Supply of goods to job worker on buyer's direction: place of supply u/s10(1)(b) made it inter-State; CGST notice quashed

GST officers' jurisdiction to initiate proceedings alleging wrong tax classification turned on whether the petitioner's supply to a job worker in Kerala, on the buyer's direction, was an inter-State or intra-State supply. Applying ss. 7, 8 and 10 of the IGST Act, the HC held that the nature of supply depends on "place of supply," not physical delivery; where goods are delivered on a third party's direction, s. 10(1)(b) fixes the place of supply at the principal/third party's location. Since the buyer/principal was outside Kerala and the invoice treated the job worker as consignee consistent with s. 143 CGST and the circular, the supply was inter-State, taxable under IGST. Consequently, proceedings under CGST/KSGST were without jurisdiction and the notice and order were quashed; the writ was allowed.

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Issues Involved:
1. Determination of whether the supply of goods to the job worker is inter-state or intra-state supply.
2. Jurisdiction of the proceedings initiated under Section 129 of the CGST Act/KGST Act.

Summary:

Issue 1: Determination of Supply Type
The petitioner, a dealer under the CGST and KGST Acts, challenged the proceedings initiated under Section 149 of the CGST Act, 2017. The petitioner argued that the supply of goods to the job worker at Kannur, Kerala, on the instructions of MRF Limited, Tamil Nadu, should be considered an inter-state supply. The court examined Section 10(1)(b) of the IGST Act, which states that when goods are delivered to a third party on the direction of the buyer, the place of supply is deemed to be the principal place of business of the buyer. The court concluded that the supply in question was indeed an inter-state supply, as the goods were directed by MRF Limited to the job worker in Kerala, making the place of supply Tamil Nadu.

Issue 2: Jurisdiction of Proceedings
The petitioner contended that the proceedings under Section 129 were without jurisdiction, as the supply was inter-state and governed by the IGST Act, not the CGST/KGST Acts. The court examined the procedural requirements under Section 143 of the CGST Act and the relevant circular (Ext.P12) issued by the Central Board of Excise and Customs. The court found that the petitioner had complied with the job work procedure by issuing the invoice with the buyer/principal as the customer and the job worker as the consignee. The court also noted that the goods were accompanied by the necessary documents, and the non-generation of KER-1 was not a valid ground for interception, especially during the transition to the E-way bill system.

Conclusion:
The court held that the supply was an inter-state supply governed by the IGST Act, and the respondents did not have jurisdiction to issue the notice and order under Section 129 of the CGST/KGST Acts. Consequently, the impugned proceedings were set aside, and the writ petition was allowed.

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