ITC as incident of tax
|
Case Title |
Jar Productions Private Limited vs The Union of India & Ors |
|
Court |
Bombay High Court |
|
Honorable Judges |
Justice S.V.Gangapurwala & Justice M.G.Sewlikar |
|
Citation |
2022 (6) GSTPanacea 370 HC Bombay WP-1143-2021 |
|
Judgement Date |
09-June-2022 |
|
Council for Petitioner |
Prasad Paranjape Mohit Raval |
|
Council for Respondent |
Pradeep Jetly |
|
Section |
Section 54(8)(e) of the CGST Act |
|
In Favour of |
In Favour of Assesee |
The Bombay High Court bench of Justice S.V.Gangapurwala & Justice M.G.Sewlikar has held that when services are rendered abroad, CGST will not apply.. Therefore, GST does not apply to the services rendered abroad as they amount to the export of services. In addition to that the respondent could not establish that the incident of tax has been passed on to the recipient ASCL located in London. In the light of the above, both the impugned orders are set aside and writ petition is allowed.
ITC as incident of tax
FACTS OF THE CASE
The petitioner is engaged in providing production services to ‘A Suitable Company Ltd ’ located in London United Kingdom (U.K.) (ASCL for short). For the purpose for providing the said services, the petitioner has entered into an agreement dated 12th September, 2019 with ASCL effective from 28th March, 2018.
It is further alleged that Clause 4.10 of the agreement provides that if any refund of tax component is received by the petitioner, such amount shall be reduced from the production expenses i.e. while computing the consideration towards production services, the said amount of tax component received as refund will be deducted from the production expenses
The Petitioner filed refund claim of Rs. 1,43,56,999/-for received and utilised various inputs/ input services for the subsequent period of August 2019 to October, 2019.
Thereafter, the Petitioner received a show cause notice. The petitioner replied to the said notice. After hearing the petitioner, the respondent no 4 rejected the claim of the petitioner on the ground that the incidence of tax has been passed on to the client i.e. ASCL resulting into unjust enrichment of the petitioner. Having held so, respondent no 4 rejected the claim of the refund of the GST. This order was passed on 27th July 2020.
Being aggrieved by this order, the petitioner preferred an Appeal to Respondent No 3. After hearing the Petitioner, Respondent No.3 dismissed the Appeal of the Petitioner vide Order-in-Appeal no APK/GST/AIII/ADC/MUM/54/2021 dated 19/02/2021 holding that the incidence of tax has passed on to the client i.e. ASCL and that it amounted to unjust enrichment
It is further alleged that the petitioner filed GST claim of Rs. 5,79,25,012/- for the period from November, 2019 to July 2020 on 1st September 2020. On 21st September, 2020, respondent no 4 issued SCN to the petitioner. Identical objections as raised in SCN dated 27th July, 2020, were also raised in the SCN dated 21st September, 2020.
The Petitioner replied to this notice . After hearing the Petitioner, Respondent No. 4 rejected the claim of refund of the GST on the same ground that the incidence of tax had been passed on to the recipient of the services and if refund was allowed, it would amount to unjust enrichment. This order was passed by respondent no 4 on 16th October 2020.
Being aggrieved by the order of Respondent No. 4, the Petitioner preferred Appeal to Respondent No.3. Respondent No. 3 gave personal hearing to the Petitioner and confirmed the order of Respondent No. 4. Respondent No. 3 also held that if refund is granted, it would amount to unjust enrichment. Both these orders are being challenged by the petitioner in this writ petition
ITC as incident of tax
COURT HELD
Considering the facts as recorded, held that court relying on the Apex court judgment held that when services are rendered abroad, CGST will not apply. In the case at hand also, the petitioner has rendered services to the ASCL abroad i.e. in U.K. Therefore, GST does not apply to the services rendered abroad as they amount to the export of services.
In addition to that the respondent could not establish that the incident of tax has been passed on to the recipient ASCL located in London. Thus, both, the Adjudicating Authority and the Appellate Authority committed error in rejecting the refund of GST of the petitioner
Therefore, orders of both the authorities cannot be sustained and need to be set aside
In the light of the above, both the impugned orders are set aside. Writ petition is allowed in terms of prayer clause (a) & (b).
ITC as incident of tax
ANALYSIS OF THE JUDGEMENT
The respondents don’t dispute that the Petitioner is entitled to the refund of GST, but their only contention is that the Petitioner has passed on the incidence of tax to the recipient company and on account of that the Petitioner is not entitled to claim refund. It is not in dispute that the Petitioner provides production services to the ASCL. Therefore, this clearly demonstrates that the Petitioner is exporting the services to the ASCL.
As GST does not apply to the services rendered abroad as they amount to the export of services.
In addition to that the respondent could not establish that the incident of tax has been passed on to the recipient ASCL located in London.
Thus, both, the Adjudicating Authority and the Appellate Authority committed error in rejecting the refund of GST of the petitioner.
Download PDF:
Jar Productions Private Limited
For Reference Visit:
Bombay High Court