TaxTMI 
TaxTMI 
2019 (11) TMI 475
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....TMI 227 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA. BRIEF FACTS OF THE CASE A. The facts relevant for the purposes of these appeal proceedings, briefly stated, are as under:- (a) The Appellant is a sole Proprietary firm carrying on the business in the trade name: "MICRO INSTRUMENTS", and holds GSTIN Number: 27AHSPB0847K1Z2 under the Maharashtra Goods & Services Tax Act, 2017 (MGST Act). (b) The Appellant is an accredited Distributor of M/S Carl Zeiss Microscopy GmbH, Jena, Germany, manufacturers of Laser Scanning Microscopes and Systems. The Appellant is, inter alia, dealing in Laboratory Instruments & its spare parts, Laboratory Equipment, and carries on other related activities such as servicing, repairs and maintenance of Laboratory Instruments/ Equipment. A copy of the Dealership Agreement is enclosed with the Appeal. (c) One of its activities relates to providing services to M/S Carl Zeiss, Germany, (for brevity: "the Principals") by way of procuring/securing Purchase Orders (P.O.) from the Indian customers desirous of purchasing advanced type of Equipment, by negotiating the terms of supply including fixation of price above the floor....
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....t been controverted, the principal question for determination placed before the Learned Authority under Section 97 (2) (e) of the CGST Act, was:- "Whether the "Commission" received by the Applicant in convertible Foreign Exchange for rendering services as an "Intermediary" between an exporter abroad and an Indian importer of an Equipment; is an "export of services" falling under section 2(6) & outside the purview of section 13 (8) (b), attracting zero rated tax under section 16 (1) (a) of the Integrated Goods and Services Tax Act, 2017?" D. During the Course of hearing before the Advance Ruling Authority, reference were made to various provisions of the IGST ACT, the basic philosophy and principles governing the GST Laws and pointed attention was drawn to the Apex Court decision in the case of RBI vs. Peerless General Finance and Investment co. Ltd. (1 SCC 424) = 1987 (1) TMI 452 - SUPREME COURT on settled principles of interpretation of statutes. E. Attention of the Learned Authority was also drawn to the case laws submitted in the Paper Book II and the other two direct decisions of the CESTAT in the case of Blue Star and ABS India Ltd., and the decision of the Delh....
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....yment - Service tax paid for Business Auxiliary Services of marketing of products manufactured by subsidiary located abroad -Transaction contended as covered under Export of Services and refund claimed -Booking of order in India not indicative of rendering of services in India - Service delivered only to company located abroad - Service not to be considered as delivered in India when recipient located abroad - Benefit derived by recipient and hence, service utilized abroad - Impugned services having been exported. exemption under Export of Services Rules, 2005 admissible - Impugned order set aside - Section 11B of Central Excise Act, 1944 as applicable to Service tax vide Section 83 of Finance Act, 1994 - Rule 3(2) ibid, [para 4] G. At the end of the hearing the Learned Authority indicated that if the provisions of Section 13 (8) (b) of the IGST Act, are read literally it would mean that the 'intermediary services' would be taxable at the location of the supplier of services, i.e. the state of Maharashtra, where the Appellant /Applicant-Dealer, is registered. H. When the Department representative was called upon to make submissions, he was rather un-prepared and hence further....
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....n section 13 (8) (b) of the IGST Act, by 'adding' a punctuation mark, an apostrophe, to the word " intermediary" and equating the expression as "intermediary's services" or by re-writing the expression as "Services of intermediary" to cover the impugned services provided by the Appellant? (e) When the expression "intermediary services" has not been defined, is it to be construed as 'Nomen Juris' or left open for multiple interpretations, meanings to be assigned by each reader, Authority? (f) When section 2 of the IGST Act starts by saying : "In this Act, unless the context otherwise requires", was it not obligatory for the Learned Authority to construe the defined term: "intermediary" as having restricted connotation to encompass only those "intermediaries" dealing in transactions involving supply of services alone & not supply of goods, as in the case on hand? (g) Whether the expression "intermediary services" in clause (b) has to be construed in conformity with the cognate clauses (a) & (c) of sub-section (8) referring to 'pure services' and in the context understood as "intermediary service" contradistinguished with "the main service"? (h) Whe....
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....e settled principle: "In a case of doubt or dispute, it is well-settled, construction has to be made in favour of the taxpayer and against the Revenue." J. Srinivasa Rao v. Govt, of A.P. [2006 (13) SCALE 27] = 2006 (11) TMI 620 - SUPREME COURT' 4. The text and tenor of the impugned order gives one an impression of a bias in favour of the Revenue as the Learned Authority has not discussed or distinguished any Court or Tribunal decisions laying down some sound principles of law. While the case laws were based on the law prevailing on the date the GST regime was ushered in, yet the GST law is nothing but a compendium of various laws which were subsumed without touching the core principles of VAT system of taxation, best described in the following words of the Supreme Court:- "It is clear that Service Tax is a VAT which in turn is destination based consumption tax in the sense that it is on commercial activities and is not a charge on the business but on the consumer and it would, logically, be leviable only on services provided within the country. Service tax is a value added tax". {All India Federation of Tax Practitioners and Ors. v. Union of India (UOI) and Ors. 2007 (7....
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....services or both or securities on his own account; It is also true that the word or term "services" is also defined in section 2 (102) of the CGST Act, which reads: (102) "services" means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged; But the phrase or expression "intermediary services" has not been defined in any of the GST Laws (CGST/MGST/UGST or IGST) and consequently, one has to apply canons of construction to arrive at its true meaning and purport. Several aspects have to be examined to construe its meaning and purport on the contextual background & its setting in sub-section (8) which applies to "services" simpliciter; and not where the person renders "services" by facilitating or arranging the sale/purchase of goods. xxxx 10. Coming to the juxtaposed words, "intermediary services", there are two ways to read: one, as an adjective + noun, or secondly, as a compound word. Incidentally, there are three types of 'compound wo....
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....lined above, this rule will apply. Normally, it is expected that the intermediary or agent would have documentary evidence authorizing him to act on behalf of the provider of the 'main service'. 13. It is manifestly clear that there has to be two independent services, one of which is called "intermediary services" and another "main services". The phrase or expression "intermediary services" fits in well when a role similar to that of Travel Agent is kept in mind.- Even if the term "intermediary" engulfed "both, goods or service" effective 14-10-2014, or under the IGST Act [sec. 2(13)] it makes no difference, because the phrase or expression has to be construed in the same sense, manner, as it had acquired in the predecessor legislation, namely, "intermediary services" as distinguished from the "main services". In other words, when the "intermediary" is acting as such for the goods, there are "two supplies" at one time, not "two services" at one and the same time. The term "intermediary" in the case on hand is a go-between the cross-border supply of goods; and not "services". 14. The term "intermediary" as defined in section 2 (13) of the IGST Act en....
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....artment claiming benefit of this "exception" in sub-section (8) to avoid inapplicability of default rule, then it has to prove by "the letter of the law" that the case of the Applicant falls in it without any shed of ambiguity. If there is any slightest doubt, which certainly exists in the present case because the statute fails to define the phrase or expression: "intermediary services", and leaves the matter at large open for anyone to put his or her own private interpretation to deny any benefit or saddle liability on the Appellant. Just as the claim for "exemption" must be proved by the assessee by showing that his case falls strictly in the four corners of law, the claim of the Department must also be proved beyond any shed of doubt that the Appellant's case falls in the "exception" in clause (b) of sub-section (8) of section 13 of the Act; otherwise the benefit of doubt goes to opposite party. If there is any ambiguity or failure of the Department to claim that the Appellant's case falls in Rule 13(8) (b) of the Act, the benefit of doubt must be in favour of the Appellant. A reference may be made to the Constitution Bench decision handed down on the 30th July 2018: ....
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....Consumption Abroad - The consumer travels across the border 3. Commercial Presence - Establishment of an office or industry 4. Movement of Natural Persons -The service supplier travels across the border. • These principles can be diagrammatically represented as follows:- • Thus only when the user and the use of the service are located outside India, the transaction amounts to export and not otherwise. In the case under consideration, the user is outside India but the use of the service is in India - situation 2 of the table above. In this situation, the transaction does not amount to export and hence taxable in India. USER In India Outside India USE In India 1 (Taxable) 2 (Taxable) Outside India 3 (Taxable) 4 (Export) Unquote: • The GST law also adopts the principles agreed at Uruguay Round. • Based on the leading case of Kesavananda Bharati it can be said that in case the language of domestic law (law enacted by the Parliament or State legislatures) are not clear, then the Court must rely on the International law (parent authority based on which the domestic l....
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....ce of supply of services, which are either inside or outside the EU to inside or outside their territory, when, according to the effective use and enjoyment of the service, this differs from the place of supply as determined by the general rules, those for hire of means of transport, or certain B2C services to a customer outside the EU [Article 59a of the VAT Directive] • Example 49: Advertising services provided by a company in Norway to a US business is normally taxed where the customer is established and no EU VAT is due. However, if the media used for the advertising campaign is within a Member State, this Member State may decide that VAT is due on its territory, making use of the effective use and enjoyment rule. • Example 50: A German company supplies to a Swedish company the service of transporting goods from the US to China. Even though the transport takes place fully outside the EU, this supply is taxable in Sweden, at the place where the customer is established. Sweden may make use of the effective use and enjoyment rule in order to avoid taxing such a transport taking place outside its territory and outside EU. • Each Member State i....
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.... definition of intermediary' and the services being provided by them are clearly the services as given in the definition of 'intermediary' as referred in the discussion above." (i) In effect, the simplistic meaning is that the undefined expression is to be read as "Intermediary's services", i. e. services provided by intermediary. The reasoning & logic adopted by the Learned Authority is that the Appellant falls in the definition of the term: 'Intermediary' and the 'services' provided by it are the same as mentioned in the definition, therefore, the Appellant's services are "intermediary services" as mentioned in section 13 (8) (b) of the IGST Act. QED = "thus it has been demonstrated." (ii) But the legislature has not used an apostrophe. The expression has to be read as two separate words: "intermediary" & "services", because the law is an edict of Parliament to be read as it is, without any addition or deletion or modification to suit assumed objectives or purposes. (iii) It may be mentioned that the literal rule of construction is to read the text of the legal provision as it exists, by taking into consideration rules of grammar of the English language in which....
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....ri determination of the meaning of a provision based on their own preconceived notions of ideological structure or scheme into which the provision to be interpreted is somewhat fitted. They are not entitled to usurp legislative function under the disguise of interpretation. (b) In A. N. Roy Commissioner of Police v. Suresh Sham Singh reported in AIR 2006 SC 2677 = 2006 (7) TMI 660 - SUPREME COURT, the Apex Court held that, It is now well settled principle of law that, the Court cannot change the scope of legislation or intention, when the language of the statute is plain and unambiguous. Narrow and pedantic construction may not always be given effect to. Courts should avoid a construction, which would reduce the legislation to futility. It is also well settled that every statute is to be interpreted without any violence to its language. It is also trite that when an expression is capable of more than one meaning, the Court would attempt to resolve the ambiguity in a manner consistent with the purpose of the provision, having regard to the great consequences of the alternative constructions. (c) In State of Haryana v. Suresh reported in 2007 (3) KLT 213 = 2007 (6) ....
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.... recipient of services is outside India) i. In respect of following category of services, the place of supply is determined with reference to a proxy. Rest of the services are governed by a default provision. S. No. Nature of service Place of supply 1 Services supplied in respect of goods that are required to be made physically available from a remote location by way of electronic means, (Not Applicable in case of goods that are temporarily imported into India for repairs and exported.) the location where the services are actually performed, the location where goods are situated 2 services supplied to an individual which require the physical presence of the receiver the location where the services are actually performed. 3 Immovable property related services including hotel accommodation. Location at which the immovable property is located. 4 Admission to or organisation of an event. The place where the event is actually held. 5 If the said three services supplied at more than one location i.e. (i) goods & individual (ii) immovable property related (iii) event related 5.1 at more than one location including a loca....
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....der to overcome these difficulties and to improve the ease of doing business for taxpayers and to extend the export related benefits to certain specific supplies, it is proposed to amend the Integrated Goods and Services Tax Act, 2017. NEW DELHI; PIYUSH GOYAL The 4th August, 2018. This clearly demonstrates that the Suppliers of gods & services are facing problems. The Amendment is "to improve the ease of doing business for taxpayers and to extend the export related benefits to certain specific supplies". The same norm holds good for the "services" as well. 28. Interpretation of Statutes (Submission at the time of personal hearing) This Court in RBI vs. Peerless General Finance & Investment Co. Ltd., 1 SCC 424 = 1987 (1) TMI 452 - SUPREME COURT, laid down the following in paragraph no.33:- "We do not think that in defining the expression 'Prize Chit', the Parliament intended to depart from the meaning which the expression had come to acquire in the world of finance, the meaning which the Datta and the Raj Study Groups had given it. That this is the only permissible interpretation will also be further evident from the ....
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.... be quashed as untenable for the reason that existence of two services, at one and the same time, is a sine qua non; and in the case on hand there are no two services, though there are "two supplies" at one and the same time. (d) The interpretation by the learned Authority failed to establish that the case falls in the 'exception clause 13 (8) (b)' and hence the default rule [section 13(2)] be held as applicable. (e) An opportunity of personal hearing be granted. (f) Any other or further relief as may be deemed fit, proper and reasonable be granted. Personal Hearing 31. A personal Hearing in the matter was conducted on 07.03.2019, wherein Shri. D.P. Bhave, Advocate, representing the Appellant, reiterated their written submissions. Shri. Tukaram Godse (Assistant Commissioner of State Tax), appearing as jurisdictional officer, also made the oral submissions, which were in line with their earlier submissions, which were made before the Advance Ruling Authority. Discussions and Findings 32. We have gone through the record and perused the facts of case and the submissions made by the appellant and the department. The brief facts of the cases as con....
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....son being not tenable. The authority for Advance Ruling after rejection of the appellant's claim of 'export of service' held it as an 'interstate supply' as per provisions of section 7 (5) (c) of the IGST Act and eligible to levy of IGST. 34. The prayer of the appellant in the present appeal is as follows:- a. The Appeal may please be allowed and it be held that the impugned services provided are actually used, consumed outside the taxable territory, and as such are "export services" having regard to the statutory provisions & various direct decisions of the Courts/Tribunals/ AARs relied upon. b. Pending final decision on this Appeal, an interim stay be granted to make the impugned order inoperative, suspended. c. The impugned Order of the Learned Authority holding that the provisions of section 13(8) (b) of the IGST Act, are attracted be quashed as untenable for the reason that existence of two services, at one and the same time, is a sine qua non; and in the case on hand there are no two services, though there are "two supplies" at one and the same time. d. The interpretation by the learned Authority failed to establish that the case falls i....
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....follows:- 'export of services' means the supply of service when:- (i) the supplier of service is located in India; (ii) the recipient of service is located outside India; (iii) the place of supply of service is outside India; (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India; and (v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8. 38. In order to decide both the issues raised by the appellant, 'place of supply' of the services provided would have to be decided. The appellant, considering himself as an 'intermediary' has asked for a ruling on whether the services qualify to be an 'export' or a 'intra-state' supply' and these questions necessarily demand an examination of the 'place of supply' of the services. Therefore, in order to answer both these questions, we will first have to examine our jurisdiction, which have, clearly, been laid out in the Section 97(2) of the CGST Act, 2017, which is being....