907-WP.12194.2017.

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

CIVIL APPELLATE JURISDICTION

WRIT PETITION NO. 12194 OF 2017

1. Builders Association of }
Navi Mumbai }
registered under the Bombay }
Public Trust Act, 1950 and }
the Society Registration Act, }
1860, having Regn. }
No. MH/371-2002/Thane, }
having its office at 308/309, }
Persipolis Co-op. Soc., }
Plot No. 74, Sector-17, }
Vashi, Navi Mumbai – }
400 703 }
}
2. Neelsidhi Realties }
a partnership firm, having }
nd
its address at 2 floor, }
The Emerald Building, }
besides Neel Sidhi Towers }
CHS, Navi Mumbai – 400 703 } Petitioners

versus

1. Union of India }
Through the Secretary, }
Ministry of Finance, }
Department of Revenue, }
Govt. of India, MSEB }
Building, 2 nd floor, Estrella }
Battery Compound, Labour }
Compound, Dharavi, }
Matunga, Mumbai – 400 019 }
}
2. The Commissioner of }
Goods and Service Tax, }
Thane District, 16 th floor, }
Satra Plaza, Plot No. 19/D, }
Palm Beach Road, Vashi, }
Navi Mumbai, Maharashtra }

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3. The Commissioner of }
Goods and Service Tax, }
CBD Belapur District, }
1 st floor, CGO Complex, }
Opp. Police Commissioner's }
office, CBD Belapur, }
Navi Mumbai – 400 614, }
Maharashtra }
}
4. City Industrial and }
Development Corporation }
of Maharashtra Limited, }
nd
Nirmal, 2 floor, Nariman }
Point, Mumbai – 400 021 }
}
5. The State of Maharashtra }
through the Government }
Pleader Bombay High Court }
(OS), Bombay }
}
6. The Commissioner of }
Goods and Service Tax, }
Maharashtra, GST Bhavan, }
Byculla (East), S. Chapsi }
Road, Tadwadi, Mazgaon, }
Mumbai – 400 010 } Respondents

Mr. Vikram Nankani-Senior Advocate

with Mr. Chirag Mody, Mr. Aman
Kacheria i/b. M/s. DSK Legal for the
petitioners.

Mr. Pradeep S. Jetly with Mr. Jitendra B.

Mishra for respondent nos. 1 to 3.

Mr. B. B. Sharma for respondent no. 4.

Mr. B. V. Samant-AGP for State.

CORAM :- S. C. DHARMADHIKARI &

PRAKASH. D. NAIK, JJ.

DATED :- MARCH 28, 2018

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ORAL JUDGMENT:- (Per S. C. Dharmadhikari, J.)

1. Rule. Respondents waive service. By consent, Rule is made

returnable forthwith.

2. By this writ petition under Article 226 of the Constitution of

India, the petitioners are challenging an order levying/collecting

the Goods and Service Tax (GST) on the one-time lease premium

charged by respondent no. 4 while letting plots of land on lease

basis. By prayer clause (b), the petitioners seek a writ of

mandamus or any other appropriate writ, order or direction in

the nature thereof directing the respondents not to collect the

Central Goods and Service Tax on the long term lease granted by

respondent no. 4 to the members of petitioner no. 1, including

respondent no. 2.

3. Before us is the first petitioner styled as Builders'

Association of Navi Mumbai, which is a registered public

charitable trust governed by the Bombay, now Maharashtra

Public Trust Act, 1950 and the Societies Registration Act, 1860.

The second petitioner is a partnership firm carrying on business

as Builder and Developer. The first, second and the third

respondents are the Union of India, through the Secretary,

Ministry of Finance, Department of Revenue, the Commissioner of

Goods and Service Tax, Thane District and the Commissioner of

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Goods and Service Tax, Central Business District (CBD), Belapur.

Respondent no. 4 is the City Industrial and Development

Corporation of Maharashtra Limited (CIDCO), whereas, the sixth

respondent is the Commissioner of Goods and Service Tax,

Maharashtra.

4. The argument of the petitioners is that their members are

reputed Builders and Developers of Navi Mumbai and areas

surrounding it. They have contributed to the growth and

development of Navi Mumbai by constructing and developing

several residential and commercial properties. These projects

are undertaken and carried out after the fourth respondent,

which is registered as a company under the Companies Act, 1956,

exercises the statutory functions in terms of section 113(3A) of

the Maharashtra Regional and Town Planning Act, 1966

(hereinafter referred to as “the MRTP Act”). Insofar as the

nature of the activities and functions of the fourth respondent,

the petitioners, in para 6 of this petition, state as under:-

“6. Respondent No. 4 was incorporated on 17th March,

1970 with the specific aim for creating a new planned, self-
sufficient and sustainable city on the main land across
Thane Creek adjoining the Mumbai City and it disposes of
the land for development for 60 years to various builders
and developers under the Navi Mumbai Land Disposal
(Amendment) Regulation, 2008 by charging them a one-
time lease premium. In addition to this one-time lease
premium a separate lease rental is charged annually for
the period of lease. Respondent No. 4 is a special planning
authority for the areas of Navi Mumbai. The multi-

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dimensional activity undertaken by Respondent No. 4

under the supervision of the Government of Maharashtra
are classified under three broad concepts as enumerated
from the website of Respondent No. 4, (i) Planning and
development of new towns; (ii) Consultancy, project
management and designing; and (iii) Development of new
towns, setting up of industrial face of the city with the help
of planned urban development with the social economic
facility. In other words, Respondent No. 4 is acting as a
special planning authority on behalf of the Government of
Maharashtra and is not carrying on any business activities
as such. A copy of introduction page taken from the
website of Respondent No. 4 is appended hereto and
marked as Exhibit “1”.”

5. It is stated that in its ordinary and normal course of

business, the fourth respondent invites offers from various

entities to acquire, on lease, residential-cum-commercial plots

and three/four star hotel plots in Panvel and Navi Mumbai from

time to time. One such invitation was issued in April, 2017

inviting offers for various plots at Navi Mumbai and Panvel. The

members of petitioner no. 1 applied for allotment of various plots.

The members were allotted these plots. Under the scheme, the

tenderer/bidder is required to make an offer by quoting a rate per

square meter on account of payment of lease premium. The plots

are to be allotted on long term lease of 60 years. A base price is

already fixed for the plot in the annexure to the tender for the

payment of one-time lease premium amount and the tenderer is

required to quote a price above the base price per square meter of

the plot which the tenderer is interested in acquiring. After the

offers are scrutinised, respondent no. 4 usually allots plots on

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lease basis to the bidder quoting the highest rate per square

meter of the one-time lease premium amount provided such a

bidder is eligible as far as the remaining terms and conditions of

the tender document.

6. Thus, the petitioners have obtained plots in the above areas,

but what they are questioning is that when the allotment letter

was issued, the allottee was called upon to pay, on the one-time

lease premium amount, the GST separately by a Demand Draft

drawn in the name of the fourth respondent payable at

Mumbai/Navi Mumbai. The fourth respondent collected GST on

the total one-time lease premium amount payable by the

successful allottee at the rate of 18%. The details of these

allottees and the one time lease premium, the GST payable have

been indicated in a chart in para 12 of the petition. In these

circumstances, a grievance was raised by approaching the Goods

and Service Tax Commissionerate as to how the GST is collected

on the above amount and demanded from the petitioners. There

was correspondence initiated and finally, when the authorities

did not respond, the present petition has been filed.

7. The argument of Mr. Nankani learned senior counsel is that

such a tax, as is demanded, cannot be levied, assessed and

recovered. A long term lease of 60 years tantamounts to sale of

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the immovable property, since the lessor is deprived of, by the

allotment the right to use, enjoy and possess the property. Our

attention is invited to section 105 of the Transfer of Property Act,

1882. The one-time premium amount is the lumpsum

consideration paid for entering into the lease. Our attention is

also invited to the fact that the lease of 60 years and with a

statutory authority is based on the position and status of that

authority. In that regard, our attention is invited to section 113

and particularly sub-section (3A) of the MRTP Act. A new town is

set up by the fourth respondent. It is a planning authority. It is a

creature of the statute. Our attention is also invited to sub-

sections (1) to (3) of section 118 of the MRTP Act. Mr. Nankani

would submit that the CIDCO discharges a Government function

and duty. In any event, it discharges a statutory obligation. The

argument of Mr. Nankani is that by virtue of Article 36, Schedule

I to the Maharashtra Stamp Act, 1958, the present transaction is

treated as a conveyance. Thus, such an instrument styled as

conveyance and conveying a right, title and interest in the

immovable property is brought into existence. Hence, the whole

transaction is akin to sale. If that is the position, then, section 7

of the GST Act cannot have any application. Once the position in

law is understood in this perspective, then, there is no warrant

for imposition of the GST. Our attention is invited to Schedule II

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of the GST Act and some of the clauses therein to urge that if the

intention of the legislation was to charge GST on this one-time

lease premium, then, appropriate provisions would have been

inserted. They not being inserted, as there was a clear intent to

leave out a transaction tantamounting to a sale. Mr. Nankani

attempted to point out that one-time lease premium is different

and distinct from lease rent. It is not a periodical payment, but a

one time. It is not, therefore, conceivable that on such a

premium, the tax could be levied, assessed and recovered. The

premium is akin to Salami and our attention is invited to its plain

dictionary meaning as set out in the legal dictionary. Our

attention is also invited to a judgment of the Hon'ble Supreme

Court in the case of Commissioner of Income Tax Assam, Tripura

and Manipur vs. Panbari Tea Co. Ltd.1. Then, our attention is

invited to a judgment of the Hon'ble Supreme Court in the case of

R. K. Palshikar (HUF) vs. Commissioner of Income Tax, M. P.,

Nagpur2. Finally, Mr. Nankani would heavily rely upon an order

passed by this court on 23rd August, 2017 in the case of

Commissioner of Central Excise, Nashik vs. Maharashtra

Industrial Development Corporation3. He would submit that this

judgment and order dealt with a similar issue concerning the

1 AIR 1965 SC 1871

2 (1988) 3 SCC 594
3 Central Excise Appeal No. 164 of 2015

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Maharashtra Industrial and Development Corporation. Hence,

we should abide by the same.

8. In any event, the argument is that the reliance by the

respondents on a Division Bench judgment of the Allahabad High

Court is misplaced. The Allahabad High Court, in the case of

Greater Noida Industrial Dev. Authority vs. Commissioner of

Customs, Central Excise4 did not notice the judgment of the

Hon'ble Supreme Court in the case of Shri Ramtanu Co-operative

Housing Society Ltd. and Anr. vs. State of Maharashtra and Ors. 5.

For all these reasons, it is submitted that the petitioners be

granted the reliefs as prayed.

9. On the other hand, Mr. Jetly appearing for the Central

Goods and Sales Tax Commissionerate and the Union of India

would urge, based on the affidavit in reply, that this is a petition

which seeks to pre-empt the levy assessment and recovery of

GST. In any event, if the GST being now paid, then, the issue

raised is purely academic. Apart therefrom, the law does not

make any distinction between governmental and non-

governmental agencies and supply of goods or services attracts

GST. The CIDCO cannot be treated as Government. Its position as

a new town planning authority is of no consequence. Once the

4 2015(40) STR 95
5 1970() SCC 323

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legal provisions are clear, unambiguous and plain, then,

regardless of the consequences, the tax is leviable. The whole

edifice of Mr. Nankani's argument is based on the judgments

delivered not in the context of the GST Act. The affidavit in reply

at page 198 of the paper book and particularly paragraph no. 8

points out that the transaction is of supply of services. Once the

Income Tax Act deals with a tax on income, then, the tests are

different. The concepts are also different. It is, therefore, risky to

read into one law the definition or provision to similar effect but

from different law. A different and distinct tax law with its object

and purpose cannot be, therefore, ignored and no automatic

borrowing of any definition from another taxing statute is

permissible. For all these reasons, Mr. Jetly would submit that

the writ petition be dismissed.

10. For properly appreciating the rival contentions, we would

make a reference to the GST Act. The GST Act is an Act to make a

provision for levy and collection of tax on intra-state supply of

goods or services or both by the Central Government and for the

matters connected therewith or incidental thereto. Chapter I

contains preliminary provisions and section 2 therein defines

certain expressions and words. The term “business” is defined in

inclusive manner in section 2(17). The expression includes any

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trade, commerce, manufacture, profession, vocation, adventure,

wager or any other similar activity, whether or not it is for a

pecuniary benefit. It also includes any activity or transaction

undertaken by the Central Government or State Government or

any local authority in which they are engaged as public

authorities. The other definition, which is material and relevant

is to be found in section 2(31) is of the word “consideration”.

Section 2(31) reads as under:-

“2(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.”

11. Then, the definition of the term “person” appearing in

section 2(84) is also relevant. Chapter II contains provisions in

relation to administration and then follows Chapter III, which is

the charging section. Section 7 is heavily relied upon and

therefore, we reproduce the same:-

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“7. (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 a
consideration by a person in the course or furtherance of
business;

(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; and

(d) the activities to be treated 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
recommendations of the Council, shall be treated neither
as a supply of goods nor a supply of services.

(3) Subject to the provisions of sub-sections (1) 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.”

12. A perusal of sections 7, 8, 9, 10 and 11 falling in this

Chapter leaves us in no manner of doubt that the expression

“supply” includes all forms of supply of goods or services or both

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such as sale, transfer, barter, exchange, licence, rental, lease or

disposal made or agreed to be made for a consideration by a

person in the course or furtherance of business. By sub-section

(2) and which opens with a non-obstante clause, 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

recommendations of the Council, shall be treated neither as a

supply of goods nor a supply of services. Equally, subject to the

provisions of sub-sections (1) and (2), the Government may, on

the recommendation of the Council, specify, by notification, the

transactions that are to be treated as a supply of goods and not as

a supply of services or a supply of services and not as a supply of

goods. Pertinently, no notification and traceable to sub-section

(2) of section 7 has been brought to our notice.

13. What is heavily relied upon before us is the position of

CIDCO. The CIDCO relies upon a notification issued under the

MRTP Act. It may be designated as a New Town Development

Authority for the purpose of the MRTP Act. For designation of a

site as a new town and for development of any area as a site for

the new town, sub-section (3A) of section 113 enables the State

Government to require the work of developing and disposing of

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land in the area of new town by any such Corporation, company

or subsidiary company as referred in sub-section (2) of section

113 thereof. It could be declared, by a notification in a Official

Gazette, to be the New Town Development Authority for that

area. Pertinently, this notification, which is relied upon and

which notifies the Navi Mumbai Disposal of Land (Amendment)

Regulations, 2008 reinforces the position that by a final

notification in Official Gazette, the CIDCO is constituted and

designated as the New Town Development Authority.

14. On a plain reading of the GST Act, we do not see how we can

agree with Mr. Nankani. Mr. Nankani also relies upon Schedule

II, which is referable to section 7. These are the activities to be

treated as supply of goods or services. The substantive provision

section 7 in clearest terms says that the activities specified in

Schedule I made or agreed to be made without a consideration

and the activities to be treated as supply of goods or supply of

services referred to in Schedule II would be included in the

expression “supply”. However, clause (a) of sub-section (1) of

section 7 includes 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 a consideration by a

person in the course or furtherance of business. We referred to

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the definitions simply to reinforce our conclusion that the CIDCO

is a person and in the course or in furtherance of its business, it

disposes of lands by leasing them out for a consideration styled as

one-time premium. Therefore, if one refers to Schedule II, section

7, then, Item No. 2 styled as land and building and any lease,

tenancy, licence to occupy land is a supply of service. Any lease

or letting out of a building, including commercial, industrial or

residential complex for business, either wholly or partly is a

supply of service. It is settled law that such provisions in a taxing

statute would have to be read together and harmoniously in order

to understand the nature of the levy, the object and purpose of its

imposition. No activity of the nature mentioned in the inclusive

provision can thus be left out of the net of the tax. Once this law,

in terms of the substantive provisions and the Schedule, treats

the activity as supply of goods or supply of services, particularly

in relation to land and building and includes a lease, then, the

consideration therefor as a premium/one-time premium is a

measure on which the tax is levied, assessed and recovered. We

cannot then probe into the legislation any further.

15. The reliance placed on the judgment of the Hon'ble Supreme

Court in the case of Panbari Tea Co. Ltd. (supra) is entirely

misplaced. There, a registered lease deed by the assessee, under

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which two estates were leased out to a firm for a period of 10

years, was in issue. The lease was executed for a consideration as

and by way of premium and annual rent to be paid by the lessee to

Panbari. The premium was made payable as noted in the Hon'ble

Supreme Court's judgment. What went before the Income Tax

Officer is the issue of treatment to the installment paid towards

the premium in the relevant accounting year. The Income Tax

Officer treated this as a revenue receipt of the assessee. On

appeal, this order was confirmed. On further appeal, the tribunal

also held that the premium was really the rent payable under the

lease deed and, therefore, it was chargeable to income tax. After

the matter was carried to the High Court, the assessee succeeded

because the question posed for the High Court's consideration was

answered by holding that this receipt is a capital receipt. The

question that arose before the Hon'ble Supreme Court was

whether this finding is correct. It is in that context and how to

treat this income, whether as a revenue receipt or a capital

receipt that all the further observations are made. Even by

terming the gain or income as Salami, what the Hon'ble Supreme

Court was essentially concerned with is not the transaction or the

nature thereof, but the income generated or derived from it. Its

treatment, therefore, led to the Hon'ble Supreme Court referring

to section 105 of the Transfer of Property Act, 1882. In these

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circumstances, the opinion rendered is that the income was

treated rightly as a capital receipt. In the context, a lease of

immovable property is a transfer of right to enjoy the property as

termed by the Transfer of Property Act, 1882 for a price paid.

That is how it being a transfer that the income derived in relation

to lease of immovable property was treated as above.

16. Similarly, in the case of R. K. Palshikar (supra), the

agricultural land of the assessee was diverted to non-agricultural

purpose by developing it as housing site several years ago and it

was not disputed that the land in question constitutes a capital

asset within the meaning of section 2(4A) of the Income Tax Act,

1961. The question was whether section 12-B of that act can be

brought in to play in this case as the transfer is of leasehold

interest in immovable property for 99 years and not an outright

sale or transfer of the complete interest of the transferor in the

immovable property. The assessee was not agreeable to pay the

tax as demanded and tried to escape the levy by urging that this

was not a transaction which would invite or attract capital gain

tax. In these circumstances, the question was answered by the

Hon'ble Supreme Court and in that context, the observations

heavily reiled upon by Mr. Nankani are made. Once again, we

cannot ignore that the observations are in the context of the

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provisions, and the interpretation to be placed thereon, but found

in the Income Tax Act, 1961. That is an assessment of the tax on

income. We are concerned here with the GST Act and the tax on

supply of goods and services. It is not disputed that the position

of the CIDCO for the purpose of orderly planning and development

will be of no assistance in the sense while developing a new

township, the objective of the planning authority is not to earn

money, but to develop the area so that the purpose of setting up a

township is achieved by more people wanting to live in the area in

lieu of the various amenities provided in the area. The CIDCO is

one such authority. It is entirely for the legislature, therefore, to

exercise the powers conferred by sub-section (2) of section 7 of

the GST Act and issue the requisite notification. Absent that

notification, merely going by the status of the CIDCO, we cannot

hold that the lease premium would not attract or invite the

liability to pay tax in terms of the GST Act.

17. Even the judgment in the case of Shri Ramtanu Co-

operative Housing Society Ltd. (supra) is of no assistance. There,

the constitutional validity of the Maharashtra Industrial

Development Act, 1962 was challenged. The argument was that

this is not an enactment and in pith and substance referable to

the constitutional entry, namely, Schedule VI List I, Entries 7 and

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52, List II Entry 24 within the meaning of Article 246 of the

Constitution of India. It is in this context that the functions and

powers of the Maharashtra Industrial Development Corporation

(MIDC) were referred and the court came to the conclusion that

the Corporation is not a Government company and cannot be

termed as a trading corporation as well. It provides amenities

and facilities in industrial areas, when it allots industrial plots for

setting up industries so as to achieve a balanced development and

growth of industries. It is performing that function and which,

therefore, enabled the Hon'ble Supreme Court to hold that the

constitutional entries would not allow the power of competent

legislature to make the law. This judgment is of no assistance.

18. In the case of Commissioner of Central Excise, Nashik

(supra), the demand of service tax was in issue. The Finance Act,

1994 and particularly section 65 clause (64) was relied upon to

urge that the service charges collected by the MIDC from the

allottees of the plots are in relation to services provided by the

MIDC to the plot holders and the same is covered by the category

“maintenance, management and repairs” under clause (64) of

section 65 of the Act. It is in relation to such a controversy that

the Hon'ble Supreme Court's judgment in the case of Shri

Ramtanu Co-operative Housing Society Ltd. (supra) outlining the

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legal position and the status of the Corporation is referred by the

Division Bench. The issue raised related to collection of service

charges, but whether the services rendered are taxable services

or not. The Division Bench noted that this consideration is an

amount received for the facilities and amenities provided. That is

a statutory function. It is in these circumstances that the

Revenue's appeal was dismissed. All the observations in the

paragraphs relied upon must be seen in the backdrop of the

essential controversy noted above. With respect, it cannot be said

that the activities performed by sovereign or public authorities

under the provisions of law, which are in the nature of statutory

obligations are excluded from the purview of the present

enactment. Pertinently, the dividing line between governmental

and non-governmental, sovereign and regal functions and

otherwise is not very thin and post globalisation, liberalisation

and privatisation. In that context, a useful reference can be made

to a judgment of the Hon'ble Supreme Court in the case of N.

Nagendra Rao and Co. vs. State of Andhra Pradesh 6. The

observations in paras 23 and 24 are extremely relevant. These

paragraphs read as under:-

“23. In the modem sense the distinction between sovereign

or non-sovereign power thus does not exist. It all depends
on the nature of power and manner of its exercise.
Legislative supremacy under the Constitution arises out of
6 AIR 1994 SC 2663

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constitutional provisions. The legislature is free to legislate

on topics and subjects carved out for it. Similarly, the
executive is free to implement and administer the law. A
law made by a legislature may be bad or may be ultra vires,
but since it is an exercise of legislative power, a person
affected by it may challenge its validity but he cannot
approach a court of law for negligence in making the law.
Nor can the Government in exercise of its executive action
be sued for its decision on political or policy matters. It is
in public interest that for acts performed by the State
either in its legislative or executive capacity it should not
be answerable in torts. That would be illogical and
impractical. It would be in conflict with even modem
notions of sovereignty. One of the tests to determine if the
legislative or executive function is sovereign in nature is
whether the State is answerable for such actions in courts
of law. For instance, acts such as defence of the country,
raising armed forces and maintaining it, making peace or
war, foreign affairs, power to acquire and retain territory,
are functions which are indicative of external sovereignty
and are political in nature. Therefore, they are not
amenable to jurisdiction of ordinary civil court. No suit
under Civil Procedure Code would lie in respect of it. The
State is immune from being sued, as the jurisdiction of the
courts in such matter is impliedly barred.
24. But there the immunity ends. No civilised system can
permit an executive to play with the people of its country
and claim that it is entitled to act in any manner as it is
sovereign. The concept of public interest has changed with
structural change in the society. No legal or political
system today can place the State above law as it is unjust
and unfair for a citizen to be deprived of his property
illegally by negligent act of officers of the State without any
remedy. From sincerity, efficiency and dignity of State as
a juristic person, propounded in nineteenth century as
sound sociological basis for State immunity the circle has
gone round and the emphasis now is more on liberty,
equality and the rule of law. The modern social thinking of
progressive societies and the judicial approach is to do
away with archaic State protection and place the State or
the Government on a par with any other juristic legal
entity. Any watertight compartmentalization of the
functions of the State as "sovereign and non-sovereign" or
"governmental and non-governmental" is not sound. It is
contrary to modem jurisprudential thinking. The need of
the State to have extraordinary powers cannot be doubted.
But with the conceptual change of statutory power being
statutory duty for sake of society and the people the claim
of a common man or ordinary citizen cannot be thrown out

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merely because it was done by an officer of the State even

though it was against law and negligent. Needs of the State,
duty of its officials and right of the citizens are required to
be reconciled so that the rule of law in a Welfare State is
not shaken. Even in America where this doctrine of
sovereignty found its place either because of the "financial
instability of the infant American States rather than to the
stability of the doctrine's theoretical foundation", or
because of "logical and practical ground", or that "there
could be no legal right as against the State which made the
law" gradually gave way to the movement from, "State
irresponsibility to State responsibility". In Welfare State,
functions of the State are not only defence of the country
or administration of justice or maintaining law and order
but it extends to regulating and controlling the activities of
people in almost every sphere, educational, commercial,
social, economic, political and even marital. The
demarcating line between sovereign and non-sovereign
powers for which no rational basis survives has largely
disappeared. Therefore, barring functions such as
administration of justice, maintenance of law and order
and repression of crime etc. which are among the primary
and inalienable functions of a constitutional Government,
the State cannot claim any immunity. The determination
of vicarious liability of the State being linked with
negligence of its officers, if they can be sued personally for
which there is no dearth of authority and the law of
misfeasance in discharge of public duty having marched
ahead, there is no rationale for the proposition that even if
the officer is liable the State cannot be sued. The liability of
the officer personally was not doubted even in Viscount
Canterbury (supra). But the Crown was held immune on
doctrine of sovereign immunity. Since the doctrine has
become outdated and sovereignty now vests in the people,
the State cannot claim any immunity and if a suit is
maintainable against the officer personally, then there is
no reason to hold that it would not be maintainable against
the State.”

19. To the similar effect are the findings in the later judgment of

the Hon'ble Supreme Court in the case of Agricultural Produce

Market Committee vs. Ashok Hari Kuni7 (see paras 22 and 31

to 33)

7 AIR 2000 SC 3116

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20. In the passing, we are of the opinion that the High Court of

Judicature of Allahabad, while considering the demand, not

arising out of the GST, but under the Finance Act in relation to the

services of renting of immovable property of Greater Noida, has

rightly arrived at the conclusion that the same was a taxable

service and on the consideration received, the service tax could

have been levied and demanded. Once we agree with the

reasoning of the Division Bench, then, we do not feel it necessary

to reproduce the paragraphs in the Division Bench judgment. We

are not in agreement with the learned senior counsel appearing

for the petitioners that the demand is contrary to law or unfair,

unjust and unreasonable in any manner.

21. We are, therefore, of the clear view that the demand for

payment of GST is in accordance with law. The said demand

cannot be said to be vitiated by any error of law apparent on the

face of the record. In these circumstances, we do not find any

merit in the writ petition. It is accordingly dismissed. Rule is

discharged. There would be no order as to costs.

(PRAKASH.D.NAIK, J.) (S.C.DHARMADHIKARI, J.)

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