2023-TIOL-452-HC-MUM-GST
Dharmendra M Jani Vs UoI
GST - Petitioners primarily challenge the constitutional validity of the provisions of Section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017 - One of the Judges of the Division Bench struck down Section 13(8)(b) of the IGST Act as ultra vires the IGST Act, besides being unconstitutional, whereas the companion Judge upheld the validity of the said provisions on all counts - In view of the cleavage of opinion, by an order dated 16 June 2021 = 2021-TIOL-1326-HC-MUM-GST , the Division Bench recording the disagreement, ordered that the proceedings be placed before the Chief Justice - Consequent thereto, by an order passed by the Chief Justice, the proceedings are referred for the opinion of this Court.
Held:
+ Division Bench has not framed any formal question to be answered by the referee Judge, as a result of the disagreement between their Lordships. the primary question which is required to be decided by this Court, is whether Section 13(8)(b) of the IGST Act 2017 is ultra vires the Constitution and the provisions of the IGST Act or otherwise [para 45, 46]
+ Thus explicitly, by virtue of clause (1)(b) of Article 286, no law of a State can impose, or authorize the imposition of, a tax on the supply of goods or of services or both, where such supply takes place outside the State; or in the course of the import or export of the goods or services outside the territory of India. [para 59]
+ 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 contended that such transactions are transactions of export of service. In my opinion, the contention of the petitioners appears to be correct that the transactions in question of the petitioners are in fact a transactions of export of service, as the recipient of service is the foreign principal. The destination/consumption of the services as provided by the petitioners takes place in a foreign land. This completely satisfies the test of "export of service" as defined under Section 2(6) of the IGST Act, also as there is no contra indication that "factually" it can be regarded as either inter-State or intra-State sale of services.[para 60]
+ The challenge is to the provisions of Section 13(8)(b), which provide that the place of supply shall be the location of the supplier of services in the case of "intermediary" services. The plain consequence as brought about by Section 13(8)(b) is that when the location of the recipient of service is outside India, then in the context of an "intermediary services", the place of supply shall be (is deemed to be) the location of supplier of services. The legal consequence as brought about by such deeming combination is that a 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. The contention of the petitioners is also to the effect that once a transaction is of export of services and as defined under Section 2(6) of the IGST Act, in regard to which there is no definition under Section 2 of CGST Act or under section 2 of MGST Act, Section 13(8)(b) cannot by a legal fiction and/or an implication form any transaction to be taxed under the CGST Act and MGST Act, by categorizing it to be an intra-State sale. [para 69, 71]
+ In my opinion, there is certainly some substance in the petitioners contention that there is a polarity which is brought about insofar as taxing export of services provided by the 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. [para 78]
+ 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. If the contention as urged on behalf of the respondents is accepted, then the definition of "export of services" as contained in Section 2(6) of the IGST Act and the consequences of export of services as the law would mandate including under Section 16 of the IGST Act, would stand nullified and/or rendered meaningless. Such cannot the intention of the legislature in framing of the IGST Act. [para 80]
+ There is an apparent dichotomy. A transaction of export of services as that of the petitioners, on one hand, is treated as inter-State trade or commerce by virtue of sub-section (5) of Section 7, and on the other hand, the same transaction is treated as an intra-State trade and commerce by virtue of Section 13(8)(b) of the IGST Act. [para 81]
+ 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. [para 82]
+ It may thus be observed that the fiction which is created by Section 13(8)(b) would be required to be confined only to the provisions of IGST Act, as there is no scope for the fiction travelling beyond the provisions of IGST Act to the CGST and the MGST Acts, as neither the Constitution would permit taxing of an export of service under the said enactments nor these legislations would accept taxing such transaction. [para 97]
+ I am not inclined to hold that the provisions of Section 13(8)(b) and the provisions of Section 8(2) of IGST Act be struck down as unconstitutional being violative of the provisions of Articles 14, 19(1)(g), 245, 246, 246A, 265, 269A and 286 of the Constitution. It also cannot be overlooked that there is likelihood that there are categories of transactions in relation to the intermediaries 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 persons who can also be classified as intermediaries, would be a fatal proposition. [para 103]
+ 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. [para 109]
+ 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 support such opinion, hence, it was available for this Court to render an opinion different from the reasons as arrived by the Hon'ble Members of the Division Bench. [para 110]
+ It is not necessary to consider the validity of the impugned provisions on the touchstone of Articles 14 and 19(1)(g) of the Constitution as canvassed by the petitioners. [para 111]
Conclusion: The provisions of Section 13(8)(b) and Section 8(2) of the IGST Act are legal, valid and constitutional, provided that 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 and MGST Acts.
- Reference answered. Petition disposed of: BOMBAY HIGH COURT 2023-TIOL-451-HC-MUM-GST
Shapoorji Pallonji And Company Pvt Ltd Vs UoI
GST - The Petitioner is engaged in providing works contract services and other allied services - They received a notice purportedly issued under section 25 of MVAT Act of 2002, for review of order of assessment - The notice indicated that Respondent was of opinion that transitional credit availed of by petitioner based on a revised return was not permissible in terms of Circular No. 35A - The Petitioner was given a hearing and impugned order was passed and order of assessment was modified to the effect that unadjusted VAT credit carried forward under GST regime was denied - Both the parties point out that though it is termed a review, the power is akin to revision by Commissioner of orders passed by subordinate officer - It is clear from language of section 25 that exercise of power under it is of such nature that it could have consequences on taxpayer; that is also why the opportunity is provided under section 25 (3) of MVAT Act of 2002 - Therefore, the reason why the power is being exercised must be specified in order since the order has to be speaking one - Impugned order has relied upon internal Circular No. 35A - No discussion found in impugned order as to whether petitioner is entitled to term set of transitional credit - The arguments advanced are entirely different from the foundation of impugned order, which has solely relied upon the Circular - Considering the nature of power, order should be self-speaking - It cannot be that the Authority passes an order without reasons, and then arguments are advanced in a writ jurisdiction at the first instance - Furthermore, Petitioner is not the one who is delaying the payment of taxes - Remand is also necessary to highlight the need to give a reasoned order - Parties jointly state that exercise of power under section 25 of MVAT Act of 2002 in respect of the order in question would be within period of limitation - Impugned order is set aside - If Respondents proceed to exercise power under section 25 of MVAT Act of 2002, will issue notice to Petitioner as per law and pass necessary orders - Respondents will initiate and complete the proceedings under section 25 of MVAT Act of 2002 within six weeks: HC
- Writ petition disposed of: BOMBAY HIGH COURT |
