2025 (8) TMI 1639 - HC - GST

Writ dismissed as premature when petitioner failed to file detailed reply and documents to foreign tax show-cause notice

M/s. Renaatus Projects Private Limited, Rep by Managing Director, Mr. Manoj Poosappan Versus The Joint Director, Directorate General of GST Intelligence, Chennai, The Joint Commissioner, CGST & Central Excise, Chennai

HC dismissed the petition as premature, holding the petitioner must first respond to an elaborate show-cause notice concerning tax liability from a ... Levy of tax on construction of New Supreme Court Building at Port Louis, Mauritius - place of provision of service - location of supplier - HELD THAT:- In the case on hand, the petitioner, who is located at Chennai, had participated in the tender, on 19.09.2017, floated by M/s.NBCC India Limited, New Delhi, for construction of New Supreme Court Building at Port Louis, Mauritius and the said contract was awarded to the petitioner vide letter dated 14.11.2017. Subsequently, they had entered into a formal agreement on 06.12.2017. The petitioner had deposited 10% of the contract value, i.e., USD 24,257,196,99/-, by way of Demand Draft No.319771 dated 10.09.2017. Thereafter, on 01.12.2017, they had established a Foreign Branch Office (FBO) in Mauritius to execute the project. Subsequently, the petitioner company had obtained corporate and business registration from Government of Mauritius on 04.12.2017 and they had also registered under the Mauritius Value Added Tax Act on 12.12.2017. Thereafter, the petitioner had completed the construction of new Supreme Court building at Mauritius during the month of October, 2020. The 1st respondent had conducted an investigation at the petitioner's premises and also enquired on the transactions and projects undertaken by the petitioner, including the projects executed outside India. All the details sought for by the Department were duly furnished by the petitioner - If the petitioner is aggrieved over the reason assigned by the respondent, they can very well challenge the same in the manner known to law. Without providing any such reply to the show cause notice, the petitioner had approached this Court in a pre-matured way, which is inappropriate. An elaborate show cause notice came to be issued on the factual aspect, which cannot be decided without any reply and supporting documents to be filed by the petitioner. When such being the case, this Court is of the view that it is obligatory on the part of the petitioner to file a detailed reply along with all the supporting documents to substantiate their case before the Assessing Officer. Therefore, it is clear that the present petition has been filed in a pre-mature manner and at this stage, the only right course available for the petitioner is to file a detailed reply along with all the supporting documents before the respondents. This Court is not inclined to entertain this writ petition. Accordingly, this petition is dismissed by granting liberty to the petitioner to file their reply, along with all the supporting documents, for the impugned show cause notice dated 22.07.2024 within a period of 30 days from the date of receipt of a copy of this order. Petition dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether a show cause notice issued by the tax authority seeking to tax construction services performed in a foreign territory is maintainable in view of the place of supply rules and definitions of 'location of supplier' and 'location of recipient' under the GST/IGST framework. 2. Whether the mere establishment of a foreign branch office (FBO), invoicing and accounting in foreign currency at the foreign location, and performance of works on immovable property situated abroad conclusively place the supply outside Indian taxation jurisdiction. 3. Whether a writ petition challenging an elaborate show cause notice (issued as a proposal seeking information/denoting tax demand) is premature where the assessee has not filed a detailed reply to the notice and provided supporting documents. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Taxability of construction services performed abroad: legal framework Legal framework: Place of supply rules under the IGST Act (including Section 12(3)) and definitions in the GST Act of 'location of supplier' (s.2(71)) and 'location of recipient' (s.2(70)) govern whether cross-border supplies of services are taxable in India. Section 7(1) of the IGST Act prescribes taxation of inter-state supplies. Precedent treatment: The Court noted a recent Division Bench decision holding that work carried out abroad is not chargeable to GST under Indian law; that precedent was referred to for factual comparison but not directly applied. Interpretation and reasoning: The respondents contend that where contractual parties are Indian entities (supplier and recipient located in India), Section 12(3) dictates the place of supply for services related to immovable property is the location of the recipient in India, making the transaction an inter-state taxable supply under Section 7(1) of the IGST Act. The petitioner relies on the FBO's operational reality in the foreign territory - corporate registration, VAT registration, local invoicing and accounting, payments in foreign currency - to assert that the supply was rendered from abroad and therefore not taxable in India. Ratio vs. Obiter: The Court did not resolve the substantive conflict between these contentions on the facts; it recognized the competing legal positions under the place-of-supply rules and treated the question as fact-sensitive. The observation that the place-of-supply/statutory definitions are central to the taxability question is ratio insofar as it frames the legal test; any resolution of the factual application was deferred and thus remains obiter. Conclusions: The Court refrained from adjudicating the taxability issue on merits at this stage because the authority issued an elaborate show cause notice and the petitioner had not filed a detailed reply with supporting documents. The Court held that the assessing authority must be given an opportunity to consider the petitioner's factual and documentary case before any final determination on whether the supply is taxable in India. Issue 2 - Significance of foreign branch office, local invoicing and payments for jurisdictional determination Legal framework: Determination of 'location of supplier' and 'location of recipient' under the GST Act is fact-based and depends on where the supply is undertaken and where the recipient is located; associated documentary and transactional indicia (place of contract formation, performance, invoicing, funds flow, corporate registrations) are relevant to determine taxable nexus. Precedent treatment: The Court referenced authority that found offshore works not taxable when established on the facts, but distinguished that case because the factual matrix, replies and adjudication had already occurred there. Interpretation and reasoning: The Court acknowledged that the petitioner's factual material - establishment of an FBO, local corporate/VAT registration, local invoicing and accounting, foreign-currency payments - may be determinative of non-taxability if accepted by the assessing authority. Conversely, the respondents' emphasis on contractual links to Indian entities and internal consolidation of accounts could support an Indian tax nexus. The Court emphasized that the assessing authority requires the petitioner's detailed written response to resolve these competing factual inferences. Ratio vs. Obiter: The proposition that indicia such as local registration, invoicing, and payments are relevant factors is ratio; the Court's refusal to decide the disputed effect of such indicia without a reply is procedural and binding for the present matter but does not lay down a definitive substantive rule as to taxation. Conclusions: The presence of an FBO and foreign transactions does not automatically preclude Indian taxation; the factual matrix must be presented to and considered by the authority. Accordingly, the Court declined to quash the show cause notice on the ground of lack of territorial or legal jurisdiction at this interlocutory stage. Issue 3 - Prematurity of writ challenging show cause notice and obligation to file a detailed reply Legal framework: Administrative law principles and statutory procedural doctrine require that an assessee respond to a show cause notice and provide material for the authority to decide before seeking judicial intervention; remedies against final adverse orders exist under the GST appellate scheme and writ jurisdiction. Precedent treatment: The Court cited a decision where, after the filing of a reply and adjudication, a court addressed merits and found work abroad not chargeable; that case was distinguished because factual reply and adjudication had been completed there, unlike the present matter. Interpretation and reasoning: The Court reasoned that the impugned show cause notice spans factual issues that cannot be resolved without a detailed reply and supporting documents from the petitioner. It underscored the assesssee's obligation to explain its case to enable the Department to appreciate the nature of the transaction and decide whether to proceed, drop proceedings, or issue a demand. Judicial intervention at the pre-adjudicatory stage was characterized as premature absent exhaustion of the statutory process. Ratio vs. Obiter: The holding that the writ is premature and that the petitioner must first file a detailed reply is ratio as applied to the facts of this petition; the Court's procedural direction is a determinative ruling in the present context. Conclusions: The writ petition was dismissed as premature. The Court granted liberty to the petitioner to file a detailed reply with supporting documents to the show cause notice within a specified period (30 days), and directed the respondents to consider that reply in accordance with law. The petitioner retains the right to challenge any adverse decision after adjudication by the prescribed remedies. Cross-references and practical outcomes - Cross-reference: Issues 1 and 2 are interlinked - the legal determination of place of supply under Section 12(3) and definitions in Sections 2(70)/2(71) require resolution of the factual matrix set out in Issue 2; the Court deferred both pending administrative adjudication. - Practical outcome: The assessment procedure is to be completed only after the petitioner files its detailed reply and the authority evaluates documentary and factual submissions; judicial review is preserved post-adjudication.