TaxTMI 
TaxTMI 
2023 (4) TMI 821
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..... 639/2020. JUDGMENT: The judgment has been divided into the following sections to facilitate analysis: Particulars Paragraph A Prelude 2-3 B Facts 4-11 C Stand of the Revenue 12-17 D Submissions on behalf of the Petitioners 18-20 E Submissions on behalf of Respondents 21-44 F Analysis and Conclusion 45-114 1. Their Lordships of the Division Bench have spoken in different voices in deciding the above Writ Petitions. In view of the cleavage of opinion, by an order dated 16 June 2021 the Division Bench recording the disagreement, ordered that the proceedings be placed before the Hon'ble the Chief Justice. Consequent thereto, by an order passed by the Hon'ble the Chief Justice, the proceedings are referred for the opinion of this Court. A) PRELUDE 2. The petitioners in both the petitions primarily challenge the constitutional validity of the provisions of Section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017 (for short "the IGST Act"). In Writ Petition No. 2031 of 2018, there is an additional prayer assailing the constitutional validity of Section 8(2) of the IGST Act. The petiti....
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....er thus undertakes activities of marketing and promotion of goods sold by its overseas customers in India. 7. The service as provided by the petitioner fructifies, if an Indian purchaser [importer] directly places a purchase order on such overseas customer of the petitioner, for supply of goods. Such transaction is enabled as a result of the service so provided by the petitioner to his foreign principal. The goods are directly shipped by the petitioner's overseas customer to the Indian purchaser. This is an independent transaction between these two parties, namely, the Indian importer and the foreign exporter, which has nothing to do with the petitioner. On arrival of the goods in India, they are cleared by the Indian purchaser directly from the port/customs. In regard to the payment of consideration qua such import, such overseas customer raises a sale invoice in the name of the Indian purchaser. The Indian purchaser directly remits the sale proceeds to the overseas customer. Thus, the petitioner has no concern whatsoever qua such import transaction. 8. Once such payment is received by the overseas customer from the Indian importer, the foreign principal pays a commissio....
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....Act as noted above. The prayers as made in the Writ Petition reads thus: "(a) that this Hon'ble Court may be pleased to issued any writ, order or direction more particularly in the nature of a Writ of Declaration to declare Section 13(8)(b) and Section 892) of the Integrated Goods and Services Tax Act, 2017 as null, void and ultra vires Article 14, 19, 246, 246A, 248, 265, 268A, 286 and 302 read with Entry 41 and 83 of List 1 of VII Schedule of the Constitution of India and as also being beyond the legislative competence of Parliament under Article 269A of the Constitution of India and as also being beyond the legislative competence of Parliament under Article 269A of the Constitution of India and being ultra vires the provisions of CGST Act and MGST Act, 2017 and pass such further or other orders as this Hon'ble Court may deem fit and necessary in the facts and circumstances of the case and thus render justice. (b) that this Hon'ble Court be pleased to issue a writ of mandamus or any other appropriate writ, order or direction staying the implementation of the provision to above in prayer clause (a) and stay thereof; (c) For ad-interim reliefs in terms of....
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....e pleased to issue an appropriate writ, order or direction declaring Section 13(8)(b) of the IGST Act insofar as it stipulates that the place of supply in case of intermediary services shall be the location of the supplier of services in cases where the location of the supplier of services is in India and the location of the recipient of services is outside India as null, void and ultra vires Article 14, 19(1)(g), 265 and 286 of the Constitution of India; and/or b) This Hon'ble Court may be pleased to issue an appropriate writ, order or direction reading down Section 13(8)(b) of the IGST Act insofar as it stipulates that the place of supply in case of intermediary services shall be the location of the supplier of services in cases where the location of the supplier of services is in India and the location of the recipient of services is outside India; and/or c) This Hon'ble Court be pleased to issue a writ of mandamus or any other appropriate writ, order of direction staying the implementation of the provision referred to in prayer clause (a) and (b) above; and/or d) This Hon'ble Court may be pleased to direct the Respondent to refund the amount of GST (C....
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....alue addition of the service provided by an intermediary is at the place where the intermediary is located. Thus, to eliminate any ambiguity between the place of supply of intermediary services provided in relation to goods and services and to bring both at par, PoS for both was made to the location of the intermediary. It is next stated that if the PoS was to be made to be the location of recipient under default rule, PoS for all intermediaries located in the taxable territory providing service to a person, whose usual place of residence is outside India, would be the location of the recipient, i.e., outside India and thus, such services would have gone outside the tax net. 14. The counter affidavit further states that the issue of POS of intermediaries was also discussed during the drafting of the GST laws and same reasoning as above was adopted by the GST Council, a Constitutional body established under Article 279A of the Constitution, entrusted to make recommendations to the Union of India and the States on all matters related to the Goods and Services Tax. It is stated that in regard to the intermediary services provided in relation to goods and services including stocks, ....
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....ion of the intermediary as per Section 13(8)(b) of the IGST Act. 17. It is next contended that the services provided by the intermediaries located in India are taxable in India, and if the intermediaries are affecting the procurement of supplies for manufacturers in India, the manufacturers in India can avail input tax credit, and in case of exports, they can avail refund of such taxes. Further, if intermediaries located in India are affecting the import of finished goods, there is no consumption of these input services within India. Whereas the Indian importer would have had to suffer same cost in the event an overseas supplier procured such services from an intermediary in a non-taxable territory. This is a situation akin to a B2C transaction where credit lapses or has no necessity of further continuation. It is stated that such taxable services would cause additional costs, however, it gives an advantage to the counterpart Indian manufacturer. It is stated that if the services of Indian intermediaries are taxed again at the hands of the foreign exporter (under reverse charge in a foreign country), then while making exports from the foreign country, the taxes ought to be zero-....
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....ediary' in Section 13(8)(b) of the Act to which a meaning is attributed as defined under Section 2(13) of the IGST Act, an attempt is made to convert the actuality of the place of supply in foreign territory to a place of supply of such service at the location of the supplier, namely, the location of the petitioners, so that it would be deemed to be an intra-State supply [supply within the State of Maharashtra] leviable with the local GST. Neither the provisions of Article 246A read with Article 269-A and Article 286 of the Constitution would permit such inclusion, nor the basic principles, under which GST would levy, would permit such consequences as created by the impugned provisions. (v) GST is a destination-based tax on consumption. It is a value added tax. It is a tax provided on services consumed within the territory of India. Hence, it does not have extra-territorial operation or nexus. This position is sufficiently clarified by a circular dated 18 February 2019 issued by the revenue [circular no. 20/16/04/2017-GST]. Paragraph 3 of the circular issues the following clarification:- "3. After introduction of GST, which is a destination-based consumption tax, ....
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.... principle, exports are not subject to tax with a refund of input taxes (that is, "free of VAT" or "Zero-Rated"), and imports are taxed on the same basis and at the same rates as domestic supplies. Consequently, the total tax paid in relation to a supply is determined by the rules applicable in the jurisdiction of its consumption and all revenue accrues within the jurisdiction where the supply to the final consumer occurs. To support this contention, reliance is being placed on the decision of the Division Bench of this Court in Commissioner of Service Tax vs. SGS India Pvt. Ltd. 2014(34) STR 554 (Bom) although SGS rendered in the context of the erstwhile service tax being levied under the Finance Act 1994. It is thus submitted that Section 13(8)(b) is contrary to the fundamental principles of destination-based consumption tax. (viii) Levy of tax on the export of service by virtue of the impugned provisions is ultra vires Article 246A read with Article 269A and Article 286 of the Constitution. These provisions under the Constitution confer power only on the Parliament to frame laws for inter-State trade or commerce. Such provisions do not permit the imposition of tax on th....
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....ners vis-a-vis other exports of services. It creates an unfair advantage for foreign customers to set up a liaison office in India at the cost of the petitioners. Thus, all service providers like the petitioners are required to be placed equally. However, this is not the case with Service providers like marketing agents, marketing consultants, management consultants, market research agents, professional advisors, etc., who provide similar services. However, the said services would not be subject to GST in terms of section 13(2) of the Act. Despite having satisfied all the conditions of section 13(2) read with section 2(6) of the IGST Act, by virtue of exception under section 13(8)(b), the services provided by the petitioners are subjected to GST. Thus, the levy is unreasonable and arbitrary and without any basis. It is submitted that a separate provision can be struck down if it is arbitrary or unreasonable. It is also well settled that tax laws are not outside Article 14, as Article 14 applies to Government policies as well. (xi) Article 269A provides for the levy and collection of goods and service tax in the course of inter-State trade or commerce. Sub-clause (1) thereo....
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....slation to such an extent is clearly a colorable legislation. In support of such contention, reliance is placed on the decision of the Supreme Court in State of Travancore-Cochin and Others vs. The Bombay Co.Ltd. 1952 AIR SC 366, Central India Spinning & Weaving and Manufacturing Co. Ltd. The Express Mills Nagpur vs. Municipal Committee Wardha 1958 AIR SC 341. (xiii) The levy is ultra vires Article 245 of the Constitution. It is submitted that the question that arises is whether the Parliament is empowered to enact laws in respect of 'extra-territorial' aspects or causes that have no nexus with India and furthermore could such laws be bereft of any benefit to India. The submission is that the answer would have to be emphatic no. In supporting such submission, reliance is placed on the decision of the Supreme Court in GVK Industries Limited vs. Income Tax Officer & Anr 2011 332 ITR 130 (SC). (xiv) There could be instances where the supplier of the goods (say, in Germany) and the buyer of the goods (say, in Singapore) are both outside India. Such a transaction would be subject to GST, in the hands of the petitioner by virtue of Section 13(8)(b). Also, exemption from....
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....ent is outside India, the place of supply is being treated in India by the impugned provision. The same is beyond the charging section. Though ordinarily, courts would not question legislative wisdom, however, if shown that the provision is contrary to the parent act or charging section, it can be struck down. Even legislative policy has to conform to the Constitution. Violation of the right to carry on business viz. Article 19(1)(g) of the Constitution (xix) By levying CGST and SGST on the export of service, i.e. the service provided by the petitioners to their overseas customers, the respondents have constituted an unreasonable restriction upon the right of the petitioners to carry on trade under Article 19(1)(g) of the Constitution of India. This action of respondent no. 1 would result in the closure of the business of the petitioners. It would encourage foreign service recipients to set up liaison offices in India and escape taxation. Reliance is placed on the decision of the Supreme Court in Bengal Immunity Company vs. State of Bihar 1955 (2) SCR 603. It is submitted that a similar view has been taken in Himmatlal Harilal Mehta v. State of Madras 1954 SCR 112....
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....J 1741. (xxiii) It is submitted that Section 13(8)(b) is ultra-virus Article 286 of the Constitution for the reason that it is not permissible for the State to impose tax on services when the supply takes place outside the State or in the course of export. It is submitted that Article 286(1) does not employ the words "place of supply", therefore, deeming fiction cannot be introduced by the impugned provision to empower the State to impose a tax on intermediary services. It is submitted that the impugned provision deems the supply of intermediary services to have occurred within India and treats such services as an intra-State supply thereby leaving state GST. 19. The petitioners have categorically contended that the grievance of the petitioners is in respect of the effect of Section 13(8)(b) categorizing intermediary services which are regarded as 'export of services' undertaken by the petitioners, to be an 'intra-State supply' for the purposes of the CGST and MGST Act. It is thus their contention that the provisions of Section 13(8)(b) remaining in the IGST Act is stated to be of no harm and injury to the petitioners, as any export of services falling u....
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....tion, however, depicts a different picture as seen from the averments made in the petition. The averments show that the petitioner is a simplicitor agent. In paragraph 4.4 of the petition, it is averred that the petitioner rendered services "only to the foreign principal", while so contending the petitioner completely ignores the definition of an 'intermediary' as defined under Section 2(13) of the IGST Act, which provides that the intermediary facilitates or arranges services between two or more persons. Thus, although a challenge is of an intermediary being taxed, the factual foundation as seen in the petition is to the effect that the petitioner is an agent simplicitor. Thus, the challenge itself is vague and bereft of particulars, and thus applying the principles of law in V.S. Rice and Oil Mills Vs. State of Andhra Pradesh AIR 1964 SC 1784 and Amrit Banaspati Co. Ltd vs Union Of India And Ors. 1995(3) SCC 335, this Court ought not to delve into the legality and validity of the provisions. 25. The constitutional validity of the impugned provisions would be required to be upheld for the reason that the petitioner is rendering services while being located in India. As ....
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....of such article, a challenge to the validity of the provisions of IGST Act need to fail. In support of such submissions, reliance is placed on the decisions of the Supreme Court in Shri Ram Krishna Dalmia Vs. Shri. Justice S. R. Tendolkar & Ors. AIR 1958 SC 538 AIR 1958 SC 538, Government of Andhra Pradesh & Ors. vs. Smt. P. Laxmi Devi AIR 2008 SC 1640; Union of India & Ors. Vs. Exide Industries Ltd. & Anr. (2020) 5 SCC 274; A.H Wadia V. Income Tax Commissioner A.I.R 1949 F.C. 18 S.C.; GVK Industries Ltd. & Anr vs The Income Tax Officer & Anr. (supra). Applying the principles of law as laid down in the above decisions, the approach of the Court in determining the constitutional validity of a statutory provision would be that the Court would be required to examine the existence of legislative power and once such power is found to be present, then the next step would be to ascertain whether the enacted provision impinges upon any rights enshrined in Part III of the Constitution. Considering the scheme of IGST, CGST and the SGST laws, it is evident that these laws function harmoniously and as a part of a well thought of statutory mechanism to tax goods and services. These three statut....
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....rovides for the residuary powers of legislation on the subject not mentioned in State or concurrent laws. Although this is subject to Article 246-A. Hence, the Parliament is within its domain to determine the place of supply. Section 13 of the IGST Act which determines the place of supply on service in a certain scenario is within the specific mandate of Parliament as per the provisions of the Constitution. Further, the legislative competence is to be determined with reference to the object of levy and not with reference to its incidence or machinery, as there is a distinction between the object of tax, the incidence of tax and the machinery for calculation of tax. To support such contention, reliance is placed on the decision in Gujarat Ambuja Cement Ltd. vs. Union of India (supra). It is submitted that Section 13(8)(b) is thus validly enacted. Upon applying the provisions of Section 2(64), 2(86) and Section 9 of the CGST Act read with 8(2) of the IGST Act (none of these provisions being challenged) the supplier of services like the petitioners, who are intermediaries, would be taxable as the supply of services by intermediaries is considered as an intra-state supply under the CGS....
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....r in Writ Petition Lodging No. 639 of 2020 (A.T.E. Enterprises Private Limited vs. The Union of India & Ors.) 33. In so far as the legal position is concerned, it is submitted that before the Constitution of 101st Amendment Act, 2016 and more particularly, prior to the 6th Constitution Amendment Act 1956, the State legislature under Article 246(3) had exclusive power to make a law for the State or any part thereof, with respect to any matters enumerated in List II in the Seventh Schedule. Further, before the Constitution of 6th Amendment Act 1956, sub-clause 4 of Article 246 empowered the Parliament to make laws in respect of any matter for any part of the territory of India not included in a State List, notwithstanding that such matter is a matter enumerated in the State List. Thus, the State legislature under Entry No. 54 of List II in the Seventh Schedule had powers to levy taxes in respect of the sale or purchase of goods other than newspapers. The power of the State to levy tax was further subject to the provisions of Article 286. It is submitted that Article 286 sub-clause (1) barred the State from imposing tax on the sale or purchase of goods that took place outside the S....
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....troduced respectively. 36. It is submitted that Article 269-A is in respect of the levy and collection of Goods and Service tax in the course of inter-State Trade and Commerce. Under Article 269-A(5), the Parliament has analogous powers as contained in Article 286(2). The Parliament, under Article 269-A, is powered by law to formulate the principles for determining the place of supply and when a supply of goods or services or both take place in the course of inter-State Trade or Commerce. The source of power of Parliament to enact the IGST Act is under Article 269(A). Article 269(5) specifically empowers the Parliament to formulate for determining the place of supply and when the place of supply of Goods and Services or both takes place in the course inter-State Trade and Commerce. Thus, the Parliament has power to determine what is a place of supply under the IGST Act, under Article 269-A, and also under Article-286. The Parliament thus has rightly, in the exercise of its power, enacted Section 13(A), (B) of the IGST Act, determining the place of supply in respect of "Intermediary" services. 37. It is submitted that the contention of the petitioner that only in the case of "....
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....the Union of India and State are given simultaneous powers, and therefore the reliance of the petitioner to pass incidences of the manner of levy of the taxes prior to introduction of the GST regime will not hold any substance. 42. It is next submitted that petitioners are not fulfilling the requirement of export as defined under Section 2(6) of the IGST Act as all 5 requirements are required to be fulfilled, and even in the absence of one of the same, it cannot be termed export of service. 43. It is next submitted that once a class of person can be distinguished by the test of reasonable classification and once the Parliament has legislative competence to provide for a distinction between different classes, the impugned provision cannot be violative of the provision of either Article 14 or Article 19(1)(g) of the Constitution. It is submitted that being a distinct class of "Intermediary" service provider, the petitioners cannot contend that there is a violation of Article 14 of the Constitution. 44. In light of the above submission, it is submitted that Section 13(8)(b) is Constitutional, valid. Analysis & Conclusion 45. At the outset it is required to be observed t....
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.... ease of handling cross-border transactions, facilitating the development of common market, and reducing trade and economic distortions. Another reason for countries adopting GST/VAT was to increase revenue from general consumption to cut down rate of income taxes. Revenue neutral approach was another reasons (Norway, New Zealand etc.) and some other countries moved to GST/VAT to consolidate and modernize their existing tax structure, comprising multiple Sales Taxes at different rates. This increasing trend towards GST/VAT can be attributed to key factors such as (i) eliminates weaknesses of single stage taxation system, such as cascading and compounding effect; (ii) GST/VAT preserves tax neutrality by taxing the Value Added Tax by each factor equally; (iii) Consumption tax is a large and more stable source of revenue; and (iv) It is potentially self-enforcing in nature. At present, it is stated that more than 162 Countries across the globe have implemented GST/VAT system of taxation. One of the key principles of GST is that as a general rule, place of taxation of goods and services is determined based on the "destination principles". Exports are to be taxed at zero rate a....
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....a major contributor to the GDP of an economy, particularly knowledge-based economy. With the enactment of Finance Act, 1994, the Central Government derived its authority from the residuary Entry 97 of the Union List for levying tax on services. The legal backup was further provided by the introduction of Article 268A in the Constitution vide Constitution (Eighty-eighth Amendment) Act, 2003 which stated that taxes on services shall be charged by the Central Government and appropriated between the Union Government and the States. Simultaneously, a new Entry 92C was also introduced in the Union List for the levy of service tax. As stated above, as an economic concept, there is no distinction between the consumption of goods and consumption of services as both satisfy human needs. It is this economic concept based on the legal principle of equivalence which now stands incorporated in the Constitution vide Constitution (Eighty-eighth Amendment) Act, 2003. Further, it is important to note, that service tax is a value added tax which in turn is a general tax which applies to all commercial activities involving production of goods and provision of services. Moreover, VAT is a consumption t....
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.... were consumed abroad, applied the destination based principle and following the decision of the Supreme Court in the case of All India Federation of Tax Practitioners (supra) accepted the contention as urged on behalf of the respondent that the principle that service tax is a destination based consumption tax, is in conformity with international practice and widely accepted, in order to avoid double taxation. 52. Having noted that GST is a destination based consumption tax, it can now be examined as to what is the legal position of the GST regime as embedded by the 101st Constitution Amendment Act, 2016 insofar as levy of GST is concerned, which replaced the prevailing VAT/Service tax regime prevailing under the provisions of the Finance Act, 1994. Statutory position in respect of the GST regime: 53. The foundation of the GST regime is the 101st Constitution Amendment Act of 2016, by which the Constitution was extensively amended, so as to provide recognition to the introduction, formulation and implementation of Goods and Service Tax (GST) regime. The genesis of the 101st Amendment Act, 2016 is the Constitution (122^nd Amendment) Bill, 2014, by virtue of which, inter ali....
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....d Services Tax" provided in Article 246A, and such power has been conferred considering the national interest. Article 269A provides for the levy and collection of goods and services tax in the course of inter-State trade or commerce. This apart, there are other articles by which amendments are incorporated by the introduction of the GST regime as provided for in Articles 246-A and 269-A. For convenience, Articles of the Constitution relevant for the present proceedings are extracted hereinbelow: "Article 245 - Extent of laws made by Parliament and by the Legislatures of States - (1) Subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of the territory of India, and the Legislature of a State may make laws for the whole or any part of the State. (2) No law made by Parliament shall be deemed to be invalid on the ground that it would have extra-territorial operation. Article 246A - Special provision with respect to goods and services tax.:- (1) Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), the Legislature of every State, have power to make l....
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....e expiration of the said period. Article 269-A: Levy and collection of goods and services tax in course of inter-State trade or commerce. (1) Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council. Explanation- For the purposes of this clause, supply of goods, or of services, or both in the course of import into the territory of India shall be deemed to be supply of goods, or of services, or both in the course of inter-State trade or commerce. (2) The amount apportioned to a State under clause (1) shall not form part of the Consolidated Fund of India. (3) Where an amount collected as tax levied under clause (1) has been used for payment of the tax levied by a State under article 246A, such amount shall not form part of the Consolidated Fund of India. (4) Where an amount collected as tax levied by a State under article 246A has been used for payment of the tax levied u....
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....ided by the Parliament by law, on the recommendations of the Goods and Services Tax Council. Explanation below Clause (1) of Article 269-A, ordains that for the purposes of this clause, supply of goods, or of services, or both in the course of import into the territory of India shall be deemed to be supply of goods or of services or both, in the course of inter-State trade or commerce. Clause (5) of Article 269-A provides that Parliament may, by law, formulate the principles for determining the place of supply and when a supply of goods, of services, or both takes place in the course of inter-State trade or commerce. By virtue of Clause (5), the Parliament is empowered by law to formulate the principles for determining the place of supply and when a supply of goods or of, services, or both, takes place in the course of inter-State trade or commerce. The Parliament having exercised such power is seen from the substantive provisions of Section 7 of the IGST Act, which defines "Inter-State supply" and Section 8 of the IGST defines "Intra-State supply". These provisions are adverted to, little later. 57. Having noted Articles 246-A and 269-A, the next Article of immense significance....
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.... shall, notwithstanding that the imposition of such tax is contrary to the provisions of this clause, continue to be levied until the thirty-first day of March, 1951. (3) No law made by the Legislature of a State imposing, or authorising the imposition of, a tax on the sale or purchase of any such goods as have been declared by Parliament by law to be essential for the life of the community shall have effect unless it has been reserved for the consideration of the President and has received his assent 286. Restrictions as to imposition of tax on the sale or purchase of goods.- (1) No law of a State shall impose, or authorise the imposition of, a tax on [the supply of goods or of services or both, where such supply takes place- (a) outside the State; or (b) in the course of the import of the [goods or services or both] into, or export of the goods or services or both out of, the territory of India. * * * * *^3 [(2) Parliament may by law formulate principles for determining when a [supply of goods or of services or both] in any of the ways mentioned in clause (1).] * * * * *^4 58. As to what is the cumulative effect of Articles 246-A, 269-....
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....itioners is in the context of their transactions, which is an export of service, as provided by the petitioners to their foreign principals. Factually and/or dehors from the repercussions as brought about by the IGST Act, as the respondents would contend on the nature of the transactions in question, being an export of service undertaken by the petitioners, there appears to be no dispute. The petitioners contend that as the recipient of their services, being a foreign party, the trade in question undertaken by the petitioners would neither amount to 'inter-State trade and commerce' nor any 'intra-State trade and commerce'. The petitioners hence have contented that such transactions are transactions of export of service. The petitioners contend that by application of the basic principles underlying clause (2) of Article 246-A, read with explanation below clause (1) of Article 269-A and further read with clause (b) of clause (1) of Article 286, the transaction being undertaken by the petitioners can never amount to an intra-State trade, hence , the petitioners cannot be taxed under the CGST Act and the MGST Act, which are legislations applicable to intra-State trade and commerce. In ....
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....h place of business; (b) where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment; (c) where a supply is received at more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and (d) in absence of such places, the location of the usual place of residence of the recipient; Section 2 (15) "location of the supplier of services" means,-- (a) where a supply is made from a place of business for which the registration has been obtained, the location of such place of business; (b) where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment; (c) where a supply is made from more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the provision of the supply; and (d) in....
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....ax on inter-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services: Provided that where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax: Provided further that where an electronic commerce operator does not have a physical presence in the taxable territory and also does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax. Section 7 - Inter-State supply (1) Subject to the provisions of section 10, supply of goods, where the location of the supplier and the place of supply are in-- (a) two different States; (b) two different Union territories; or (c) a State and a Union te....
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....e a person has,-- (i) an establishment in India and any other establishment outside India; (ii) an establishment in a State or Union territory and any other establishment outside that State or Union territory; or (iii) an establishment in a State or Union territory and any other establishment registered within that State or Union territory, then such establishments shall be treated as establishments of distinct persons. Explanation 2.-- A person carrying on a business through a branch or an agency or a representational office in any territory shall be treated as having an establishment in that territory. Section 12: Place of supply of services where location of supplier and recipient is in India. (1) The provisions of this section shall apply to determine the place of supply of services where the location of supplier of services and the location of the recipient of services is in India. (2) The place of supply of services, except the services specified in sub-sections (3) to (14),- (a) made to a registered person shall be the location of such person; (b) made to any person other than a registered perso....
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.... rights to use immovable property, services for carrying out or co-ordination of construction work, including that of architects or interior decorators, shall be the place where the immovable property is located or intended to be located. (5) The place of supply of services supplied by way of admission to, or organisation of a cultural, artistic, sporting, scientific, educational or entertainment event, or a celebration, conference, fair, exhibition or similar events, and of services ancillary to such admission or organisation, shall be the place where the event is actually held. (6) Where any services referred to in sub-section (3) or sub-section (4) or sub-section (5) is supplied at more than one location, including a location in the taxable territory, its place of supply shall be the location in the taxable territory. (7) Where the services referred to in sub-section (3) or sub-section (4) or sub-section (5) are supplied in more than one State or Union territory, the place of supply of such services shall be taken as being in each of the respective States or Union territories and the value of such supplies specific to each State or Union territory shal....
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.... (12) The place of supply of online information and database access or retrieval services shall be the location of the recipient of services. Explanation.--For the purposes of this sub-section, person receiving such services shall be deemed to be located in the taxable territory, if any two of the following non-contradictory conditions are satisfied, namely:-- (a) the location of address presented by the recipient of services through internet is in the taxable territory; (b) the credit card or debit card or store value card or charge card or smart card or any other card by which the recipient of services settles payment has been issued in the taxable territory; (c) the billing address of the recipient of services is in the taxable territory; (d) the internet protocol address of the device used by the recipient of services is in the taxable territory; (e) the bank of the recipient of services in which the account used for payment is maintained is in the taxable territory; (f) the country code of the subscriber identity module card used by the recipient of services is of taxable territory; (g) the location of t....
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....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; 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. As observed above, the case of the petitioners is to the effect that the transactions of the petitioners, subject matter of the present proceedings, is of an export of service. The petitioners in undertaking such transactions are stated to be acting as "intermediaries" as defined in Section 2(13) of the IGST Act, which defines an intermediary as a broker, an agent, or any other person, by whatever name called, who arranges or facilitates the "supply of goods or services or both", or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account. As observed hereinabove, all the ingredients of Section 2(6) are present in regard to the transactions in question being undertaken by the petitioners. 65. Section 5 of the IGST Act is the charging section pr....
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.... unit. Thus, sub-section (2) of Section 8 is another relevant provision for the present proceedings, as it incorporates the effect of Section 12 of the IGST Act. 67. Section 10 provides for "the place of supply of goods, other than supply of goods imported into, or exported from India". Section 11 provides for "the place of supply of goods imported into India or exported from India". These provisions need not be discussed in the context of the present proceedings. 68. Section 12 is another vital provision providing for "the place of supply of services where the location of supplier of services and the location of the recipient of services is in India". Sub-section (2)(ii) of Section 12 inter alia provides that the place of supply of services, except the services specified in sub-sections (3) to (14), if made to any person other than a registered person shall be the location of the supplier of services in other cases. It needs to be observed that Section 12(2) is required to be read in conjunction, as to what has been provided for in sub-section (1), namely, that provisions of Section 12 shall apply to determine the place of supply of services, where location of supplier "and ....
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.... supply of service, of the nature of intermediary services, which is in the nature of "export of service" as defined under Section 2(6) of the IGST Act becomes an "intra-State" sale falling under the charging provision (Section 9) of the CGST Act and the MGST Act. Thus, according to the petitioners, a transaction/trade or commerce which is necessarily a transaction of "export of service" becomes an 'intra-State'/local transaction, being available to be taxed as an intra-State transaction. 70. The petitioners have contended that Section 13(8)(b) of the IGSTAct is unconstitutional primarily on the ground that such provision cannot be read and/or utilized under the provisions of the CGST Act and MGST Act, as what is explicitly not permissible to be incorporated under the CGST Act and the MGST Act cannot be done implicitly, i.e., to tax export of services, by reading Section 13(8)(b) of the IGST Act into the provisions of the CGST and the MGST Acts. 71. It is seen that insofar as the IGST Act is concerned, "export of services" as defined under Section 2(6) fall within the purview of the provisions of Section 16, namely, the provision made for "zero rated supply". The contention o....
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....under the CGST Act, which is the cause and concern as echoed by the petitioners. The incorporation of the provisions of the IGST Act within the CGST Act begins with the definition clause itself. The relevant definitions in the CGST Act are 2(57), 2(58), 2(62), 2(64), 2(65), 2(70), 2(71), 2(72), 2(86) and 2(98). Further, Section 9 is the charging section. It would be necessary to note these provisions which read thus:- "2. Definitions.- In this Act, unless the context otherwise requires,-- ... .. .. ... (57) "Integrated Goods and Services Tax Act" means the Integrated Goods and Services Tax Act, 2017; (58) "Integrated tax" means the integrated goods and services tax levied under the Integrated Goods and Services Tax Act; ... .. ... ... (62) "input tax" in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes- (a) the integrated goods and services tax charged on import of goods; (b) the tax payable under the provisions of sub-sections (3) and (4) of section 9; (c) the tax payable under th....
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....name, character and use and the term "manufacturer" shall be construed accordingly; ... ... ... (86) "place of supply" means the place of supply as referred to in Chapter V of the Integrated Goods and Services Tax Act; ... ... .... ... (98) "reverse charge" means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or sub- section (4) of section 5 of the Integrated Goods and Services Tax Act; ... ... ... 9. Levy and collection.- (1) Subject to the provisions of sub-section (2) there shall be levied a tax called the Central Goods and Services Tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent, as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person." (2) The central tax on the sup....
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.... and Services Tax on all "intra-State supplies of goods or services or both". By virtue of Section 2(65) of the CGST Act 'intra-State supply of services' is required to have the same meaning as assigned to it in Section 8 of the IGST Act. As noted above, Section 8 of the IGST Act provides for 'intra-State supply'. Section 8(2) of the IGST Act provides that subject to the provisions of Section 12, the supply of services where the location of the supplier and the place of supply of services are in the same State or same Union Territory shall be treated as intra-State supply. Sub-section (2) of Section 8 recognizes the effect of Section 12(2) namely that the place of supply of services made to any person other than a registered person shall be the location of the supplier of services and hence, for transaction of such nature, the supply of services becomes an intra-State supply. The consequence brought about by such provision is that by mere inclusion of Section 8 of the IGST Act within the provisions of Section 2(65) of the CGST Act, which defines 'intra-State supply of services', a legal effect which emerges is that not only Section 8 of IGST Act, but also the accomp....
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....intermediaries are concerned, as a consequence of an interplay of the enactments, namely, the IGST Act on one hand and the CGST and the MGST Acts on the other hand. Also, there appears to be some internal friction within the provisions of the IGST Act in this regard, which also needs to be discussed. Firstly such enigma is noticed in the operation of Section 5 which is the charging section and Section 13(8)(b) of the IGST Act. This for the reason that sub-section (1) of Section 5 interalia provides that subject to the provisions of sub-section (2), there shall be levied a tax called the Integrated Goods and Services Tax on all inter-State supply of goods or services or both. The proviso below sub-section (1) of Section 5 ordains that the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of Section 3 of the Customs Tariff Act, 1975, on the value as determined under the said Act at the point when duties of customs are levied on the said goods under Section 12 of the Customs Act, 1962. 79. The conflict is that, the export of services for a commission to be received by the petitioners, fructify only after the goods are suppli....
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.... materialized, and the Indian intermediary receiving commission for the services offered by him to the foreign principal, in convertible foreign exchange, in these circumstances, it is not understood as to how such a transaction of export of service, is being categorized as an intermediary services and can amount to an intra-State sale, so as to be liable for levy of GST under the CGST Act and the MGST Act. In regard to such transaction, there is no basis or any hypothesis to conclude that the beneficiary of the services provided by the intermediary, becomes an Indian party so as to apply the destination principle and that too at the hands of the exporter of service. It would be too far-fetched to hold that the intention of Section 13(8)(b) read with Section 8(2) of the IGST Act is to reach out to such foreign transactions so as to tax them as an intra-State trade and commerce, which has no foundation for taxability, either under the IGST Act or CGST/MGST Act. Even otherwise, it is difficult to accept the respondents' contention that even if persons like the petitioners, who are exporters of service and who are regarded as intermediaries within the definition of Section 2(13), the ....
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....mmerce by virtue of Section 13(8)(b) of the IGST Act. 82. In my opinion, certainly, the intention of the legislature is not to tax such transaction of export of services, also categorized as an intermediary services both under the IGST Act as also under the CGST and the MGST Acts. If it is to be such effect, interpretation and operation of these two provisions, it would lead to an absurdity making the provisions unworkable but also creating an uncertainty in the operation of the statutory mechanism, as neither there could be a desire of double taxation nor such a consequence would be acceptable under the regime of both the legislations, namely the legislations governing Inter-State and Intra-State trade and commerce. 83. From the above discussion, what can be discerned and derived, is that it is necessary to confine transactions which are clearly transactions in the course of Inter-State trade or commerce and more particularly transactions of export of services as defined under Section 2(6) of the IGST Act and the intermediary services, to be subjected, relevant and confined only to the provisions of the IGST Act, and transactions which are in the course of Intra-State trade ....
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....lhi Administration & Ors. (1978)4 SCC 494 is also required to be made in regard to the principles of statutory interpretation the Courts would be guided in considering the validity and constitutionality of legislations. In the concurring judgment of Mr. Justice Krishna Iyer, it was observed that a validation- oriented approach becomes the philosophy of the statutory construction recognizing that certain provisions of law construed in one way to be consistent with the Constitution and if another interpretation would render them unconstitutional, the Court would lean in favour of the former construction. The relevant observations of the Court read thus: "39. The jurisprudence of statutory construction, especially when a vigorous break with the past and smooth reconciliation with a radical constitutional value-set are the object, uses the art of reading down and reading wide, as part of interpretational engineering. Judges are the mediators between the societal tenses. This Court in R.L. Arora V. State of Uttar Pradesh (AIR 1964 SC 1230) and in a host of other cases, has lent precedential support for this proposition where that process renders a statute constitutional. The le....
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....dia. There is another provision that is relevant, namely, Section 16 of the IGST Act providing for "Zero Rated Supply", which ordains that export of goods or services or both would amount to a zero-rated supply. A person registered to make 'zero rated supply' shall be eligible to claim a refund, as provided for in sub-section (3). Thus, a cumulative reading of these provisions of the IGST Act gives a complete indication of a statutory mechanism as created for the purpose of the IGST Act, namely, insofar as the transaction of export of services by the intermediary is concerned, the same would necessarily fall within the framework of the IGST Act only. It would be too far-fetched to consider that certain provisions of the IGST Act are framed not of any relevance to the IGST Act but for the CGST and the State GST Acts. This would indirectly mean that something which could be expressly legislated to fall under the CGST or the State GST Acts, has been legislated under the IGST Act for the purposes of the CGST/MGST Acts. Such intention cannot be attributed to the IGST Act, as the provisions incorporated therein are certainly are of relevance and applicability in so far as the inter-State....
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.... incorporation by mere implication, unless such incorporation is explicit and as permissible under the Constitution. 90. [Blank] 91. In such context, it would also be required to be examined whether Section 13(8)(b), along with the ancillary provisions, namely Section 12 and Section 8 of the IGST Act would have any applicability and/or relevance in the context of export of services under the CGST Act and MGST Act. In forwarding the discussion on this aspect, it may be stated and as noted above, the provisions of the IGST Act find recognition in their applicability in the CGST Act and the MGST Act under the provisions of Sections 2(57), 2(58), 2(62), 2(64), 2(65), 2(70), 2(71), 2(72), 2(86) and 2(120) of these enactments. However, what is most significant is that such provisions by virtue of what has been provided in the opening part of Section 2 of the CGST and the MGST Act, cannot be read out of the context, and/or can be read and applied only in the context the CGST and the MGST Act(s) warrant their applicability and not otherwise. This is also the legislative intent as clear from the reading of the opening words of Section 2 of the CGST and the MGST Act when such prov....
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....principles of contextual interpretation in interpreting Section 23 of the Electricity Act, 2003. The Court observed thus:- "Supply - Contextual Meaning 96. It was submitted by the respondents that in any event the word 'supply' as used in Section 23 should be given the same meaning as is given to it in Section 2(70) of the Act i.e. the sale of electricity to a licensee or consumer. Accordingly by its very nature, supply would have a supplier and a receiver and any direction which is aimed at ensuring or regulating supply by its very nature would have to be directed to both the supplier and the receiver. 97. However, when the question arises as to the meaning of a certain provision in a statute, it is not only legitimate but proper to read that provision in its context. The legal principle is that all statutory definitions have to be read subject to the qualification variously expressed in the definition clause which created them and it may be that even where the definition is exhaustive inasmuch as the word defined is said to mean a certain thing, it is possible for the word to have some what different meaning in different sections of the Act depending up....
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....e India", in the manner Section 13 more particularly sub-section 8(b) of Section 13, would provide in the case of 'intermediary services'. If the legislature, and it ought not be without a reason, has refrained from making "any specific" reference or incorporation to such provision, it may not be permissible for the respondent to read into the provisions by the CGST and the MGST Act, as to what has been omitted and/or expressly not provided. It clearly appears that the entire concept of "export of services" which has been specifically stipulated and provided only under the provisions of the IGST Act, to be read into the provisions of the CGST and MGST Acts, in my opinion, would not be a correct reading of the provisions of Section 2(86) read with 2(65) of the said Acts, for the respondents to consider that Section 13(8)(b) stands firmly incorporated in the provisions of the CGST Act or the MGST Act. This more particularly, when the Legislature itself has explicitly avoided having any such express incorporation. 95. There is yet another strong reason for the Legislature refraining from incorporating anything to do with the "export of services" and/or falling under the pro....
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....ition is also supported by significant and glaring indications intrinsic to the CGST Act and MGST Act, namely, that these enactments do not define export of services. As noted above, they do not define an intermediary; they do no contain provisions akin to the provisions of Section 13(8)(b) and Section 12 as contained in the IGST Act. Thus, the cumulative effect of the provisions of Section 13(8)(b) read with Section 8(2) and Section 12 of the IGST Act, in my opinion, can neither be read nor can be said to be of any relevance for the purpose of CGST and MGST Act(s) when it comes to any levy of GST under the said Acts on intermediary services, of the nature export of services falling within the meaning of Section 2(6) of the IGST Act. On first principles as also applying the golden rule of interpretation, this appears to be an apparent consequence, having noticed not only relevant provisions under the Constitution but also the provisions of IGST Act, which deal exclusively in regard to the inter-State supply of goods and services and the CGST and the MGST, dealing with intra-state supply of goods and services for the purpose of levy of collection of tax under the said enactment. ....
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....e inevitable corollaries of that state of affairs." 100. In State of Punjab & Ors. vs. Dr. R.N. Bhatnagar & Anr. 1999 2 SCC 330, it was held that the deeming fiction cannot be extended by analogy to cover any other field not meant to be covered by its sweep. 101. In Prafulla Kumar Swain vs. Prakash Chandra Mishra & Ors., the Supreme Court referring to the celebrated commentary of Justice G.P. Singh: Principles of Statutory Interpretation (Fourth Edition 1988), in the context of a statute creating a legal fiction observed thus: "35. Coming to the deeming clause, that creates a legal fiction; the Court is to ascertain for what purpose the fiction is created. In Justice G.P. Singh Principles of Statutory Interpretation (Fourth Edition 1988) at page 208 it is stated thus: "As was observed by James, LJ. : 'When a statute enacts that something shall be deemed to have been done, which in fact and in truth was not done, the court is entitled and bound to ascertain for what purposes and between what person the statutory fiction is to be resorted to'. 'When a legal fiction is created', stated S.R. Das, J. "for what purposes, one is led to ask at once, ....
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....ermediaries which may stricto sensu fall under the provisions of the IGST Act only and hence, to dislodge the provisions of Section 13(8)(b) from the IGST Act merely because it is deemed to have an application under the CGST Act and the MGST Act qua the export of service, in regard to such categories of person who can also be classified as intermediaries, would be a fatal proposition. It is for such reason, in my opinion, insofar as the provisions of Section 13(8)(b) is concerned, the same are required to be read to confined only to the provisions of the IGST Act. Constitutionally and for the reasons as discussed in the forgoing paragraphs, it is not permissible for such provision to operate under the CGST Act and the MGST Act. It is not possible to foresee and visualize such provision becoming relevant in case of a particular transaction which may purely fall under the IGST Act. 104. In so far as Mr. Singh's reliance on the decision of the Division Bench of Gujarat High Court in Material Recycling Association of India vs. Union of India and others 2020 SCC OnLine Guj 3205 is concerned, in my opinion, it would not take forward the case of the revenue. In fact, the observations a....
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....ne reason. Firstly, there can be no doubt that no law made by the Parliament would be invalid on the ground that it has an extraterritorial operation as Clause (2) of Article 245 would provide. The present case, in my opinion, does not involve any extra-territorial operation of law made by the Parliament inasmuch as the subject matter of legislation purely pertains to inter-State trade and commerce in respect of which goods and services tax can be levied in the spheres as covered by the legislation. Further, in the context of the transaction in question to say that a law has been enacted to have an extra-territorial operation, would be a complete misnomer inasmuch as the IGST Act under Section 13(8) (b) has treated the transaction as undertaken by the intermediary who are dealing in export of services as an intra-State trade and commerce. It is, therefore, difficult to accept the proposition as canvassed on behalf of the respondents that the IGST Act is a law having an extra territorial operation, and therefore, would fall within the purview of Clause (2) of Article 245 insofar as its validity is concerned. 106. The respondents have contended that the analogy as under the 'Place....
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....ecause the foreign exporter sells its goods to the Indian importer and which is as a consequence of the services provided by the exporter of service, it needs to be accepted that the transaction of export of service changes its character as a intra-State transaction, is untenable in view of the aforesaid discussion. Such contention cannot be accepted on the interpretation of the provisions of the Constitution or on the interpretation of the provisions of IGST Act as discussed in detail in the foregoing paragraphs. 109. In the light of the above discussion in my opinion the provisions of Section 13(8)(b) and Section 8(2) are confined in their operation to the provisions of IGST Act only and the same cannot be made applicable for levy of tax on services under the CGST Act and MGST Act, on such interpretation, the provisions are intra vires the Constitution, the IGST, the CGST and the MGST Acts. 110. At this stage, it may be observed that the view I have taken is distinct from the view taken by the Hon'ble members of the Division Bench. As a referral Judge, there would be no bar in expressing an independent opinion while deciding the reference by assigning reasons which would su....
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....pproach indicated in the decision in Shivani Properties (supra), or, in other words, that such an approach as adopted by the referee Judge in Shivani Properties (supra) is contrary to the rules. The difference of opinion having arisen in the present case in regard to the fate of the appeal, an opinion as of necessity has to be rendered either way based on the reasoning that would support such opinion. Even if the reason in support of the opinion rendered by the referee Judge is different from the reason assigned by one of the differing Judges for arriving at the same conclusion, such course of action is not precluded by the rules relating to reference and would not disable me from rendering my opinion on the point as to whether the appeal should succeed. 33. For the reasons aforesaid, I find no reason to uphold the conclusion of the learned presiding Judge of the Hon'ble Division Bench that clause 3 applied to the facts and circumstances before His Lordship and the appellant was entitled to the benefit of sub-clause (d) thereof. I also hold the view that the writ petition of the appellant deserved an order of dismissal but not for the reasons assigned by the learned Si....