Tata Group moves High Court on Rs 1,500 crore GST claim

The salt-to-software Tata Group has approached the Bombay High Court to contest a ₹1,500-crore goods and services tax (GST) claim pertaining to its 2017 settlement of a dispute with NTT Docomo, sources aware of the development told ET.

The GST claim, made by the Directorate General of GST Intelligence (DGGI), relates to the dispute settlement involving $1.27 billion in payments to the Japanese telecommunications company. Tata Sons, the holding entity for the conglomerate, has challenged the claim of GST liabilities on the payments made, having earlier sought government intervention in the matter.

Hearing scheduled for January 9

The DGGI, on the other hand, is intent on pursuing the case, officials close to the development said. Sources added that in October, the DGGI had issued an intimation of tax, ascertained as payable through the DRC-01 A form. This is issued by the department before it serves a show-cause notice.

"The said form is issued before a notice is sent. However, the company has filed a writ petition and, therefore, a call on the SCN will now be taken once the matter is decided by the court," said another person aware of the matter.

The writ was filed before the Bombay High Court in November under Article 226 and is scheduled to be heard on January 9. The company has made the Union of India, through the Ministry of Finance, and the Central Board of Indirect Taxes & Customs (CBIC), through the Secretary and the Additional Director, DGGI, as respondents in the case.

The Tata Group had told the department that the payment was the outcome of arbitration proceedings in a London court and, hence, GST was not applicable."The amount was the dues paid on behalf of Tata Teleservices by Tata Sons and not for any services rendered by Docomo. It is an arbitration case that was paid and closed," said a senior official close to the development.

Tata's position
Tata Sons is determined to challenge the DGGI claim and is putting its top legal experts to handle the case, officials said. Some legal experts believe that since the dues pertained to services rendered by a group company, DGGI is looking at it in a very technical manner.Tata Sons did not comment.

The DGGI functions under the CBIC and is entrusted with the collection, collation and dissemination of intelligence relating to evasion of GST. It used to be the Directorate General of Central Excise Intelligence (DGCEI) earlier.

GST has been levied under Schedule 2 of the CGST Act, which treats the payment of loans as a service rendered. "Since Tata Sons is the holding company, it is liable to pay 18% GST on behalf of Tata Teleservices," a senior official told ET. "The matter is being pursued by DGGI, and the department is of the view that this route could be taken by other companies to avoid paying GST levied on services rendered and, hence, setting a precedent is a must."NTT Docomo had acquired a 26.5% stake in Tata Group company Tata Teleservices in 2009. The two sides had agreed at the time that the Japanese company could exit the venture at a pre-determined minimum price - at least half of what it paid to acquire the stake. The Japanese firm sought to exercise that option due to Tata Teleservices' financial struggles.

The Reserve Bank of India (RBI), however, was of the view that such an exit could only take place at fair market value in tune with a rule amended in 2013. Tata Sons, then under the leadership of the late Cyrus Mistry, cited this and said it couldn't pay the agreed amount. Docomo filed for international arbitration and in 2017, it stated that it received from Tata Sons $1.27 billion awarded by an international arbitration court for its stake in Tata Teleservices.