Rajasthan High Court – Jodhpur
Urn: Cw / 27068U / 2025Cg Tollway Ltd vs The Union Of India on 22 May, 2026
[2026:RJ-JD:22539-DB]
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
D.B. Civil Writ Petition No. 15048/2025
CG Tollway Ltd, Through Its Authorised Signatory, Having Its
Registered Office At Floor No. 1, Villa No. 122, Gaurav Path Barliyas
Royal Farm, Bhilwara, Rajasthan - 311001.
----Petitioner
Versus
1. The Union Of India, Through The Secretary, Ministry Of
Finance, Department Of Revenue, North Block, New Delhi
110 001.
2. State Of Rajasthan, Through The Secretary, Ministry Of
Finance, Department Of Revenue, 1St Floor, Main Building,
Gate 2, Government Secretariat, Jaipur, Rajasthan 302005.
3. The Special Commissioner, State Gst Office, Kar Bhawan,
Todarmal Marg, Ajmer, Rajasthan 305001
4. The Deputy Commissioner, State Tax, Business Audit 1,
Bhilwara Rajasthan, Bhilwara 311001
5. The Joint Commissioner, State Tax, Business Audit 1,
Bhilwara Rajasthan, Bhilwara 311001
----Respondents
For Petitioner(s) : Mr. Bharat Raichandani
Mr. R.S. Chouhan
Mr. Jitendra Mohan Choudhary
For Respondent(s) : Mr. Mahaveer Bishnoi, AAG
Mr. Harshvardhan Singh
HON'BLE MR. JUSTICE ARUN MONGA
HON'BLE MR. JUSTICE SANDEEP SHAH
Order
1. Date of conclusion of arguments 05.05.2026
2. Date on which judgment was reserved 05.05.2026
3. Whether the full judgment or only the
operative part is pronounced: Full Judgment
4. Date of pronouncement 22.05.2026
REPORTABLE
Per: Hon'ble Shah, J:
1. By way of the present petition, the petitioner has laid a challenge
to the impugnedoriginal order dated 14.12.2023 passed by the Deputy
Commissioner, State Tax Business Audit-I, Bhilwara (hereinafter
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referred to as 'Deputy Commissioner) while exercising powers under
Section 73 read with other provisions of Rajasthan Goods and Services
Tax Act, 2017 (hereinafter referred to as 'RGST Act, 2017') and Central
Goods and Services Tax Act, 2017 (hereinafter referred to as 'CGST Act,
2017')holding the petitioner liable for payment of the GST, amounting to
Rs. 16,36,20,418/-, along with interest and penalty. The petitioner has
also laid a challenge to the order dated 09.05.2025passed by the
Appellate Authority, Commercial Tax Department, Ajmer (hereinafter to
be referred as 'Appellate Authority') whereby the Appellate Authority
while rejecting the appeal filed by the petitioner upheld the order dated
14.12.2023 holding it to be valid and in accordance with law. The
petitioner has also laid a challenge to the subsequent intimation letter,
dated 06.06.2025, directing him to deposit the amount.
Factual Matrix
2. The brief facts of the case are that the NHAI entered into a
concession agreement with the petitioner for the purpose of six laning
of Kishangadh Udaipur Ahmedabad Section from kilometer 90.000
(near Gulabpura) to kilometer 214.870 (end of Chittorgarh bypass) of
NH-79 in the State of Rajasthan Package-2 under NHDP Phase-V on
BOT (Toll) Mode on 09.12.2016. As per the agreement, the
concessionaire (i.e. the petitioner) was required to design, build,
finance, operate and transfer ("DBFOT") the highway in question in
accordance with the terms and conditions of this concession agreement.
The scope of the project clarified that it was for the purpose of
construction of Project Highway at the site in question along with the
provisions of Project Facilitiesas also for the operation and maintenance
in accordance with the provisions of agreement. Further, the right to
collect the toll post commercial operation of the project and till the date
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of validity of the concession agreement was given to the concessionaire.
Furthermore, as per Clause 26.1 of the agreement, the concession fee was
Re. 1 (Rupee one) per annum along with the premium as specified in
Clause 26.2 Clause 26.2.1 specified that the concessionaire was required to
be paid to the NHAI immidiately after third (3rd) anniversary of the
Commercial Operation Date (COD), a premium in the form of an additional
Concession Fee equal to Rs.2,28,60,00,000/- during that year and for each
subsequent year till 9th anniversary of COD, the Premium shall be paid by
increasing the amount of premium by an additional 3% (three percent) as
compared to the immediately preceding year.
3. The admitted fact is that the petitioner had given the work contract
for the construction of the road to a sub-contractor, i.e., IRB Infrastructure
Developers Limited, whereas the collection of toll was to be done by the
petitioner, which is being undertaken by the petitioner as of now also.
4. During the course of an Internal Audit, Report No. 15 dated
30.07.2023 came to be prepared, emphasizing the output tax liability of
the petitioner and noting that the petitioner had not paid any tax for the
amount of Rs. 16,36,20,418/-. The audit report referred to various
provisions of the GST Act and the Rules, as well as the terms and
conditions of the concession agreement dated 09.12.2016, and therefore
emphasized that the amount in question, along with tax and interest, was
required to be paid.
5. In response to the audit report, the petitioner filed a reply dated
28.07.2023 before the Deputy Commissioner, Business Audit-I, Bhilwara,
Rajasthan. However, since the reply of the petitioner was not found
satisfactory, a show cause notice came to be issued on 29.09.2023 by the
Deputy Commissioner, Commercial Tax Department, Business Audit-I,
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Bhilwara, Rajasthan, setting out in detail the terms of the audit
objection as well as the applicable law and quoting the relevant articles
of the concession agreement. It was emphasized that in case no reply
to the show cause notice was received within the time frame,
appropriate proceedings would be initiated against the petitioner. The
petitioner filed a detailed reply to the above-mentioned show cause
notice on 07.12.2023, emphasizing that there could not be any tax
liability upon the petitioner as the work was sub-contracted and the
sub-contractor had already paid the GST upon the work undertaken for
the construction of the highway. Various other objections were also
raised by the petitioner, including the ground that in identical
circumstances, the authorities of GST in Karnataka and Gujarat had
found the explanation given by the petitioner therein and the same sub-
contractor to be justified and had dropped the audit proceedings. An
opportunity of hearing was given to the petitioner, and thereafter the
Deputy Commissioner proceeded to pass a detailed order dated
14.12.2023, holding the petitioner liable for payment of GST to the tune
of Rs. 16,36,20,418/- along with penalty @ 10% and interest.
6. Being aggrieved by the aforesaid order, the petitioner filed an
appeal under Section 107 of the Act of 2017 before the Appellate
Authority, and post granting of an opportunity of hearing, the appeal
filed by the petitioner came to be dismissed vide order impugned dated
09.05.2025. Hence, the present petition.
Arguments of the counsel for the petitioner:
7. Learned counsel Mr. Bharat Raichandani, along with Mr. R.S.
Chouhan and Mr. Jitendra Mohan Choudhary, appearing for the
petitioner, while laying a challenge to the impugned orders passed by
the Deputy Commissioner as well as the Appellate Authority,
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emphasized that the authorities concerned have failed to consider that
there was no service provided by the petitioner to the NHAI and thus
there was no supply, and consequently, no incidence of tax was involved
in the case at hand. Learned counsel Mr. Bharat Raichandani while
placing reliance upon the Circular dated 17.06.2021, emphasised that
the only alleged consideration received by the petitioner pursuant to the
concession agreement was the right to collect toll, and the right to
collect toll has been exempted under Entry 23 of Notification No.
12/2017-Central Tax (Rate) dated 28.06.2017. He asserted that the
same was reiterated by way of Circular No.150/06/2021-GST dated
17.06.2021, and thus the issuance of the show cause notice and
subsequent orders were not justified.
8. Learned counsel for the petitioner referred to the judgment
passed by the Division Bench of the Andhra Pradesh High Court in
Larsen & Toubro Ltd. v. State of Andhra Pradesh (Writ Petition
No. 12124/2006), decided on 12.10.2006, which came to be affirmed
by the Hon'ble Apex Court vide judgment dated 26.08.2008 passed in
Civil Appeal No. 5239/2008 (State of Andhra Pradesh v. Larsen
and Toubro Ltd.). Heemphasized that by way of the said judgment,
while dealing with the provisions of the Value Added Tax Act, 2005, the
Hon'ble Apex Court, while affirming the judgment of the Andhra Pradesh
High Court, held that there can be no incidence of double taxation and
that there is no sale of goods in building work contracts where the
execution of the work is undertaken by a sub-contractor. He further
asserted that the Hon'ble Apex Court has clearly held that the State can
either collect tax from the sub-contractor or from the main contractor.
9. Learned counsel also relied upon the findings given by the
authorities of the concerned department in Gujarat and Karnataka,
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wherein audit objections raised against the sub-contractor in identical
circumstances were dropped, and asserted that two different stands
cannot be taken by the department on the same issue of incidence of
tax.
10. Initially, written submissions were filed by the counsel for the
petitioner on 18.04.2026. However, post hearing of the matter on
05.05.2026, on the same date, another set of written submissions were
filed by the counsel for the petitioner in consonance with the liberty
granted to him. The brief of the written submissions filed by the counsel
for the petitioner is as under:
"Submissions
4. First, there is no service provided to NHAI. It is an
independent contract entered with the NHAI. There is no
service/supply.
5. Second, reliance placed on the CBIC Circular vide Circular
No. 150/06/2021-GST dated 17.06.2021 is completely
incorrect. The said circular provides clarification with respect
to the applicability of GST on the activity of construction of
road where considerations are received in deferred payment
(annuity). In the present case, the Petitioner has not received
any payment from NHAI. The Petitioner has collected only toll
from toll users which is exempt under Entry 23 of Notification
No. 12/2017-Central Tax (Rate) dated 28.06.2017.
6. Third, the reliance placed by the Respondents on the
decision of the Hon'ble Telangana High Court in the case of
GMR Pochanpalli Expressways Limited Vs. Additional
Director, DGGI and ors. - 2024 SCC Online TS 3988 is
misconceived. At Para 20, of the said judgment, the Hon'ble
Court itself recognises that the activity, which is under dispute
in the present case is exempt. The relevant extract is
reproduced below:
"Therefore, it is obvious that Sl.No.23 is specifying
exempting the tax for the services by way of access to a
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road or a bridge, the consideration is by way of toll
charges."
7. Further, the Hon'ble Court in the above judgment held that
the GST is leviable on deferred annuity payments received
towards construction services. However, in the present case,
the Petitioner has not received a single consideration from the
NHAI. The petitioner has received only toll charges which is
exempt.
8. Fourth, the CBIC, vide Letter dated 28.06.2021 (F. No.
CBIC-190354/77/2021- TO(TRU-II)-CBEC), addressed to
the Secretary, Ministry of Road Transport & Highways,
clarified that no GST is applicable on the BOT (TOLL)
transactions. The said letter is enclosed as Annexure 15 with
the writ petition.
9. Fifth, the consideration received towards construction of
the project already stands subjected to tax in the hands of M/s
IRB Infrastructure Developers Ltd. The present demand
therefore seeks to subject the very same consideration to tax
once again, resulting in impermissible double taxation and a
demand wholly without jurisdiction. In Larsen & Toubro Ltd.
vs. State of Andhra Pradesh [2006-TIOL- 327-HC-HYD-
VAT), (Para 38 and Para 39) the Hon'ble Andhra Pradesh
High Court held that where work is executed through sub-
contractors, the transfer of property in goods takes place only
once, and the same cannot be taxed again in the hands of the
main contractor.
10. The said judgment has been affirmed by the Hon'ble
Supreme Court in State of Andhra Pradesh vs. Larsen &
Toubro Ltd. [2008-TIOL-158-SC-VAT, Para 17 to Para 22].
11. Sixth, the similar projects have been undertaken by the
Petitioner, throughout the country and identical issue came up
before the jurisdictional officers. The GST department for the
Petitioner's sister concerns including M/s. IRB Westcoast
Tollway Limited, in the States of Gujarat and Karnataka, have
accepted and acted upon the aforesaid CBIC clarifications
and Entry No. 23 of Notification No. 12/2017- Central Tax
(Rate) dated 28.06.2017 and has dropped the demands. In
those cases, the department has taken a consistent view and
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granted relief, confirming the non- taxability services under
consideration.
12. The Petitioner, being similarly situated, is entitled to parity
in treatment under Article 14 of the Constitution of India.
Therefore, once this is the case, the Respondent No. 3 & 4
cannot take a contradictory stand. The GST is a central
statute, there cannot be different and varying stand of the GST
department. Reliance is placed upon the decision of the
Hon'ble Supreme Court in the case of Union of India and Ors.
vs. Kaumudini Narayan Dalal and Anr. - 2001 (10) SCC 231,
wherein it was held that, it is not open to the revenue to accept
one judgment in the case of the assessee in the case and
challenge its correctness in the case of other assessees without
just cause. A copy of the said audit reports are enclosed as
Annexure 17 and Annexure 18 respectively of the present writ
petition.
13. Without prejudice, even assuming that GST is applicable,
the entire exercise is revenue neutral inasmuch as the
construction activity has already suffered tax in theHon'ble
hands of the EPC contractor. There is no loss to the revenue,
and the demand is therefore unsustainable. Reliance is placed
on CCE v. Narmada Chematur Pharmaceuticals Ltd., (2005)
179 ELT 276 (SC), M/s Technova Imgaging Systems Private
Limited Vs. CCE & ST - 2019 (370) ELT 54 (Bom).
14. Thus, the impugned order is contrary to the exemption
Notification, statutory framework, CBIC's clarifications.
Therefore, the present writ petition be allowed and order-in-
appeal dated 09.05.2025 be quashed and set aside."
11. No other arguments, except those stated above, were made by
the learned counsel for the petitioner.
12. Learned counsel for the petitioner thus prayed for allowing the
writ petition and for quashing and setting aside the orders passed by
the Deputy Commissioner dated 14.12.2023 (Annexure-2) as well as
the Appellate Authority dated 09.05.2025 (Annexure-1), as also the
Recovery Notice/Intimation Letter dated 06.06.2025 (Annexure-3).
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Arguments on behalf of the State counsel
13. On the other hand, Mr. Mahaveer Bishnoi, learned Additional
Advocate General, along with Mr. Harshvardhan Singh, opposed the writ
petition and raised a preliminary objection with regard to the petitioner
having an alternate remedy to challenge the impugned order passed by
the Appellate Authority before the Appellate Tribunal, as provided under
Section 112 of the CGST Act, 2017. He asserted that the order was
passed while exercising powers under Section 107 of the Act of 2017,
and against the same, a specific remedy of appeal has been provided
under Section 112 of the Act of 2017. He submitted that, in view of
availability of an alternative efficacious remedy and the matter in issue
involving various disputed questions of fact, this Hon'ble Court would
not like to interfere with the matter in question at this stage.
14. To fortify the above submissions, counsel for the respondents
placed reliance upon the judgment passed by the Hon'ble Apex Court in
Whirlpool Corporation v. Registrar of Trade Marks (1998) 8 SCC
1, and in Assistant Commissioner (CT) LTU, Kakinada & Ors. v.
M/s. Glaxo Smith Kline Consumer Health Care Limited, (2020)
19 SCC 681.
15. Apart from the objection regarding availability of alternative
remedy, learned counsel for the respondents, while referring to the
definition of "supply" under Section 7 of the Act of 2017 as well as the
definition of "consideration" under Section 2(31) of the Act of 2017,
emphasized that 'supply' includes 'barter' and 'consideration' includes
'payment in money or otherwise'. Learned counsel thus emphasized that
since the petitioner was granted the right to collect toll, the same
amounted to consideration and the transaction was essentially 'barter',
inasmuch as the petitioner constructed the road and in barter, received
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the right to collect toll. He therefore emphasized that the transaction
clearly falls within the definition of taxable supply.
16. Mr. Bishnoi further referred to the exemption granted under the
notification dated 28.06.2017, is confined to services falling under
Heading 9967, i.e., "supporting services in transport". He submitted
that, thus as far as the service by way of access to a road or bridge on
payment of toll is concerned, the same was exempted under Entry 23.
However, the service in question is construction of road, which falls
under Heading 9954, covering general construction services of
highways, streets, roads, railways, airfield runways, bridges, and
tunnels. He explained that consideration for construction may be paid
partially upfront and partially in deferred annual payments, often
termed as annuities. Entry 23A clarifies that exemption does not cover
construction of road services, even if deferred payment is made by way
of installments. He asserted that collection of toll was essentially
deferred annuity received by the petitioner.
17. He thus referred to the clarification issued by the department
pursuant to the 43rd GST Council meeting dated 28.05.2021, wherein it
was clarified that services like construction of roads are not exempted.
He further emphasized that the collection of toll is treated to be an
annuity and therefore the impugned orders have rightly been passed by
the authorities concerned. He also referred to Clause 26 of the
agreement to emphasize that even premium has been paid by the
concessionaire to the NHAI for the work undertaken, and that payment
of revenue is part and parcel of the agreement in question. Therefore,
the impugned orders have rightly been passed. Thus, while supporting
the impugned orders, he prayed for dismissal of the writ petition.
Analysis & Reasoning:-
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18. As far as the ground taken by the counsel for the respondent with
regard to the availability of an alternative remedy is concerned, the
counsel for revenue very frankly admitted that the remedy of appeal
under Section 112 before the Tribunal is available, however, he also
admitted that, till date, the Tribunal is not functional, thereby rendering
the remedy otiose. He, however, asserted that the Tribunal shall be
functional by the next month. In view of the fact that the Tribunal is not
functional till date, the petitioner in question cannot be refused to be
entertained on the ground of availability of an alternate and efficacious
remedy. This Court thus deems it appropriate to adjudicate the matter
on merits rather than leaving the petitioner remediless.
19. Before delving into the facts and law applicable to the case at
hand, it would be relevant first to quote certain provisions of the Act of
2017 and the Rules framed thereunder, for the purpose of elucidating
the issue.
Section 2(31) of the CGST Act, 2017
(31) "consideration" in relation to the supply of goods or services
or both includes-
(a) any payment made or to be made, whether in money or
otherwise, in respect of, in response to, or for the inducement of,
the supply of goods or services or both, whether by the recipient
or by any other person but shall not include any subsidy given by
the Central Government or a State Government;
(b) the monetary value of any act or forbearance, in respect of, in
response to, or for the inducement of, the supply of goods or
services or both, whether by the recipient or by any other person
but shall not include any subsidy given by the Central
Government or a State Government:
Provided that a deposit given in respect of the supply of
goods or services or both shall not be considered as payment
made for such supply unless the supplier applies such deposit as
consideration for the said supply;
Section 2(119)
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(119)"works contract" means a contract for building, construction,
fabrication, completion, erection, installation, fitting out,
improvement, modification, repair, maintenance, renovation,
alteration commissioning of any immovable property wherein
transfer of property in goods (whether as goods or in some other
form) is involved in the execution of such contract;
Section 7
7. Scope of supply.-(1) For the purposes of this Act, the
expression "supply includes
(a) all forms of supply of goods or services or both such as sale,
transfer, barter, exchange, licence, rental, lease or disposal made
or agreed to be made for consideration by a person in the course
or furtherance of business;
the activities or transactions, by a person, other than an
individual, to its members or constituents or vice-versa, for cash,
deferred payment or other valuable consideration.
Explanation. For the purposes of this clause, it is hereby
clarified that, notwithstanding anything contained in any other
law for the time being in force or any judgment, decree or order
of any Court, tribunal or authority the person and its members or
constituents shall be deemed to be two separate persons and the
supply of activities or transactions inter se shall be deemed to
take place from one such person to another;
(b) import of services for a consideration whether or not in the
course or furtherance of business;
(c) the activities specified in Schedule I, made or agreed to be
made without a consideration;
(1A) where certain activities or transactions constitute a supply in
accordance with the provisions of sub-section (1), they shall be
treated either as supply of goods or supply of services as referred
to in Schedule II.
(2) Notwithstanding anything contained in sub-section (1), -
(a) activities or transactions specified in Schedule III; or
(b) such activities or transactions undertaken by the Central
Government, a State Government or any local authority in which
they are engaged as public authorities, as may be notified by the
Government on the recommendation of the Council,
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shall be treated neither as a supply of goods nor a supply of
services.
(3) Subject to the provisions of sub-sections (1), (1A) and (2), the
Government may, on the recommendations of the Council, specify,
by notification, the transactions that are to be treated as-
(a) a supply of goods and not as a supply of services; or
(b) a supply of services and not as a supply of goods.
Schedule-II Entry 6
6. Composite supply
The following composite supplies shall be treated as a supply of
services, namely:-
(a) works contract as defined in clause (119) of section 2; and
(b) supply, by way of or as part of any service or in any other
manner whatsoever, of goods, being food or any other article for
human consumption or any drink (other than alcoholic liquor for
human consumption), where such supply or service is for cash,
deferred payment or other valuable consideration.
Rule-27 & 28 of the CGST Rules, 2017
27.Value of supply of goods or services where the consideration
is not wholly in money.- Where the supply of goods or services
is for a consideration not wholly in money, the value of the
supply shall,-
(a) be the open market value of such supply;
(b) if the open market value is not available under clause (a), be
the sum total of consideration in money and any such further
amount in money as is equivalent to the consideration not in
money, if such amount is known at the time of supply;
(c) if the value of supply is not determinable under clause (a) or
clause (b), be the value of supply of goods or services or both of
like kind and quality;
(d) if the value is not determinable under clause (a) or clause (b)
or clause (c), be the sum total of consideration in money and
such further amount in money that is equivalent to consideration
not in money as determined by the application of rule 30 or rule
31 in that order.
Illustration:
(1) Where a new phone is supplied for twenty thousand rupees
along with the exchange of an old phone and if the price of the
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new phone without exchange is twenty four thousand rupees, the
open market value of the new phone is twenty four thousand
rupees.
(2) Where a laptop is supplied for forty thousand rupees along
with the barter of a printer that is manufactured by the recipient
and the value of the printer known at the time of supply is four
thousand rupees but the open market value of the laptop is not
known, the value of the supply of the laptop is forty four
thousand rupees.
28.Value of supply of goods or services or both between distinct
or related persons, other than through an agent.-The value of
the supply of goods or services or both between distinct persons
as specified in sub-section (4) and (5) of section 25 or where the
supplier and recipient are related, other than where the supply is
made through an agent, shall-
(a) be the open market value of such supply;
(b) if the open market value is not available, be the value of
supply of goods or services of like kind and quality;
(c) if the value is not determinable under clause (a) or (b), be the
value as determined by the application of rule 30 or rule 31, in
that order:
Provided that where the goods are intended for further
supply as such by the recipient, the value shall, at the option of
the supplier, be an amount equivalent to ninety percent of the
price charged for the supply of goods of like kind and quality by
the recipient to his customer not being a related person:
Provided further that where the recipient is eligible for full
input tax credit, the value declared in the invoice shall be
deemed to be the open market value of the goods or services."
20. An in-depth analysis of the definitions quoted above reveals that
'consideration' has been defined to include any payment made or to be
made, whether in money or otherwise, in respect of the supply of
goods or services or both. At the same time, "works contract" has been
defined to mean a contract for building, construction, erection, repair,
maintenance, etc., of any immovable property, (wherein transfer of
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property in goods or in some other form is involved) in the execution of
such contract. It is thus clear that even if the consideration is not in
money but otherwise, and payment is made or to be made in future,
the same is included within the definition of 'consideration'. At the same
time, for a contract to qualify as a works contract, the handing over of
any immovable property in execution of such contract for construction,
maintenance, etc., is a necessary indice.
21. As far as supply is concerned, all forms of supply of goods or
services or both, including sale, transfer, barter, exchange, licence,
lease, rental, etc., made or agreed to be made for a consideration, have
been treated as falling within the definition of supply. Furthermore,
even in cases of composite supply, the details provided under Schedule-
II, which forms part of Section 7, includes works contract as defined in
Clause 119(2) of the Act of 2017, as part of the supply of services.
22. As far as the levy and collection of tax is concerned, specific
provision has been made under Section 9 of the Act of 2017, and for
the purpose of calculation of the value of taxable supply, specific
provision has been made under Section 15 of the Act of 2017. It
emphasizes that the value of supply of goods and services shall be the
transaction value, i.e., the price actually paid or payable for the said
supply of goods or services or both. The details as to what shall be
included in the value of supply have further been provided under sub-
section (2) of Section 15. Furthermore, in cases where consideration is
not wholly in money, for the purpose of determining the value of supply,
Rule 27 of the Rules of 2017 specifies how the value is to be calculated,
and Rule 28 deals with calculation of supply of goods or services
between distinct or related persons other than through an agent, while
emphasizing that the same is to be calculated on the basis of the open
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[2026:RJ-JD:22539-DB] (16of 34) [CW-15048/2025]
market value of the supply, and in case of non-availability of the same,
other yardsticks have been fixed.
23. For the purpose of determining the interest, rights, and liabilities
of the parties, as well as the nature of the transaction, certain terms
and conditions/articles of the concession agreement would be relevant
and essential for deciding the present controversy.
24. Needless to emphasize, the concession agreement dated
09.12.2016 itself refers to the patch of the national highway, i.e., the
area in question, being handed over to the petitioner on a design, build,
finance, operate, and transfer (DBFOT) basis. However, the scope of the
project will be relevant to be quoted for understanding the nature of the
concession agreement. Clause 2.1, which pertains to the scope of the
project, provides as under:
"2.1 Scope of the Project
The scope of the Project (the "Scope of the Project") shall
mean and include, during the Concession Period:
(a) construction of the Project Highway on the Site set forth in
Schedule-A and as specified in Schedule-B together with
provision of Project Facilities as specified in Schedule-C, and
in conformity with the Specifications and Standards set forth in
Schedule-D;
(b) operation and maintenance of the Project Highway in
accordance with the provisions of this Agreement; and
(c) performance and fulfilment of all other obligations of the
Concessionaire in accordance with the provisions of this
Agreement and matters incidental thereto or necessary for the
performance of any or all of the obligations of the
Concessionaire under this Agreement."
25. As to what concession has been granted has been specified under
Clauses 3.1.1 and 3.1.2, which provide as under:
3.1.1 Subject to and in accordance with the provisions of this
Agreement, the Applicable Laws and the Applicable Permits, the
Authority hereby grants to the Concessionaire, the Concession
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set forth herein including the exclusive right, license and
authority to design, finance, construct, operate and maintain the
Project (the "Concession") and provide Services for a period of
45 (forty-five) years, commencing from the Appointed Date, and
ending on the Transfer Date (the "Concession Period"), and the
Concessionaire hereby accepts the Concession and agrees to
implement the Project subject to and in accordance with the
terms and conditions set forth herein.
3.1.2 Subject to and in accordance with the provisions of this
Agreement, the Concession hereby granted shall oblige or entitle
(as the case may be) the Concessionaire to undertake the
following in accordance with the provisions of Applicable Laws
and Applicable Permits, during the Concession Period to:
(a) Right of Way, access, and license to the Site for the purpose of
and to the extent conferred by the provisions of this Agreement;
(b) plan, design, develop, procure, construct, finance, upgrade,
equip, operate, maintain and manage the Project as per the terms
and conditions of this Agreement including Specifications and
Standards, Applicable Laws, Applicable Permits and Good
Industry Practice and transfer the same to the Authority or
designated Government Instrumentality on the Transfer Date;
(c) manage, operate and maintain the Project and regulate the
use thereof by third parties;
(d) demand and collect Fee from Users liable for payment of Fee
for using the Project MMLP and / or availing any Services or any
part thereof and refuse entry to any User if the Fee due is not
paid;
(e) perform and fulfill all of the Concessionaire's obligations in
accordance with the provisions of this Agreement;
(f) bear and pay all costs, expenses, and charges in connection
with or incidental to the performance of the obligations of the
Concessionaire under this Agreement; and
(h) neither assign, transfer, or sublet or create any lien or
Encumbrance on this Agreement, or the Concession hereby
granted or on the whole or any part of the Project nor sell,
transfer, exchange, lease, sub-license, part possession thereof,
save and except as expressly permitted by this Agreement or the
Substitution Agreement."
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26. Clause 10.2.1 specifies the right of the concessionaire to have
access to the site, and Clause 10.2.2 further emphasizes that from the
date of commencement of the work, the land, including any building,
construction, immovable asset, etc., upon the site in question, shall be
handed over on a leave and licence basis to the concessionaire. The
relevant Article provides as under:
"10.2.1 The Authority hereby grants to the Concessionaire
license to the Site for carrying out any surveys, investigations
and soil tests that the Concessionaire may deem necessary
during the Development Period, it being expressly agreed and
understood that the Authority shall have no liability
whatsoever in respect of survey, investigations and Tests
carried out or work undertaken by the Concessionaire on or
about the Site pursuant hereto in the event of Termination or
otherwise.
10.2.2 In consideration of the Concession Fee, this
Agreement and the Covenants and warranties on the part of
the Concessionaire herein contained, the Authority, in
accordance with the terms and conditions set forth herein,
hereby grants to the Concessionaire, commencing from the
Appointed Date, leave and license rights in respect of all the
land (along with any buildings, constructions or immovable
assets, if any, thereon) comprising the Site which is described,
delineated and shown in Schedule-A hereto (the "Licensed
Premises"), on an "as is where is" basis, free of any
Encumbrances, to develop, operate and maintain the said
Licensed Premises, together with all and singular rights,
liberties, privileges, easements and appurtenances
whatsoever to the said Licensed Premises, hereditaments or
premises or any part thereof belonging to or in any way
appurtenant thereto or enjoyed therewith, for the duration of
the Concession Period and, for the purposes permitted under
this Agreement, and for no other purpose whatsoever."
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27. Articles 26.1 and 26.2 of the agreement in question make
reference to the concession fee to be charged by NHAI and the
additional concession fee amounting to Rs. 2,28,60,00,000/- after the
third anniversary of the commercial operation of the work, with a
further increment of 3% every year thereafter. It is, thus, clear that,
for the work undertaken, the concessionaire is not only required to
build, operate, and maintain the road but is also obligated to pay the
premium to NHAI as quantified in the agreement itself. Clauses 26.1
and 26.2 provide as under:
"26.1 Concession Fee
In consideration of the grant of Concession, the
Concessionaire shall pay to the Authority by way of
concession fee (the "Concession Fee") a sum of Re. 1 (Rupee
one) per annum and the Premium specified in Clause 26.2.
26.2 Additional Concession Fee
26.2.1 Without prejudice to the provisions of Clause 26.1, the
Concessionaire agrees COD. a Premium in the form of an
additional Concession Fee equal to Rs. to pay to the
Authority, immediately after the third (3rd) anniversary year
of 2.28,60,00,000/-(Rupees Two Hundred Twenty Eight Crore
and Sixty Lakh only) as due to the Authority during that year,
due and payable for the period remaining in that year; and
for each subsequent year till the 9th anniversary of COD, the
Premium shall be determined by increasing the amount of
Premium in the respective year by an additional 3% (three
percent) as compared to the immediately preceding year and
for each subsequent year of the Concession Period, the
premium shall be determined by increasing the amount of
Premium in the respective year by an additional 8% (eight
percent) as compared to the immediately preceding year.
For avoidance of doubt it is clarified that the term 'Premium'
as referred in para above shall be as applicable for one
financial year. In accordance with and in compliance with
the terms of this agreement, if payment of such'Premium' is
due and payable only for part of such financial years, then
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[2026:RJ-JD:22539-DB] (20of 34) [CW-15048/2025]
only pro-rata payments @ 1/12th of such Premium shall be
payable for each month of such part financial year for which
such Premium payments is due as payable. For the purpose
of assessing the amount due for payment on such payment of
Premium, part of a month shall be deemed to be a fullmonth.
In such circumstances the subsequent year as referred to in
para above, for the purpose of annual escalation, shall fall to
commence on 1st of April of the immediately succeeding
financial year.
26.2.2 The Premium payable under Clause 26.2.1 shall be
deemed to be part of the Concession Fee for the purposes of
this Agreement."
28. Further perusal of the terms of the contract, including Clause 37,
reveals that absolute right of termination has been conferred upon the
NHAI, and even the project itself is to be undertaken under the
complete control and supervision of the NHAI. Needless to emphasize,
as far as the contract in question is concerned, the same has been
entered into between the NHAI and the writ petitioner in the capacity of
concessionaire, and there is no corresponding agreement between the
NHAI and the sub-contractor. In other words, there is no privity of
contract between the NHAI and the sub-contractor.
29. Thus, there are two distinct contracts, one executed between the
NHAI and the petitioner, and the other between the petitioner and the
sub-contractor, i.e., IRB Infrastructure Developers Limited.
30. An in-depth analysis of the terms and conditions of the articles of
the contract clearly reveals that the argument raised by the counsel for
the petitioner, with regard to no service being provided to the NHAI, is
liable to be rejected, inasmuch as the scope of supply, as defined under
Section 7, includes barter, transfer, licence, etc. In the present case,
admittedly, premium is also being paid by the concessionaire to the
NHAI, and land has been provided on leave and licence. Furthermore,
even assuming for the sake of argument that no premium is being paid,
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[2026:RJ-JD:22539-DB] (21of 34) [CW-15048/2025]
then too it would essentially amount to barter, in as much asfor the
work undertaken by the concessionaire, i.e., building of road and
maintenance of the same, the concessionaire has been granted the
right to collect toll from the persons using the road in question during
the subsistence of the agreement. Thus, the ingredients of 'barter' are
made out.In barter for undertaking the construction and maintenance of
the road, the concessionaire has been conferred certain exclusive
rights, including leave and licence to construct and operate the road and
collect the toll tax, etc. some of which have been elaborated under
Article 3.1.2 of the concession agreement itself.
31. Further, Clause 27.1, which pertains to 'user fee', reveals that as
far as collection of toll fees is concerned, the concessionaire has been
given exclusive rights for the same. Furthermore, Article 10 also leaves
no doubt that the land in question has been handed over to the
concessionaire under exclusive possession of the petitioner through the
leave and licence rights.
32. The definition of "works contract" as provided under Section
2(119) of the Act of 2017, and as included in Schedule II, Entry 6,
would be applicable to the present case. Inasmuch as the petitioner
supplies the works contract services to the NHAI and, in return, receives
the right to demand and collect fees from the users, licence of the site,
and right of way, thus all the ingredients of 'barter' are clearly available
in the contract at hand. Moreover, the right to receive premium, as
specified supra, itself shows that consideration forms part of the
contract. Thus, the agreement in hand would fall within the definition of
"supply" as defined under Section 7 of the Act of 2017.
33. It is further relevant to note that, as per the terms of the
agreement itself, the valuation of toll collection rights undertaken by the
petitioner has been assessed at around Rs. 2590 million, and as rightly
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[2026:RJ-JD:22539-DB] (22of 34) [CW-15048/2025]
quoted by the Deputy Commissioner, the petitioner has been awarded
the right to collect the toll bythe NHAI in consideration of the
construction services rendered by the petitioner on a DBFOT basis. The
service encompasses direct and indirect expenses related to
construction of roads, bridges, infrastructure, etc. and other assets at
the toll plaza. Thus, the arrangement in question falls within the
definition of "works contract services" and has rightly been treated as
taxable.
34. Since, as there is a promise of fulfilling the obligation on the part
of the petitioner to construct and maintain the road, vis-Ã -vis the
corresponding promise of NHAI to permit the petitioner to collect toll for
the road in question during the subsistence of the contract, the
transaction squarely falls within the statutory framework of 'supply' and
'consideration'.
34. As far as the argument advanced by the counsel for the petitioner
with regard to double taxation is concerned, though they may appear
attractive at first blush, but upon perusal of the record of the case, the
same fizzles out. This is for the reason that there is no privity of
contract between the NHAI and the sub-contractor. Rather, there exist
two distinct contracts, one between the NHAI and the petitioner, and
another between the petitioner and the sub-contractor.
35. As far as the work undertaken by the sub-contractor, i.e., the
Principal Engineering, Procurement and Construction (EPC) Contractor,
is concerned, the sub-contractor has provided works contract services
to the petitioner and has allegedly deposited the due output tax liability.
The services rendered by the sub-contractor, i.e., IRB Infrastructure
Developers Limited attracted tax liability and are distinct from the
contract between the petitioner and the NHAI.
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[2026:RJ-JD:22539-DB] (23of 34) [CW-15048/2025]
36. With regard to the concession agreement in question, the
petitioner, after getting the road constructed through the sub-contractor
by virtue of a separate contract, handed over the same by way of
transfer to the NHAI and thereafter has been collecting toll upon the
same while paying the premium as agreed between the parties, in
consonance with the concession agreement. Thus, both contracts are
distinct and cannot be treated as overlapping. They are not part of the
same transaction, nor is there any privity of contract between the NHAI
and the sub-contractor.
37. As far as the arguments of the counsel for the petitioner with
regard to exemption from applicability of GST to the collection of toll are
concerned, it would be relevant to quote Notification No. 12/2017-CT
(Rate) dated 28.06.2017, relied upon by the petitioner. The relevant
portion of the same provides as under:
SL. No. Chapter, Description of Rate (per cent) Condition
Section, Services
Heading,
Group or
Service Code
(Traiff)
(1) (2) (3) (4) (5)
23 Heading 9967 Service by way Nil Nil
of access to a
road or a bridge
on payment of
toll charges.
38. At the same time, the clarification issued by the Ministry of
Finance dated 17.06.2021 would also be relevant to quote here, which
provides as under:
"Circular No.150/06/2021-GST
CBIC-190354/36/2021-TRU Section-CBEC
Government of India
Ministry of Finance
Department of Revenue
*****
North Block, New Delhi,
Dated the 17th June, 2021
To,
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The Principal Chief Commissioners/ Chief Commissioners/
Principal Commissioners/ Commissioner of Central Tax (All) /
The Principal Director Generals/ Director Generals (All)
Madam/Sir,
Sub-Clarification regarding applicability of GST on the
activity of construction of road where considerations are
received in deferred payment (annuity)-reg.
Certain representations have been received requesting for a
clarification regarding applicability of GST on annuities paid for
construction of road where certain portion of consideration is
received upfront while remaining payment is made through deferred
payment (annuity) spread over years.
2. This issue has been examined by the GST Council in its 43rd
meeting held on 28th May, 2021.
2.1 GST is exempt on service, falling under heading 9967 (service
code), by way of access to a road or a bridge on payment of annuity
[entry 23A of notification No. 12/2017-Central Tax]. Heading 9967
covers “supporting services in transport” under which code
996742 covers “operation services of National Highways, State
Highways, Expressways, Roads & streets; bridges and tunnel
operation services”. Entry 23 of said notification exempts “service
by way of access to a road or a bridge on payment of toll”.
Together the entries 23 and 23A exempt access to road or bridge,
whether the consideration are in the form of toll or annuity
[heading 9967].
2.2 Services by way of construction of road fall under heading
9954. This heading inter alia covers general construction services
of highways, streets, roads railways, airfield runways, bridges and
tunnels. Consideration for construction of road service may be paid
partially upfront and partially in deferred annual payments (and
may be called annuities). Said entry 23A does not apply to services
falling under heading 9954 (it specifically covers heading 9967
only). Therefore, plain reading of entry 23A makes it clear that it
does not cover construction of road services (falling under heading
9954), even if deferred payment is made by way of instalments
(annuities).
3. Accordingly, as recommended by the GST Council, it is hereby
clarified that Entry 23A of notification No. 12/2017-CT(R) does not
exempt GST on the annuity (deferred payments) paid for
construction of roads.
4. Difficulty if any, in the implementation of this circular may be
brought to the notice of the Board.
Yours faithfully,
(Rajeev Ranjan)
Under Secretary, TRU
Email: [email protected]
Tel: 011 2309 5558″
39. A comparative analysis of both the circular and the clarification
reveals that the work undertaken for construction of roads falls under
Heading 9954 and not under Heading 9967, as tried to be claimed by
the learned counsel for the petitioner. Only Entry No. 9967, with regard
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[2026:RJ-JD:22539-DB] (25of 34) [CW-15048/2025]to collection of toll, has been exempted. However, where construction of
roads is undertaken and, pursuant thereto, as a reciprocal arrangement
under the agreement, the toll is being collected, there is no exemption
under that heading whatsoever. This is further clarified by the Circular
dated 17.06.2021 issued by the Ministry of Finance. More particularly,
when the payment for construction of roads is made in deferred annual
installments, it may be called annuity. In the present case, the
collection of toll is essentially oneof the consideration, which is being
received by the petitioner and essentially amounts to annuity. Thus, the
same does not fall within the ambit of the exemption clause in this
regard.
40. Even otherwise, as far as the exemption notifications are
concerned, in case of any ambiguity the same are to be interpreted in
favour of the revenue and not in favour of the assessee. The law in this
regard is no longer res integra, in view of the judgment pronounced by
the Hon’ble Apex Court in Commr. of Customs v. Dilip Kumar & Co.;
(2018) 9 SCC 1, followed in Commr. (CGST) v. Safari Retreats (P)
Ltd.;(2025) 2 SCC 523. The Hon’ble Supreme Court in Dilip Kumar
(supra) has observed as under:
“53. After thoroughly examining the various precedents some
of which were cited before us and after giving our anxious
consideration, we would be more than justified to conclude
and also compelled to hold that every taxing statute including,
charging, computation and exemption clause (at the threshold
stage) should be interpreted strictly. Further, in case of
ambiguity in charging provisions, the benefit must necessarily
go in favour of subject/assessee, but the same is not true for
an exemption notification wherein the benefit of ambiguity
must be strictly interpreted in favour of the Revenue/State.
54. In Govind Saran Ganga Saran v. CST [Govind Saran
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[2026:RJ-JD:22539-DB] (26of 34) [CW-15048/2025]447] , this Court pointed out three components of a taxing
statute, namely, subject of the tax; person liable to pay tax;
and the rate at which the tax is to be levied. If there is any
ambiguity in understanding any of the components, no tax can
be levied till the ambiguity or defect is removed by the
legislature. [See Mathuram Agrawal v. State of M.P.
[Mathuram Agrawal v. State of M.P., (1999) 8 SCC 667] ;
Indian Banks’ Assn. v. Devkala Consultancy Service [Indian
Banks’ Assn. v. Devkala Consultancy Service, (2004) 11 SCC
1 : AIR 2004 SC 2615] and Consumer Online Foundation v.
Union of India [Consumer Online Foundation v. Union of
India, (2011) 5 SCC 360] .]
55. There is abundant jurisprudential justification for this. In
the governance of rule of law by a written Constitution, there
is no implied power of taxation. The tax power must be
specifically conferred and it should be strictly in accordance
with the power so endowed by the Constitution itself. It is for
this reason that the courts insist upon strict compliance before
a State demands and extracts money from its citizens towards
various taxes. Any ambiguity in a taxation provision,
therefore, is interpreted in favour of the subject/assessee. The
statement of law that ambiguity in a taxation statute should be
interpreted strictly and in the event of ambiguity the benefit
should go to the subject/assessee may warrant visualising
different situations. For instance, if there is ambiguity in the
subject of tax, that is to say, who are the persons or things
liable to pay tax, and whether the Revenue has established
conditions before raising and justifying a demand. Similar is
the case in roping all persons within the tax net, in which
event the State is to prove the liability of the persons, as may
arise within the strict language of the law. There cannot be
any implied concept either in identifying the subject of the tax
or person liable to pay tax. That is why it is often said that
subject is not to be taxed, unless the words of the statute
unambiguously impose a tax on him, that one has to look
merely at the words clearly stated and that there is no room
for any intendment nor presumption as to tax. It is only the
letter of the law and not the spirit of the law to guide the
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interpreter to decide the liability to tax ignoring any amount
of hardship and eschewing equity in taxation. Thus, we may
emphatically reiterate that if in the event of ambiguity in a
taxation liability statute, the benefit should go to the
subject/assessee. But, in a situation where the tax exemption
has to be interpreted, the benefit of doubt should go in favour
of the Revenue, the aforesaid conclusions are expounded only
as a prelude to better understand jurisprudential basis for our
conclusion. We may now consider the decisions which support
our view.
…. …. ….
63. In TISCO Ltd. v. State of Jharkhand [TISCO Ltd. v. State of
Jharkhand, (2005) 4 SCC 272] , which is another two-Judge
Bench decision, this Court laid down that eligibility clause in
relation to exemption notification must be given strict
meaning and in para 44, it was further held: (SCC pp. 289-
290)
“44. The principle that in the event a provision of fiscal
statute is obscure such construction which favours the
assessee may be adopted, would have no application to
construction of an exemption notification, as in such a case it
is for the assessee to show that he comes within the purview
of exemption (see Novopan India Ltd. v. CCE [Novopan India
Ltd. v. CCE, 1994 Supp (3) SCC 606] ).”
66. To sum up, we answer the reference holding as under:
66.1. Exemption notification should be interpreted strictly;
the burden of proving applicability would be on the assessee
to show that his case comes within the parameters of the
exemption clause or exemption notification.
66.2. When there is ambiguity in exemption notification which
is subject to strict interpretation, the benefit of such
ambiguity cannot be claimed by the subject/assessee and it
must be interpreted in favour of the Revenue.
66.3. The ratio in Sun Export case [Sun Export Corpn. v.
Collector of Customs, (1997) 6 SCC 564] is not correct and
all the decisions which took similar view as in Sun Export
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[2026:RJ-JD:22539-DB] (28of 34) [CW-15048/2025]
case [Sun Export Corpn. v. Collector of Customs, (1997) 6
SCC 564] stand overruled. “
41. The Hon’ble Supreme Court in Safari Retreats (supra) has
observed as under:
“Rules regarding the interpretation of taxing statutes
27. Regarding the interpretation of taxation statutes, the
parties have relied on several decisions. The law laid down
on this aspect is fairly well settled. The principles governing
the interpretation of the taxation statutes can be summarised
as follows:
27.1. A taxing statute must be read as it is with no
additions and no subtractions on the grounds of legislative
intendment or otherwise;
27.2. If the language of a taxing provision is plain, the
consequence of giving effect to it may lead to some absurd
result is not a factor to be considered when interpreting the
provisions. It is for the legislature to step in and remove the
absurdity;
27.3. While dealing with a taxing provision, the principle
of strict interpretation should be applied;
27.4. If two interpretations of a statutory provision are
possible, the Court ordinarily would interpret the provision in
favour of a taxpayer and against the Revenue;
27.5. In interpreting a taxing statute, equitable
considerations are entirely out of place;
27.6. A taxing provision cannot be interpreted on any
presumption or assumption;
27.7. A taxing statute has to be interpreted in the light of
what is clearly expressed. The Court cannot imply anything
which is not expressed. Moreover, the Court cannot import
provisions in the statute to supply any deficiency;
27.8. There is nothing unjust in the taxpayer escaping if
the letter of the law fails to catch him on account of the
legislature’s failure to express itself clearly;
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[2026:RJ-JD:22539-DB] (29of 34) [CW-15048/2025]27.9. If literal interpretation is manifestly unjust, which
produces a result not intended by the legislature, only in such
a case can the Court modify the language;
27.10. Equity and taxation are strangers. But if construction
results in equity rather than injustice, such construction
should be preferred;
27.11. It is not a function of the Court in the fiscal arena
to compel Parliament to go further and do more;
27.12. When a word used in a taxing statute is to be
construed and has not been specifically defined, it should not
be interpreted in accordance with its definition in another
statute that does not deal with a cognate subject. It should be
understood in its commercial sense.
Unless defined in the statute itself, the words and expressions
in a taxing statute have to be construed in the sense in which
the persons dealing with them understand, that is, as per the
trade understanding, commercial and technical practice and
usage.”
42. Apparently, there is no ambiguity. However, even assuming for the
sake of argument that some ambiguity exists with regard to the
exemption, then the same has to be interpreted in favour of the
department, in view of the clarification circular dated 17.06.2021. Thus,
the ground taken by the counsel for the petitioner with regard to the toll
being collected, as exempted under Entry 23-A of the circular in
question, cannot be accepted in view of the clarification issued by the
department, as also considering the fact that, in the present case, the
toll is being collected as a barter for the work contract undertaken by
the petitioner, and further considering that apart from toll collection,
there is also a payment of premium as specified under Article 26.2 of
the agreement in question. Exemption is only with regard to toll
collection simpliciter and not for toll being collected for barter.
43. As far as the reliance placed by the counsel for the petitioner upon
the judgment passed by the Hon’ble Apex Court in State of Andhra
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[2026:RJ-JD:22539-DB] (30of 34) [CW-15048/2025]
Pradesh v. Larsen and Toubro Ltd. (supra) is concerned, it is pertinent
to note that the said case pertained to the provisions of the Value
Added Tax (VAT) and not GST. As far as the VAT is concerned, the
taxability arose at the time of incorporation of goods in the works
contract, as per the provisions of the VAT Act, which has further been
emphasized by the Hon’ble Apex Court.
44. However, as far as GST is concerned, it is a destination-based tax
levied on the supply of goods and services. Under the VAT Act, there is
no concept of taxing services, only goods are taxed. The issue before
the Hon’ble Apex Court in Larsen and Toubro (supra) was with regard to
VAT being imposed upon the sale of goods purchased by the sub-
contractor and thereafter handed over by the contractor to the
procuring authority.
45. In contrast, in the present case, the nature of tax is entirely
different and is being levied upon the services provided by the
contractor in terms of the concession agreement. Thus, the judgment in
question, as referred to by the counsel for the petitioner has no
application to the case at hand.
46. It will be relevant to mention here that recently the Division
Bench of the High Court of Telangana had an occasion to deal with an
identical issue concerning a BOT contract for construction of a road in
GMR Pochanpalli Expressways Limited v. Additional Director,
DGGI and Ors.; 2024 SCC OnLine TS 3988.
47. In the above-mentioned case, the validity of the Circular dated
17.06.2021 (as referred above) was under challenge, with a prayer for
declaring it being in contravention of the Notification dated 28.06.2017,
more particularly Entry 23 thereof.
48. The Hon’ble Court, while dealing with an identical concession
agreement (with the only distinction that the toll was being collected by
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[2026:RJ-JD:22539-DB] (31of 34) [CW-15048/2025]
the NHAI and not by the concessionaire in that particular case), held
that the prolonged collection of toll in question amounted to annuity.
Though it was not a hybrid annuity model, it was treated as a BoT-
annuity model.
49. The Court, while examining both the Circular dated 17.06.2021
and the Notification dated 28.06.2017, held as under:
“26. Therefore by the contents of the circular, the Entry of
23A in the Notification that the GST is exempt on service
falling under Service Code 9967, by way of access to a road
or a bridge on payment of annuity has been reaffirmed.
Additionally, explained that the service code covers (a)
supporting services in transport (b) operation 17
PSKJ&NTRJ Wp_16266_2023 services of National
Highways, State Highways, Express Highways, Roads and
streets, (c) bridges and tunnel operation services, by way of
access to a road or bridge on payment of toll under Entry 23
of the Notification. In substance, the services enumerated in
23 and 23A for providing access to roads or bridges are
exempted, whether the consideration is in the form of tolls or
annuities. On top of that, specified the services of
construction of highways, streets, road railways, airfield
runways, bridges and tunnels, which fall under Service Code
9954, whether the consideration may be upfront or partially
in deferred annual payment/annuity is not covered under
Entry 23A and not exempt from the GST.
27. The resolution of the 22nd GST Council and the
consequent notification Nos.32 and 33 of 2017 elucidates
that payment of annuity to the developers of public
infrastructure has been equated with toll which was already
exempted from tax. In effect, the service of access to a road
or bridge on payment of an annuity covered under Code
9967 is qualified for exemption. Therefore insertion of
entries 23A and 24A is in consonance with the resolution of
the 22nd GST Council.
28. The clarification of the 43rd GST Council saved
exemption to the service under 9967 in entry No.23A and(Uploaded on 22/05/2026 at 01:55:35 PM)
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[2026:RJ-JD:22539-DB] (32of 34) [CW-15048/2025]held that the exemption does not cover any deferred/annuity
payment for construction service. Therefore it has been
announced that the construction of roads simplicitor is
taxable service, though the payment is in full or annuity to
the concessionaire. The council’s reiteration preserved the
exemption of the Service under the Code 9967 and
enunciated that the taxable Service fall within the scope of
heading 9954. A close reading of notification Nos. 12, 32
and 33 of 2017 in no way suggests that the entries 23 or 23A
or 24A exempts the services under 9954 i.e. construction
service of the highways, bridges, and so on. Thus, we are of
the considered opinion that there is no intersection or
overlap or contradiction of direction in the resolutions of the
22nd and the 43rd GST Council vis-Ã -vis Notifications Nos.
12, 32 and 33 of 2017 and the impugned circular. In this
view, the circular’s explanation aligns with the 43rd GST
Council resolution.”
50. We are in complete agreement with the reasoning given by the
Division Bench of the Telangana High Court as far as the applicability of
the Circular dated 17.06.2021 is concerned, and with regard to GST not
being exempted for the toll being collected pursuant to the construction
of roads, as well as toll, forming part of the deferred annuity payment
for construction services.
51. With regard to the arguments raised by the counsel for the
petitioner qua the dropping of identical objections in Karnataka and
Gujarat, it is needless to emphasize that, firstly, even if identical
objections (assuming they are indeed identical) were dropped, it makes
no difference. The Court has been called upon to adjudicate a pure
question of law, and simply because an office of the department has
dropped identical objections does not preclude this Court to deliberate
and decide the taxability of the petitioner. Even otherwise, there can be
no concept of negative equality, as sought to be invoked by the counsel
for the petitioner.
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[2026:RJ-JD:22539-DB] (33of 34) [CW-15048/2025]
52. However, in the interest of justice and for complete adjudication,
this Court finds it appropriate to deal with the argument advanced by
the counsel for the petitioner in this regard. The petitioner has placed
on record the audit reports and decisions thereupon pertaining to the
States of Karnataka and Gujarat, wherein audit objections were initiated
against M/s. IRB Westcoast Tollway Limited and M/s. IRB Ahmedabad
Baroda Super Express Tollway Pvt. Ltd., respectively.
53. A perusal of the objection shows that, as far as the audit objection
in the State of Karnataka is concerned, it was with regard to the
assessee/auditee declaring ITC of a certain amount as ITC available but
ineligible at column No. 8 of Form GSTR-9. However, no documentary
evidence was produced regarding the ineligible ITC as listed in the
annual statement filed in Form GSTR-9. The proceedings were dropped
while considering the reply filed and the documents produced by the
audit. Thus, the issue before the assessing officer in Karnataka was not
whether the construction undertaken by the assessee would fall within
the definition of supply or services, nor whether the subcontractor or
the principal contractor would be liable for the payment of taxable
liability of the principal contractor. Thus, the issue in the case of
Karnataka is entirely different and has no bearing in the present case.
54. Similarly, as far as the audit objection in Gujarat is concerned, the
issue there was with regard to payment of VAT, more particularly GVAT,
and whether the same was paid under the composition scheme or not.
Even the assignment by the NHAI of the user fee collection from the
users of the road was being considered. However, the issue pertained to
liability under the VAT Act and not under the GST. As held supra, the
provisions of both Acts operate differently, and simply because an audit
objection was dropped in Gujarat, cannot make the same applicable to
the present case. Thus, the arguments raised by the counsel for the
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[2026:RJ-JD:22539-DB] (34of 34) [CW-15048/2025]
petitioner with regard to parity with Gujarat and Telangana are without
substance.
55. This Court has further examined the orders impugned, passed by
the Deputy Commissioner as well as the Appellate Authority, and finds
that the same are well-reasoned orders, while referring to the
provisions of law as well as the terms and conditions of the concession
agreement. This Court does not find any illegality in the impugned
orders, and the same are thus upheld.
Conclusion
56. As an upshot of the above discussion, the writ petition filed by the
petitioner is bereft of merit and is accordingly dismissed. The orders
dated 14.12.2023 and 09.05.2025 passed by the Deputy Commissioner
and the Appellate Authority respectively, are affirmed.
57. No order as to costs.
(SANDEEP SHAH),J (ARUN MONGA),J
mohit/-
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