Allowed

Twin Disc Power Transmission Pvt.ltd v. The Deputy Commissioner (St)

Madras HC13 Dec 2024WP/6678/2021

Case brief

AI extract

What is this about?

The High Court allowed Writ Petitions challenging GST refund rejection orders. It held that services provided by a domestic company to its foreign holding/group companies constitute 'export of services' and qualify for refund, overturning the Authority's view that they were 'intermediary services' between distinct persons.

What did the court decide?

Impugned Rejection Orders, Deficiency Memos, and Show Cause Notices were quashed. The 2nd Respondent was directed to refund the claimed amounts within 30 days.

Twin Disc Power Transmission Pvt.ltd Vs The Deputy… — GST and Indirect Tax | Madras HC (2024)

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W.P.Nos.6678 of 2021 etc., batch

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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DATED : 13.12.2024

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CORAM :

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THE HONOURABLE MR.JUSTICE C.SARAVANAN

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W.P.Nos.6678, 6687, 6696, 6700, 6693, 14305, 14310, 14313, 14318 14765 and 23191 of 2021

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and W.M.P.Nos.7238, 7240, 7254, 7247, 7251, 7230, 7244, 7242, 15193, 15209, 15654, 15205, 15213, 24496, 24494, 15194, 15200, 15198, 15206, 15655 of 2021

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W.P.No.6678 of 2021

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Twin Disc Power Transmission Pvt. Ltd., Represented by its Country Manager and Financial Controller Ms.Indira Bongarala ... Petitioner

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Vs.

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1.The Deputy Commissioner (ST), GST Appeals, Zone VI, Chennai, 4^th Floor, PJM Building, Greams Road, Chennai – 06.

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2.The Assistant Commissioner (ST), Valluvarkottam Assessment Circle, 10, Palaniyappa Maaligai, Greams Road, Chennai – 600 006.

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3.The Assistant Commissioner of GST &

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W.P.Nos.6678 of 2021 etc., batch

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Central Excise, Triplicane Division, Chennai North Commissionerate, 26/1, Mahatma Gandhi Road, Nungambakkam, Chennai – 600 034. ... Respondents

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Prayer in W.P.No.6678 of 2021: Writ Petition filed under Article 226 of the Constitution of India, for issuance of a Writ of Certiorarified Mandamus, to call for the records of the Impugned Order passed by the 1^st respondent vide Order No.AP/GST/7/2019 dated 31.07.2020 rejecting the refund claim made for the month of August, 2017, from the files of the 1^st respondent herein, quash the same, and further direct the respondents to sanction the refund claim made by the petitioner.

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For Petitioner : Mrs.Aparna Nandakumar (In all W.Ps) for Mr.J.Nandakumar For Respondents : (In all W.Ps) For R1 and R2 : Mr.T.N.C.Kaushik Additional Government Pleader For R3 : Mr.M.Santhanaraman Senior Standing Counsel

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COMMON ORDER

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By this Common Order, all these Writ Petitions are being disposed of.

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I have considered the arguments advanced by the learned counsel

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W.P.Nos.6678 of 2021 etc., batch

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for the Petitioner, learned Additional Government Pleader for the 1^st and

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2^nd Respondents and the learned Senior Standing Counsel for the 3^rd Respondent.

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The Petitioner is a Private Limited Company engaged in the business of Engineering Design Support Services, Sourcing Support Services and Marketing Support Services and had exported services to its holding Company namely “Twin Disc Incorporated” situated at United States of America (USA) and a group Company called “Twin Disc (Far East) Pte. Ltd.,” situated at Singapore. The Petitioner had made exports to these Companies under two separate “Support Service Agreements” both dated 01.11.2011 signed with the respective Companies.

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On the exports made by the Petitioner, the Petitioner had claimed refund of “Input Tax Credit” as defined in Section 2(63) of CGST Act availed on the “input service” as defined in Section 2(60) of CGST Act, utilized for effecting export of services, which qualified as “Zero Rated Supply” within the meaning of Section 16 of the Integrated Goods and Services Tax (IGST) Act, 2017 (hereinafter referred to as “IGST Act”), as

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W.P.Nos.6678 of 2021 etc., batch

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it stood during the period in dispute. Section 16(3) of IGST Act reads differently during the period in dispute. Section 16(3) of IGST Act as it read during the period in dispute and as it reads now are extracted

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hereunder:-

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Section 16. Zero rated supply Section 16. Zero rated supply (Substituted by the Finance Act, 2021 with effect from 01.10.2023)

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(3) A registered person making (3) A registered person making zero rated supply shall be eligible zero rated supply shall be eligible to claim refund under either of the to claim refund of unutilized input following options, namely:tax credit on supply of goods or services or both, without payment

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(a) he may supply goods or of integrated tax, under bond or

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services or both under bond or Letter of Undertaking, in

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Letter of Undertaking, subject accordance with the provisions of

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to such conditions, safeguards Section 54 of the Central Goods

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and procedure as may be and Services Tax Act or the rules

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prescribed, without payment made thereunder; subject to such

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of integrated tax and claim conditions, safeguards and

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refund of unutilised input tax procedure as may be prescribed:

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credit; or

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(a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or

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(b) he may supply goods or services or both, subject to Provided that the registered person such conditions, safeguards making zero rated supply of goods and procedure as may be shall, in case of non-realisation of prescribed, on payment of sale proceeds, be liable to deposit integrated tax and claim the refund so received under this refund of such tax paid on subsection along with the goods or services or both applicable interest under Section supplied, in accordance with 50 of the Central Goods and the provisions of section 54 of Services Tax Act within thirty days the Central Goods and after the expiry of the time limit Services Tax Act or the rules prescribed under the Foreign made thereunder. Exchange Management Act, 1992

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W.P.Nos.6678 of 2021 etc., batch

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Section 16. Zero rated supply	Section 16. Zero rated supply
	(Substituted by the Finance Act, 2021 with effect from 01.10.2023)
	(42 of 1999) for receipt of foreign
	exchange remittances, in such
	manner as maybeprescribed.

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The refund claims of the Petitioner were filed under Section 54 of CGST Act, 2017 read with Rule 89 of the Central Goods and Services Tax (CGST) Rules, 2017 on the aforesaid export of service made by the Petitioner which were rejected by the 2^nd Respondent.

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In these Writ Petitions, the Petitioner has challenged the Order No.AP/GST/7/2019 dated 31.07.2020 of the 1^st Respondent, Rejection Orders and Show Cause Notices issued by the 2^nd Respondent and the Deficiency Memos issued by the 2^nd Respondent with regard to the refund claim of the Petitioner.

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There are 4 categories of cases in the present batch of Writ

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Petitions. 1^st category of cases pertain to the Rejection Order of the 1^st

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W.P.Nos.6678 of 2021 etc., batch

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Respondent on the appeal preferred by the Petitioner. 2^nd category of cases pertain to the Rejection Orders passed by the 2^nd Respondent on the refund claims made by the Petitioner. 3^rd category of cases pertain to Deficiency Memos issued by the 2^nd Respondent against the refund claims of the Petitioner and the 4^th category of cases pertains to the Show Cause Notices issued to the Petitioner by the 2^nd Respondent.

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Details of the Rejection Orders/Show Cause Notices/Deficiency

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Memos/Orders passed by the Respondents and the subject matter of

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challenge in these Writ Petitions are given below:-

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Sl. No.	W.P.No.	Month of Refund Claim	Proceedings	Amount of Refund Claimed (Rs.)
1	6678 of 2021	August, 2017	1^st Respondent, AP/GST/7/2019 dated 31.07.2020	67035.00
2	6687 of 2021	September, 2017	1^stRespondent, AP/GST/7a/2019 dated 31.07.2020	1,22,948.00
3	6693 of 2021	August, 2018	2^ndRespondent, Refund rejected vide Order dated 21.11.2020	1,95,347.00
4	6696 of 2021	September, 2018	Deficiency Memo dated 03.12.2020	1,12,503.00

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W.P.Nos.6678 of 2021 etc., batch

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Sl. No.	W.P.No.	Month of Refund Claim	Proceedings	Amount of Refund Claimed (Rs.)
5	6700 of 2021	October, 2018	Deficiency Memo dated 03.12.2020	1,15,346.00
6	14313 of 2021	November, 2018	Deficiency Memo dated 28.04.2021	1,94,769.00
7	14318 of 2021	December, 2018	Deficiency Memo dated 29.04.2021	1,43,336.00
8	14305 of 2021	September, 2018	2^ndRespondent, Show Cause Notice dated 17.06.2021	1,12,503.00
9	14310 of 2021	October, 2018	2^ndRespondent, Refund Rejection Order dated 18.06.2021	1,15,436.00
10	14765 of 2021	September, 2018	2^ndRespondent, Show Cause Notice dated 05.07.2021	1,12,503.00
11	23191 of 2021	January 2019	Deficiency Memo dated 08.10.2021	1,06,296.00

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By the Impugned Order dated 31.07.2020, the 1^st Respondent

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dismissed the appeals filed by the Petitioner under Section 107 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”) and confirmed the Orders of rejection passed by the 2^nd respondent for months of August, 2017 and September, 2017.

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W.P.Nos.6678 of 2021 etc., batch

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Relevant portion of the Impugned Orders in W.P.No.6678 of

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2021 and W.P.No.6687 of 2021 read as under:-

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Impugned Order bearing Impugned Order bearing No.AP/GST/7/2019 dated No.AP/GST/7a/2019 dated 31.07.2020 31.07.2020

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From the above facts, it can be seen From the above facts, it can be seen that the judgements relied on by the that the judgements relied on by the Appellants are not applicable to the Appellants are not applicable to the facts of the case. facts of the case. 1) The Decision of the Appellate 1) The Decision of the Appellate Tribunal Delhi, in the case of Tribunal Delhi, in the case of GAP International Sourcing GAP International Sourcing (India) Pvt Ltd., Vs. CST Delhi (India) Pvt Ltd., Vs. CST Delhi in which it was held on facts of in which it was held on facts of the case that sourcing support the case that sourcing support service qualifies as Business service qualifies as Business Auxiliary Service and those Auxiliary Service and those services should be treated as services should be treated as delivered outside India. delivered outside India.

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1. The Authority of Advance 2) The Authority of Advance Ruling Ruling in AAR/ST/08/2016 in in AAR/ST/08/2016 in the case the case of M/s. Go Daddy India of M/s. Go Daddy India Web Web Services Pvt Ltd., it was Services Pvt Ltd., it was held by held by the AAR that Marketing the AAR that Marketing Support Support Services provided by Go Services provided by Go Daddy Daddy India Web Services Pvt India Web Services Pvt Ltd., to Ltd., to Go Daddy US) does not Go Daddy US) does not qualify qualify as intermediary service as intermediary service and will and will be construed as Export be construed as Export of of Service. This is also differs Service. This is also differs from from the facts of the case and the the facts of the case and the issue issue of distinct person has not of distinct person has not be be dealt. dealt.

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W.P.Nos.6678 of 2021 etc., batch

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Impugned Order bearing Impugned Order bearing No.AP/GST/7/2019 dated No.AP/GST/7a/2019 dated 31.07.2020 31.07.2020

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1. In the case of Microsoft Corporation (India) Vs. Cue, Delhi III , the Appellate Tribunal had a occasion to consider the following three question

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1. In the case of Microsoft Corporation (India) Vs. Cue, Delhi III , the Appellate Tribunal had a occasion to consider the following three question

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i. Whether the Marketing Support Services (MSS) provided by the Appellant to Microsoft Singapore during the relevant period qualify as export of service under the Export of Service Rules, 2005 and therefore the consideration including reimbursements received by the Appellant from Microsoft Singapore is not taxable?

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i. Whether the Marketing Support Services (MSS) provided by the Appellant to Microsoft Singapore during the relevant period qualify as export of service under the Export of Service Rules, 2005 and therefore the consideration including reimbursements received by the Appellant from Microsoft Singapore is not taxable?

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ii. Whether the reimbursement received in relation to Product Support Services (PSS) rendered by the Appellant is not taxable for the period from 09.07.2004 to 31.03.2005?

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ii. Whether the reimbursement received in relation to Product Support Services (PSS) rendered by the Appellant is not taxable for the period from 09.07.2004 to 31.03.2005?

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iii. Whether certain foreign currency expenditure incurred by the Appellant from April 2006 till March 2009 is not taxable under the Act?

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iii. Whether certain foreign currency expenditure incurred by the Appellant from April 2006 till March 2009 is not taxable under the Act?

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And as all the issues were to be decided only on facts and the facts were not properly discussed by the Adjudicating Authority, the answer to all the three questions were remanded to the Adjudicating Authority

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W.P.Nos.6678 of 2021 etc., batch

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Impugned Order bearing No.AP/GST/7/2019 dated 31.07.2020

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Impugned Order bearing No.AP/GST/7a/2019 dated 31.07.2020

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for fresh consideration. The issue for consideration was only whether the same was liable to tax or not and it was not with reference to whether it is eligible for refund or not.

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for fresh consideration. The issue for consideration was only whether the same was liable to tax or not and it was not with reference to whether it is eligible for refund or not.

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Therefore all the above decisions cannot be applied to the case on hand on facts as stated supra.

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Therefore all the above decisions cannot be applied to the case on hand on facts as stated supra.

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On fact the taxable person has paid On fact the taxable person has paid tax on the import of service from tax on the import of service from Twin Disc Incorporated, USA for the Twin Disc Incorporated, USA for the Expenses Reimbursement for the Cost Sharing Charges for the month of July 2017 under RCM for month of August 2017 under RCM. import of services . Reimbursement Cost Sharing Charges takes place of expenses takes place only only between two distinct entities in between two distinct entities in accordance with Explanation 1 in accordance with Explanation 1 in Section 8 of the IGST Act 2017. Section 8 of the IGST Act 2017.

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Therefore, the value IGST of Therefore, the value IGST of Rs.26,582/- , CGST of Rs.48,183/Rs.4,025/- , CGST of Rs.31,505/- and SGST of Rs.48,183/- are not and SGST of Rs.31,505/- are not eligible for refund as the services eligible for refund as the services covered in the Invoices do not covered in the Invoices do not qualify for export of services. qualify for export of services. Therefore the Refund Rejection Therefore the Refund Rejection Order passed by the Assistant Order passed by the Assistant Commissioner, Valluvarkottam as Commissioner, Valluvarkottam as per the provisions of the TNGST per the provisions of the TNGST Act/CGST Act and IGST Act 2017 Act/CGST Act and IGST Act 2017 calling for no intervention. calling for no intervention.

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Thereafter, the 2^nd Respondent rejected the refund claims for the

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W.P.Nos.6678 of 2021 etc., batch

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succeeding months from August, 2018 to January, 2019 by passing the Impugned Rejection Order dated 21.11.2020 and issued Deficiency Memos for the months of September, 2018 and October, 2018.

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Section 54 of CGST Act and Rule 89 of CGST Rules, 2017

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reads as under:-

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Section 54 of CGST Act, 2017 Rule 89 of CGST Rules, 2017

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54 . Refund of tax 89 . Application for refund of tax, interest, penalty, fees or any

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(1) Any person claiming refund other amount

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of any tax and interest, if any, paid on such tax or any other (1) Any person, except the persons amount paid by him, may covered under notification make an application before issued under Section 55, the expiry of two years from claiming refund of any tax, the relevant date in such form interest, penalty, fees or any and manner as may be other amount paid by him, prescribed: other than refund of integrated tax paid on goods exported out

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Provided that a registered of India, may file, subject to

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person, claiming refund of the provisions of Rule 10B, an

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any balance in the electronic application electronically in

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cash ledger in accordance FORM GST RFD-01 through

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with the provisions of subthe common portal, either

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section (6) of Section 49, may directly or through a

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claim such refund in such Facilitation Centre notified by

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form and manner as may be the Commissioner.

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prescribed.

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(2) A specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation notified under the United

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Provided that any claim for refund relating to balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of Section

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Section 54 of CGST Act, 2017

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Nations (Privileges and Immunities) Act, 1947 (46 of 1947), Consulate or Embassy of foreign countries or any other person or class of persons, as notified under Section 55, entitled to a refund of tax paid by it on inward supplies of goods or services or both, may make an application for such refund, in such form and manner as may be prescribed, before the expiry of two years from the last day of the quarter in which such supply was received.

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(3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period:

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Provided that no refund of unutilised input tax credit shall be allowed in cases other than-

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i. zero-rated supplies made without payment of tax;

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ii. where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies other than nil rated or fully exempt supplies, except supplies of goods or services or both as may be

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W.P.Nos.6678 of 2021 etc., batch

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Rule 89 of CGST Rules, 2017

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49 may be made through the return furnished for the relevant tax period in FORM GSTR-3 or FORM GSTR-4 or FORM GSTR-7 , as the case may be:

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Provided further that in respect of supplies to a Special Economic Zone unit or a Special Economic Zone developer, the application for refund shall be filed by the-

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(a) supplier of goods after such goods have been admitted in full in the Special Economic Zone for the authorised operations, as endorsed by the specified officer of the Zone;

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(b) supplier of services along with such evidence regarding receipt of services for authorised operations as endorsed by the specified officer of the Zone.

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Provided also that in respect of supplies regarded as deemed exports, the application may be filed by,-

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(a) the recipient of deemed export supplies; or

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(b) the supplier of demand export supplies in cases where the recipient does not avail of input tax credit on such supplies and

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Section 54 of CGST Act, 2017 notified by the Government on the recommendations of the Council.

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Provided further that no refund of unutilised input tax credit shall be allowed in cases where the goods exported out of India are subject to export duty.

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Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.

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W.P.Nos.6678 of 2021 etc., batch

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Rule 89 of CGST Rules, 2017

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furnishes an undertaking to the effect that the supplier may claim the refund.

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Provided also that refund of any amount, after adjusting the tax payable by the applicant out of the advance tax deposited by him under Section 27 at the time of registration, shall be claimed in the last return required to be furnished by him.

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(1A) Any person, claiming refund under Section 77 of the Act of any tax paid by him, in respect of a transaction considered by him to be an intra-State supply, which is subsequently held to be an inter-State supply, may, before the expiry of a period of two years from the date of payment of the tax on the inter-State supply, file an application electronically in FORM GST RFD-01 through the common portal, either directly or through a Facilitation Centre notified by the Commissioner.

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Provided that the said application may, as regard to any payment of tax on inter-State supply before coming into force of this sub-rule, be filed before the expiry of a period of two years from the date

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W.P.Nos.6678 of 2021 etc., batch

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Section 54 of CGST Act, 2017 Rule 89 of CGST Rules, 2017 on which this sub-rule comes into force.

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The case of the Petitioner is that the Petitioner was originally under the Central Authority and for the export made during the month of July 2017, the Central Authority had also rightly allowed the refund claim of the Petitioner in terms of Section 54 of CGST Act read with Section 16

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of IGST Act.

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However, for the exports made during the subsequent months, namely August and September 2017, the 2^nd Respondent rejected the refund claims by two separate Orders dated 11.06.2018 which culminated in the appeal Order dated 31.07.2020 of the 1^st Respondent which are impugned in W.P. Nos. 6678 and 6687 of 2021.

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It is the further case of the Petitioner that on the identical exports

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made by the Petitioner, the 2^nd Respondent has also granted refund of Input

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W.P.Nos.6678 of 2021 etc., batch

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Tax Credit during the interregnum for the period between October 2017 and July 2018. However, the 2^nd Respondent rejected the refund claim for the succeeding months from August 2018 to January 2019 either by passing the Rejection Order dated 21.11.2020 and the Rejection Order dated 18.06.2021 which are subject matter of challenge in W.P. No.6693 of 2021 and W.P. No.14310 of 2021 or by issuing Deficiency Memos which are the subject matter of challenge in W.P. Nos. 6696, 6700, 14313, 14318 and 23191 of 2021.

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The thumb rule under Section 13(2) of IGST Act is that the place

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of supply of service shall be the location of the recipient of service except in the circumstances specified in Section 13(3) of IGST Act. SubSection 3 to Section 13 of IGST Act reads as under:-

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“ 13 . Place of supply of services where location of supplier or location of recipient is outside India

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(1)...

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(2)...

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(3)The place of supply of the following services shall be the location where the services are actually performed, namely:-

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(a) services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of

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W.P.Nos.6678 of 2021 etc., batch

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services in order to provide the services:

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Provided that when such services are provided from a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services.

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Provided further that nothing contained in this clause shall apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs or for any other treatment or process and are exported after such repairs or treatment or process without being put to any use in India, other than that which is required for such repairs or treatment or process.

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(b)services supplied to an individual, represented either as the recipient or services or a person acting on behalf of the recipient, which require the physical presence of the recipient or the person acting on his behalf, with the supplier for the supply of services.”

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The issue in these Writ Petitions centres around the

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interpretation of the definition of “export of services” as in Section 2(6) of IGST Act. The stand of the Department in these proceedings is that the Petitioner has not satisfied the requirements of Clause (iii) and Clause (v) to Section 2(6) of IGST Act. For the sake of clarity, Section 2(6) of IGST Act is reproduced below:-

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“ 2 . Definitions

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(1)...

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(2)...

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(3)...

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(4)...

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(5)...

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W.P.Nos.6678 of 2021 etc., batch

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(6)“export of services” means the supply of any service when,-

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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;

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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

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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.”

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As far as Clause (v) to Section 2(6) of IGST Act is concerned,

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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 of IGST Act. The issue also stands covered against the Respondents in terms of Paragraph 5.1 of Circular No.161/17/2021-GST dated 20.09.2021 issued by the Central Board of Indirect Taxes and Customs, GST Policy Wing, Department of Revenue, Ministry of Finance, Government of India.

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The above Clarification of the Board in Paragraph 5.1 of

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Circular No.161/17/2021-GST dated 20.09.2021 reads as under:-

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W.P.Nos.6678 of 2021 etc., batch

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“5.1. In view of the above, it is clarified that a company incorporated in India and a body corporate incorporated by or under the laws of a country outside India, which is also referred to as foreign company under Companies Act, are separate persons under CGST Act, and thus are separate legal entities. Accordingly, these two separate persons would not be considered as “merely establishments of a distinct person in accordance with Explanation 1 in Section 8”.

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5.2 Therefore, supply of services by a subsidiary/sister concern/group concern, etc., of a foreign company, which is incorporated in India under the Companies Act, 2013 (and thus qualifies as a 'company' in India as per Companies Act), to the establishments of the said foreign company located outside India (incorporated outside India), would not be barred by the condition (v) of the sub-section (6) of the section 2 of the IGST Act, 2017 for being considered as export of services, as it would not be treated as supply between merely establishments of distinct persons under Explanation 1 of Section 8 of IGST Act, 2017. Similarly, the supply from a company incorporated in India to its related establishments outside India, which are incorporated under the laws outside India, would not be treated as supply to merely establishments of distinct person under Explanation 1 of Section 8 of IGST Act, 2017. Such supplies, therefore, would qualify as 'export of services', subject to fulfilment of other conditions as provided under sub-section (6) of Section 2 of IGST Act.

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It is requested that suitable trade notices may be issued to publicize the contents of this Circular.

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Difficulty, if any, in the implementation of this Circular may be brought to the notice of the Board. Hindi version will follow.”

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W.P.Nos.6678 of 2021 etc., batch

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In view of the above, the objection of the Respondents insofar as the failure of the Petitioner to satisfy the condition in Section 2(6)(v) of

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IGST Act has to be overruled and answered in favour of the Petitioner.

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In any event, this issue has also been answered by this Court in

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Vuram Technology Solutions (P.) Ltd., Vs. Additional Commissioner

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of GST (Appeals) vide Order dated 10.04.2024 in W.P (MD) No.15092

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of 2022 wherein, the Court has ultimately held as under:-

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“13.In my view, the above interpretation placed by the first respondent is incorrect. Admittedly, the petitioner and its subsidiary are two distinct entities and therefore, it cannot be said that the petitioner has not satisfied the requirements of Section 2(6)(v) of IGST Act, 2017 . The doctrine of the authority for advance Ruling in Segoma Imaging Technologies India Pvt. Ltd., reported in 2019 (20) GSTL 611 (AAR-GST) cannot be applied to the facts of this case.

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14.It cannot be said that the petitioner and its subsidiary are not merely establishment of a distinct person in accordance with the explanation I in Section 8 of the IGST Act, 2017. The issue now stands clarified by Circular No.161/17/2021-GST dated 20.09.2021 bearing Ref.F.No.CBIC-20001/8/2021-GST, content of, which has been extracted above.

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15.This view has also been followed by the Delhi

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High Court in Xilinx India Technology Services (P) Ltd.(supra). That apart, the Revenue cannot argue against its own circular, although such clarification in Circular of the Board are much binding on the petitioner nor on this Court. The view expressed in the said circular is correct and clarifies the legal position and therefore, this Court is not inclined to take a different view, though such a circular is not binding on this Court .

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16.Since the view taken by the Board is correct, the impugned order is liable to be set aside. Consequently, the second respondent is directed to process the re-fund claim of the petitioner together with interest payable in accordance with the provisions of the Act as expeditiously as possible, preferably within a period of 12 weeks from the date of receipt of a copy of this order.

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17.The Writ Petition stands allowed, with the above directions. No costs. Consequently, connected Miscellaneous Petition is closed.”

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As far as the other requirements regarding place of supply of service to be outside India in Section 2(6)(iii) of the Act is concerned, it has to be read along with Section 13(2) of IGST Act. For the sake of clarity, Section 2(6)(iii) and Section 13(2) of IGST Act are extracted

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hereunder:-

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Section 2(6)(iii) of IGST Act	Section 13(2) of IGST Act
2.Definitions	13.Place of supply of services
In this Act, unless the context otherwise requires,-	where location of supplier or location of recipient is outside

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Section 2(6)(iii) of IGST Act	Section 13(2) of IGST Act
(1) ...	India
(2) ...	(1) ...
(3) ... (4) ...	(2) The place of supply of services except the services specified in sub-sections (3) to (13) shall
(5) ...	be the location of the recipient
(6) “export of services” means the	of services.
supply of any service when,- i. ... ii. ...	Provided that where the location of the recipient of services is not available in the ordinary course of business,
iii. the place of supply of service is outside India.	the place of supply shall be the location of the supplier of services.

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According to the Respondents Department, service provided by

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the Petitioner to its holding Company and the group Company under the 2 Service Agreements would come within the definition of “intermediary service” as defined in Section 2(13) of IGST Act and therefore, supply of service in the case of the Petitioner shall be the location of the Petitioner itself in terms of Section 13(8)(b) read with Section 13(2) and the definition in Section 2(13) of IGST Act. Section 2(13), Section 13(2) and

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Section 13(8)(b) of IGST Act are extracted below:-

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Section 2(13) of IGST	Section 13(2) of IGST	Section 13(8)(b) of
Act	Act	IGST Act
2.Definitions	13.Place of supply of	13.Place of supply of

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Section 2(13) of IGST Act	Section 13(2) of IGST Act	Section 13(8)(b) of IGST Act
In this Act, unless the context otherwise requires,- (13) “Intermediary” means 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.	services where location of supplier or location of recipient is outside India (1) ... (2) The place of supply of services except the services specified in sub-sections (3) to (13) shall be the location of the recipient of services. Provided that where the location of the recipient of services is not available in the ordinary course of business, the place of supply shall be the location of the supplier of services.	services where location of supplier or location of recipient is outside India (8) The place of supply of the following services shall be the location of the supplier of services, namely:- (a) ... (b) intermediary services

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Sub-Section 13 to Section 13 of IGST Act is attracted. The

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definition of “intermediary” in Section 2(13) of IGST Act, makes it clear that it applies to a broker, an agent, or any other person, by whatever name called, who arranges or facilitates the supply of goods or service or both, or securities, between two or more persons. Section 2(13) of IGST Act is extracted hereunder:-

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“ 2 . Definitions

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In this Act, unless the context otherwise requires,-

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(13) “Intermediary” means 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.”

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25. The definition excludes a person, who supplies such goods or services or both or securities from his own account. Thus, it cannot be said that the Petitioner acted as a broker or an agent or any other person who arranged or facilitated the supply of goods or services or both between two or more persons.

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26. In this context, it is to be borne in mind that the Petitioner has an independent Support Service Agreements both dated 01.11.2011 with its holding Company namely Twin Disc Incorporated situated in USA and group Company namely Twin Disc (Far East) Pte. Ltd situated in Singapore.

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27. A reading of the Support Service Agreements both dated 01.11.2011 entered between the Petitioner and its holding company makes

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it clear that the services provided by the Petitioner to these two Companies which are holding and the group Companies are from its own account and not on its broker, agent or any other person who arranged or facilitated the supply of goods or services or both between two or more persons.

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28. Therefore, there is no legal basis on which, the benefit of rules that is available for export of service as defined in Section 2(6) of IGST Act can be denied to the Petitioner.

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29. Under these circumstances, the Impugned Orders passed by the 1st Respondent and the Impugned Rejection Orders passed by the 2 nd Respondent and the Impugned Deficiency Memos and the Show Cause Notices issued by the 2 nd Respondent are liable to be quashed, and are accordingly quashed with consequential relief to the Petitioner.

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30. The 2 nd Respondent is directed to refund the amount claimed by the Petitioner on the exports made by the Petitioner to its holding Company and the group Company within a period of 30 days from the date of receipt of a copy of this order.

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31. These Writ Petitions are allowed. No costs. Connected Writ

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Miscellaneous Petitions are closed.

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13.12.2024

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Neutral Citation : Yes / No

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arb

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To:

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1.The Deputy Commissioner (ST), GST Appeals, Zone VI, Chennai, 4^th Floor, PJM Building, Greams Road, Chennai – 06.

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2.The Assistant Commissioner (ST), Valluvarkottam Assessment Circle, 10, Palaniyappa Maaligai, Greams Road, Chennai – 600 006.

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3.The Assistant Commissioner of GST & Central Excise, Triplicane Division, Chennai North Commissionerate, 26/1, Mahatma Gandhi Road, Nungambakkam, Chennai – 600 034.

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