Alternate Remedy vs Writ Jurisdiction in GST: Lessons from Jorabat Shillong Expressway Case

1. Background of the Dispute

The controversy arose from GST proceedings initiated against Jorabat Shillong Expressway Limited, a concessionaire engaged in development, operation and maintenance of a national highway segment under the BOT (Annuity) model.

The Union Government entrusted National Highways Authority of India (NHAI) with a project to upgrade approximately 61.98 KM of the Jorabat–Shillong stretch of National Highway No. 40 in Assam and Meghalaya. The work was to be executed through a Design, Finance, Operate and Transfer structure on a BOT (Annuity) basis.

Pursuant to a tender dated 08.12.2008, a consortium of IL&FS Transportation Networks Limited and Ramky Infrastructure was selected, and a Letter of Acceptance dated 20.05.2010 was issued. The consortium subsequently incorporated the petitioner company, which entered into a Concession Agreement dated 16.07.2010 with NHAI.

Under this Concession Agreement:

  • The assessee was granted the right to construct, operate and maintain the project highway for 20 years.
  • NHAI retained the right to collect toll from users.
  • The assessee funded the project upfront and became entitled to periodic annuity payments from NHAI after achieving commercial operation date (COD).

This is a standard Public Private Partnership (PPP) in the form of a BOT-Annuity arrangement, where:

  • The concessionaire constructs and operates the asset for a defined period.
  • The Government compensates the concessionaire through fixed annuities rather than toll revenue.
  • The asset is transferred back to the Government at the end of the concession period.

2. Origin of the GST Dispute

2.1 Show Cause Notice and Order-in-Original

Following the implementation of GST, the authorities demanded tax on annuity receipts under the Concession Agreement. This culminated in:

  • Show Cause Notice dated 30.09.2023 (bearing DIN No. 202309DEE3000000A006F) issued under Section 74 of the CGST Act, 2017 and corresponding provisions of the MGST Act, 2017.
  • Order-in-Original No. 01/Additional Commissioner/CGST Shillong/2024-25 dated 18.04.2024, DIN No. 2024047OUS00008858B4 (“Impugned Order”) passed by the Additional Commissioner, CGST, Shillong.

The Impugned Order:

  • Determined GST liability of Rs. 112,39,64,394/- (CGST + SGST)
  • In respect of annuity receipts of Rs. 864,12,69,958/- from July 2017 to December 2022
  • Along with interest under Section 50 and penalty under Section 74.

The department classified the assessee’s activity as works contract service (SAC 9954), treated as taxable, instead of service by way of access to a road/bridge (SAC 9967) which the assessee claimed as exempt under Entry 23A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 (as amended on 13.10.2017) and related State notification dated 29.06.2017 (as amended on 09.11.2017).

2.2 Earlier Challenge and Supreme Court Directions

The assessee had earlier questioned the Show Cause Notice and Circular No. 150/06/2021-GST dated 17.06.2021 before the High Court, but that petition was dismissed as premature. A Special Leave Petition was then filed before the Supreme Court, which, by order dated 05.02.2024, extended the time for filing reply and directed the adjudicating authority to consider the assessee’s submissions with due application of mind.

Subsequently, after personal hearing on 19.03.2024, the Additional Commissioner passed the Impugned Order dated 18.04.2024 confirming a reduced but substantial demand.

3. Assessee’s Principal Contentions

The assessee filed a writ petition under Article 226 of the Constitution seeking to quash both the Show Cause Notice and the Order-in-Original, and to obtain a declaration that annuity under BOT projects is exempt from GST.

3.1 Jurisdictional Challenge to DGGI and Proper Officer

The core jurisdictional attack was:

  • Notification No. 14/2017 dated 01.07.2017 (with corrigendum dated 29.07.2019) appointing DGGI officers as Central Tax officers and vesting them with Commissioner-level powers under Sections 3 and 5 of the CGST Act was alleged to be ultra vires Section 2(91) read with Sections 3 & 5.
  • Circular No. 3/3/2017 dated 05.07.2017 designating the Additional Commissioner as “Proper Officer” for Section 74 was challenged as being beyond the scope of Section 2(91).

On this basis, the assessee argued:

  • The Additional Director, DGGI who issued the Show Cause Notice, and
  • The Additional Commissioner, CGST, Shillong who passed the Impugned Order

lacked valid statutory authority, rendering the entire proceedings void.

3.2 Claim of Exemption for Annuity

On merits of classification and exemption, the assessee contended:

  1. Nature of Concession Agreement

    • The arrangement is not a simple EPC or construction contract.
    • It is an integrated Concession Agreement encompassing construction, operation, and maintenance, with detailed divestiture at the end of the concession period and payment of concession fee by the concessionaire.
    • These features distinguish it from a standard works contract, where there is no concession fee and no transfer-back under divestiture arrangements.

  2. Classification Dispute

    • The services should fall under SAC 9967 (service by way of access to road/bridge) covered by Entry 23A of the exemption notification, which allegedly exempts the entire consideration, including deferred annuity payments.
    • The department’s attempt to split construction and access components and tax the construction element under SAC 9954 (works contract services) was said to defeat the purpose of the exemption.

  3. Validity and Effect of Circular dated 17.06.2021

    • Circular No. 150/06/2021-GST dated 17.06.2021 clarified that Entry 23A does not exempt GST on annuity paid for construction of roads; it only exempts service of access to road/bridge against annuity.
    • The assessee argued this Circular curtails a statutory exemption and is therefore contrary to Section 11(3) of the CGST Act and well-settled principles that circulars cannot override exemption notifications.
    • The Circular was challenged as ultra vires and unconstitutional.