2020 (3) TMI 186 - HC - GST

Jurisdiction confirmed for determining place of supply for services provided by Indian branch to foreign customers

SUTHERLAND MORTGAGE SERVICES INC Versus THE PRINCIPAL COMMISSIONER OFFICE OF THE PRINCIPAL COMMISSIONER OF CUSTOMS, CENTRAL GST AND CENTRAL EXCISE, KOCHI, THE COMMISSIONER OF STATE TAX, ASSISTANT COMMISSIONER, KAKKANAD RANGE-4

The court held that the Advance Ruling Authority has jurisdiction to determine the place of supply for services provided by an Indian branch to customers ... Jurisdiction of Advance ruling - location of supplier - Levy of GST - Export of Services or not - supply of services by India Branch of Sutherland Mortgage Services Inc. USA to the customers located outside India - intra company agreement entered into by the branch with the principal company incorporated in USA - In the instant case, the specific plea of the petitioner is that the services are rendered by the petitioner India branch directly to the overseas customers and not to the principal company incorporated in USA. Whether the determination of the issue of place of supply can be the subject matter of advance ruling? HELD THAT:- It is common ground that if an order is passed under Sec. 97(2) of the CGST Act, then the same is not appealable in terms of Sec. 100 of the Act as sub section (1) of Sec. 100 clearly provides that only if the applicant concerned is aggrieved by any advance ruling pronounced under Sec. 98(4) of the Act that the appeal would lie. Since the stand of the Advance Ruling Authority is that it has rendered its decision under Sec. 98(2) of the CGST Act, an order in the nature of Ext.P-2 cannot be the subject matter of an appeal under Sec. 100 of the said Act. Since that is the position there cannot be any dispute that since the petitioner does not have any alternative statutory remedy, he can challenge the same mainly by way of judicial review in writ proceedings under Art. 226 of the Constitution of India. No dispute has been raised by the respondent regarding the maintainability of the present writ proceedings. A reading of clauses (a) to (g) of sub section (2) of Sec. 97 of the CGST Act would make it clear that 7 items are enumerated as per clauses (a) to (g) of sub section (2) of Sec. 97 and all those clauses other than clause (e) thereof, are in specific terms. Whereas clause (e) of sub section (2) of Sec. 97 of the CGST Act clearly mandates that the larger issue of “determination of liability to pay tax on any goods or services or both” would also come within the ambit of the questions to be raised and decided by the Advance Ruling Authority on which advance ruling could be sought and rendered under the said provisions. Whereas Clauses (a), (b), (c), (d), (f) & (g), ie. the clauses other than clause (e), are in specific “pigeon holes” and the provision as per clause (e) of sub section (2) of Sec. 97 is in wide terms and the Parliament has clearly mandated that the latter issue of determination of liability to pay tax on any goods or services or both, should also be matters on which the applicant concerned could seek advance ruling from the Advance Ruling Authority on which the said authority is obliged to render answers thereto. In the instant case, it is true that the issue relating to determination of place supply as aforestated is not expressly enumerated in any of the clauses as per clauses (a) to (g) of Sec. 97(2) of the CGST Act, but there cannot be any two arguments that the said issue relating to determination of place of supply, which is one of the crucial issues to be determined as to whether or not it fulfills the definition of place of service, would also come within the ambit of the larger of issue of “determination of liability to pay tax on any goods or services or both” as envisaged in clause (e) of Sec. 97(2) of the CGST Act. The Advance Ruling Authority has proceeded on a tangent and has missed the said crucial aspect of the matter and has taken a very hyper technical view that it does not have jurisdiction for the simple reason that the said issue is not expressly enumerated in Sec. 97(2) of the Act. This Court has no hesitation to hold that the said view taken by the Advance Ruling Authority is legally wrong and faulty and therefore the matter requires interdiction in judicial review in the instant writ proceedings. The application will stand remitted to the Advance Ruling Authority concerned for fresh consideration and decision in accordance with law. Issues Involved:1. Jurisdiction of the Advance Ruling Authority under Section 97(2) of the CGST Act.2. Determination of 'place of supply' and its relevance to 'export of services.'3. Applicability of GST on services provided by the Indian branch to customers outside India.4. Definition and interpretation of 'export of services' under Section 2(6) of the IGST Act.Issue-wise Detailed Analysis:1. Jurisdiction of the Advance Ruling Authority under Section 97(2) of the CGST Act:The petitioner sought an advance ruling on whether the supply of services by the Indian branch to customers outside India would attract GST. The Advance Ruling Authority rejected the application, stating that the issue of 'determination of place of supply' does not fall within the permissible issues under Section 97(2) of the CGST Act. The court analyzed Section 97(2) which lists seven specific questions that can be addressed by the Advance Ruling Authority. The court emphasized that while the determination of the place of supply is not explicitly listed, it falls under the broader category of 'determination of liability to pay tax on any goods or services or both' as per clause (e) of Section 97(2). Thus, the court held that the Advance Ruling Authority has jurisdiction to entertain the application on merits and determine all related issues, including the place of supply.2. Determination of 'place of supply' and its relevance to 'export of services':The petitioner argued that the services provided by the Indian branch directly to customers outside India should qualify as 'export of services' under Section 2(6) of the IGST Act. The Advance Ruling Authority noted that the place of supply must be outside India for a service to be considered an export. The court referred to Section 13 of the IGST Act, which deals with the place of supply of services where the location of the supplier or recipient is outside India. The court concluded that the determination of the place of supply is crucial to ascertain whether the services qualify as export and thus fall under zero-rated supply as per Section 16 of the IGST Act.3. Applicability of GST on services provided by the Indian branch to customers outside India:The petitioner contended that the services provided by the Indian branch directly to customers outside India should not attract GST as they qualify as export of services. The court analyzed the intra-company agreement and noted that the services are provided directly to customers outside India, and the Indian branch receives reimbursement from the principal company in the USA. The court highlighted that the services are delivered directly to the customers without any consolidation at the principal company in the USA. Therefore, the services should qualify as export of services, provided they meet the criteria under Section 2(6) of the IGST Act.4. Definition and interpretation of 'export of services' under Section 2(6) of the IGST Act:The court examined the definition of 'export of services' under Section 2(6) of the IGST Act, which requires that the supplier of service is located in India, the recipient is located outside India, the place of supply is outside India, payment is received in convertible foreign exchange, and the supplier and recipient are not merely establishments of a distinct person as per Explanation 1 in Section 8. The court noted that the petitioner’s services are rendered directly to customers outside India and not to the principal company in the USA, thus fulfilling the criteria for export of services. The court concluded that the Advance Ruling Authority should have considered these aspects and rendered a decision on the merits rather than rejecting the application on jurisdictional grounds.Conclusion:The court quashed the rejection order of the Advance Ruling Authority and remitted the application for fresh consideration on merits. The Advance Ruling Authority was directed to permit the petitioner to submit additional materials, provide a personal hearing, and render an advance ruling in accordance with Section 98(4) of the CGST Act. The court emphasized the importance of clarity and precision in tax liability for foreign and domestic investors to foster economic growth.