954 and not SAC 9967 (toll/annuity access), and no exemption had ever been claimed by classifying annuity under SAC 9967.
  • Contended that the adjudicating authority wrongly applied the general time-of-supply rule under Section 31(2) instead of Section 31(5), applicable to continuous supply of services, contrary to CBIC Circular No.22/15/2024 dated 26.06.2024.
  • Submitted that the appellate order, at paragraph 10, summarily rejected the appeal without referring to or discussing any of the detailed grounds and evidence submitted.

Respondent's Arguments

  • The Government Pleader for State Tax was unable to dispute that the grounds raised in the memo of appeal had not been dealt with by the appellate authority, nor that the petitioner's factual case — receipt during the construction phase, not post-COD annuity — had gone unaddressed.

Court Order / Findings

  • The Division Bench found that the appellate authority had failed to deal with or discuss any of the grounds supported by evidence while confirming penalty and interest for FY 2019-20.
  • Held that reasons are the soul of an order, and a mere perusal of paragraph 10 of the impugned order showed total non-consideration of the grounds urged, relying on Kranti Associates.
  • Set aside the order-in-appeal dated 20.06.2025 for non-application of mind, without independently ruling on the correctness of the Section 31(2) versus 31(5) classification dispute.
  • Remitted the matter to the appellate authority for fresh consideration in accordance with law, directing the petitioner to appear on 06.10.2025.

Important Clarification

  • An appellate authority under the GST Act must specifically deal with and discuss the grounds and evidence raised by the taxpayer; a summary rejection without engaging with the substance of the appeal amounts to non-application of mind and is liable to be set aside.
  • In Hybrid Annuity Model road projects, the correct classification and timing of taxable supply — whether pre-COD 'Construction Support' or post-COD 'annuity' — is a substantive and recurring GST issue for infrastructure concessionaires, governed by CBIC's clarificatory circular on continuous supply of services.

Sections Involved

  • Section 73, CGST/Telangana GST Act, 2017 – governs demand and recovery of tax not paid, other than by fraud.
  • Section 31(2) and 31(5), CGST Act, 2017 – prescribe the time of issuance of invoice, including for continuous supply of services.
  • Section 107(12), CGST Act, 2017 – requires the appellate authority's order to state points for determination, decision, and reasons.

Decision – In Favour of

Allowed in favour of the assessee, with the appellate order set aside for want of reasons and the matter remanded for fresh consideration of all grounds on merits.

Case Details

  • Court: High Court for the State of Telangana at Hyderabad
  • Case No.: Writ Petition No. 28654 of 2025
  • Coram: Hon'ble the Chief Justice Aparesh Kumar Singh and Hon'ble Sri Justice G.M. Mohiuddin
  • Date of Order: 23 September 2025

Link to Download the Order

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