No GST Exemption On Annuity Paid For Road Construction: Meghalaya High Court

The Meghalaya High Court has held that Entry 23A of the exemption notification does not exempt GST on annuity paid for construction of roads. The bench of Justice H.S. Thangkhiew and Justice B. Bhattacharjee refused to entertain a writ petition filed by Jorabat Shillong Expressway Limited (JSEL), challenging a GST demand exceeding ₹112 crore on annuity payments received from the National Highways Authority of India (NHAI) under a Build-Operate-Transfer (BOT) annuity highway project. The Court held that the dispute primarily concerns tax classification, interpretation of exemption notifications, and assessment issues that must first be examined through the statutory appellate mechanism provided under the Goods and Services Tax laws. The dispute arose from the four-laning of the Jorabat–Shillong section of National Highway-40, a project awarded by NHAI under the BOT (Annuity) model. Under the concession agreement executed in July 2010, JSEL was granted rights to construct, operate, and maintain the highway for a concession period of 20 years. Unlike toll-based BOT projects, the concessionaire was compensated through periodic annuity payments made by NHAI rather than direct toll collection from road users. GST authorities subsequently alleged that the company had failed to pay GST on annuity receipts received between July 2017 and December 2022. Following investigations, authorities issued a show cause notice and later passed an Order-in-Original confirming a tax demand of approximately ₹112.39 crore, along with applicable interest and penalties. The demand pertained to annuity receipts aggregating about ₹864.12 crore. JSEL contended that the annuity payments were exempt from GST under Entry 23A of Notification No. 12/2017, which exempts services by way of access to a road or bridge on payment of annuity. The company argued that the authorities had wrongly classified its activities as taxable “works contract services” under Service Accounting Code (SAC) 9954 instead of exempt road-access services under SAC 9967. The petitioner further challenged the validity of CBIC Circular No. 150/06/2021-GST dated June 17, 2021, which clarified that exemption under Entry 23A does not extend to annuity payments made for construction of roads. According to the company, the circular unlawfully restricted the scope of a statutory exemption notification and could not override the exemption granted under GST law. The company also questioned the jurisdiction of GST intelligence officers and adjudicating authorities, alleging that the show cause notice and adjudication order had been issued by officers who lacked legal authority under the CGST framework. Additionally, it relied upon the Karnataka High Court's ruling in the DPJ Bidar-Chincholi Annuity Road Project case, which had held that annuity receipts under similar projects were entitled to GST exemption. The department defended the tax demand, arguing that the petitioner was engaged primarily in construction services and that annuity payments represented deferred consideration for taxable works contract services. They contended that Entry 23A only exempts services involving access to roads or bridges and not annuity payments made towards construction activities. The department maintained that the 2021 CBIC circular merely clarified the legislative intent behind the exemption and was issued pursuant to recommendations of the GST Council. They further argued that the petitioner had wrongly classified its services and therefore attracted proceedings under Section 74 of the CGST Act. The department emphasized that an effective appellate remedy was available under Section 107 of the CGST Act and that the writ petition should not be entertained when a complete statutory mechanism existed for adjudication of tax disputes. The High Court rejected the company's jurisdictional challenge and held that officers of the Directorate General of GST Intelligence (DGGI) and Additional Commissioners of CGST had been validly empowered through notifications issued under Sections 3 and 5 of the CGST Act. The Court found that the Additional Director of DGGI was competent to issue the show cause notice and that the Additional Commissioner, CGST Shillong, possessed lawful authority to adjudicate the proceedings. Referring to statutory notifications and judicial precedents, the Court observed that the powers exercised by the authorities were traceable to valid legal sources and that mere technical objections regarding the manner of conferment of powers could not invalidate the proceedings. A key aspect of the judgment was the Court's emphasis on the doctrine of alternate remedy. The Bench observed that although High Courts possess wide powers under Article 226 of the Constitution, such powers are ordinarily not exercised when the legislature has created a comprehensive appellate mechanism. The Court held that the present dispute involved complex questions concerning classification of services, applicability of exemption notifications, characterization of annuity receipts, interpretation of concession agreements, and determination of principal supply under GST law. These issues required factual and legal examination by the statutory authorities and could not be treated as pure questions of law warranting direct intervention under writ jurisdiction. While the petitioner relied heavily on the Karnataka High Court's decision in the DPJ Bidar-Chincholi matter, the Meghalaya High Court noted that the legal position had not attained finality and proceedings arising from that judgment were still pending consideration. Consequently, the Court declined to treat the ruling as conclusively settling the controversy. Although the Court refrained from deciding the substantive tax controversy, it observed that, on a prima facie reading of Entry 23A, the petitioner appeared liable for GST on annuity receipts. However, it clarified that detailed determination of the issue would require examination of contractual provisions, classification of services, and exemption provisions by the competent appellate authorities. Concluding that no exceptional circumstances existed to bypass the statutory appellate framework, the Meghalaya High Court declined to exercise its extraordinary writ jurisdiction. The Court held that the petitioner must pursue remedies available under the GST legislation and challenge the assessment before the appropriate appellate forum. Case Details Case Title: M/s Jorabat Shillong Expressway Limited Versus UOI Citation: JURISHOUR-1511-HC-2026(MEG) Case No.: WP(C) No. 245 of 2024 Date: 02/06/2026 Counsel For Petitioner: Sr. Adv. S. Ghosh Counsel For Respondent: Dr. N. Mozika, DSGI Click Here To Read Order Read More: Dept. Can’t Classify Product as Zarda Scented Tobacco After Repeatedly Approving It As Chewing Tobacco: CESTAT

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