Facts
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.
In Writ Petition, there is an additional prayer assailing the constitutional validity of Section 8(2) of the IGST Act. The petitioners have commonly contended that the impugned provisions are violative of Articles 14, 19, 245, 246, 246A, 248, 265, 269A, and 286 of the Constitution.
Submission
Advocate Bharat Raichandani and Advocate Abhishek Rastogi, appearing for the petitioners contended that Section 13(8)(b) of the IGST Act read with Section 2(13) and 2(6) to the extent, these provisions seek to levy GST on services provided by the petitioners to its overseas customers, which are consumed by such customers/ recipients outside India, by fiction of law as created by these provisions are treated as intra-state supply making GST leviable on such export of service, under the CGST Act and MGST Act.
They submitted that these provisions are violative of the provisions of Article 246A read with Articles 269A and 286 of the Constitution this more particularly when the nature of the transaction entered by the petitioner with overseas customers is not in dispute and in fact, is accepted by the respondent in the reply affidavit.
Additional solicitor General, submitted that the case of the petitioners is premised on the plea that service rendered by them amounts to “export of services”, and that “export of services”, is not taxable and hence the levy on the petitioners as supplier of intermediary services is invalid.
He submitted that such contention is not tenable, as on a plain reading of the averments as made in the petition and the supporting agreements produced therewith would show that the respondents’ case that the services being rendered by the petitioner take place entirely in India, hence, there is no export of service.
AGP, Jyoti Chavan, appearing for the State Government contended that the principal foreign company had entered into an Agency Agreement with the petitioner, as such foreign party was desirous of selling the goods in India.
She submitted that the commission payable to the petitioner is for a particular item, contract, or buyer, and it may change from time to time by mutual consent, which is also clear from the facts that the invoices raised by the petitioner would show that the petitioner is entitled to commission as per the orders placed by the Indian customers and therefore, the petitioner’s commission depends upon the orders placed by the Indian Customers and thus the services rendered by the petitioner are of the peculiar nature and, therefore, under Section 2(13) of the IGST Act, the petitioner has been classified as “Intermediary”.
Decision
The single judge bench of Justice G. S. Kulkarni said that the contention as urged on behalf of the State Government that because 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.
The court added that 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.
The court opined 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 Act and MGST Act, on such interpretation, the provisions are intra vires the Constitution, the IGST, the CGST and the MGST Acts.
It was held by the court that 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.
Case title: Dharmendra M. Jani v/s The Union of India and Ors.
Citation: Writ Petition No.2031 Of 2018
