AAAR Maharashtra rejects rectification application for export services advance ruling under IGST Act 2017

AAAR Maharashtra rejected the applicant's rectification application seeking correction of an advance ruling regarding export of services and zero-rated tax treatment under IGST Act 2017. The Authority held no error apparent on record existed in the original order, noting the tax liability determination under Section 97(2)(e) CGST Act 2017 involved debatable interpretations rather than clear mistakes. The Authority considered all case law cited by applicant regarding "error apparent" principles and found the original ruling legally sound. A subsequent miscellaneous application was deemed legally non-maintainable and rejected.

---

---

Issues Involved:
1. Whether the "Commission received by the Applicant in convertible Foreign Exchange for rendering services as an “Intermediary” is an “export of services” falling under section 2(6) & outside the purview of section 13 (8) (b) of the IGST Act, 2017.
2. Whether the Appellate Authority for Advance Ruling (AAAR) has jurisdiction to determine the place of supply.
3. Whether there was an error apparent on the face of the record in the original AAAR order.
4. Whether the miscellaneous application for restoration of the rectification application is legally maintainable.

Detailed Analysis:

1. Commission Received as Export of Services:
The Applicant, a distributor for a German company, received commission in foreign currency for procuring purchase orders from Indian customers. The Maharashtra Advance Ruling Authority (MAAR) ruled that the services provided by the Applicant were intermediary services, and thus, the place of supply would be the location of the supplier (Maharashtra). Consequently, the services were considered inter-state supply and liable to tax at 18%. The Applicant contended that the commission should be treated as export of services, attracting zero-rated tax under section 16 (1) (a) of the IGST Act, 2017.

2. Jurisdiction of AAAR to Determine Place of Supply:
The Applicant appealed against the MAAR ruling, but the AAAR held that determining the place of supply does not fall within the purview of Advance Ruling. The Applicant filed for rectification, arguing that the AAAR had jurisdiction under section 97(2)(e) of the CGST Act, 2017, to determine the place of supply as it pertains to the liability to pay tax. The Applicant cited the Kerala High Court judgment in the case of Sutherland Mortgage Services Inc., which supported the view that determining the place of supply falls within the jurisdiction of the Advance Ruling Authority.

3. Error Apparent on the Face of the Record:
The Applicant claimed that the AAAR committed an error by not considering the CBIC Circular No. 107/29/2019-GST, which clarifies that a person supplying services on his own account is not an intermediary. The AAAR, in its order dated 11.12.2019, rejected the rectification application, stating that the interpretation of section 97(2)(e) was debatable and not an error apparent on the face of the record. The AAAR referenced several judicial pronouncements, including the Supreme Court judgments in T.S. Balaram, ITO Vs. Volkart Bros. and Parsion Devi and Others vs. Sumitri Devi and Others, to support its conclusion that a debatable point of law does not constitute an apparent error.

4. Legality of Miscellaneous Application for Restoration:
The Applicant filed a miscellaneous application dated 25.09.2020, seeking restoration of the rectification application. The AAAR held that there is no provision under the CGST Act, 2017, to admit such an application once a rectification order has been passed. The AAAR also noted that the Kerala High Court judgment was not available at the time of the original order and thus could not be considered an apparent error. The AAAR reiterated that an erroneous decision cannot be reheard and corrected under the guise of rectification, as per the Supreme Court's ruling in Parsion Devi and Others vs. Sumitri Devi and Others.

Conclusion:
The AAAR concluded that the miscellaneous application dated 25.09.2020, seeking restoration of the rectification application, is not legally maintainable and is liable to be rejected. The original order dated 22.03.2019 and the subsequent order dated 11.12.2019 stand as they are, with no error apparent on the face of the record warranting rectification. The AAAR emphasized that the determination of the place of supply does not fall within its jurisdiction as per section 97(2) of the CGST Act, 2017.

---