Untitled Document<\/title> \n<\/head><\/p>\n<body><\/p>\nA division bench of the Bombay High Court comprising Justice S.V. Gangapurwala & Justice M.G.Sewlikar has held that petitioner is entitled to the refund of the amount if the incidence of tax has not been passed on to the recipient of the services. If the incidence of tax has been passed on, petitioner is not entitled to the refund. Accordingly, the bench has allowed a refund claim quashing the orders of the GST authorities by holding that the authorities could not establish that the incident of tax has been passed on to the recipient ASCL located in London.<\/p>\n1. Petitioner : <\/strong>JAR PRODUCTIONS PRIVATE LIMITED<\/p>\n2. Respondents : <\/strong>THE UNION OF INDIA & ORS. \n <\/strong> \n 3. Appeal Type\/ No. : <\/strong>WRIT PETITION NO. 1143 OF 2021 <\/strong><\/p>\n4. CORAM : <\/strong>1. HON’BLE Justice S.V. Gangapurwala, \n2. Justice M.G.Sewlikar <\/p>\n5. Council For Petitioners<\/strong> : Mr. Prasad Paranjape a\/w Mohit Raval i\/b Lumiere Law Partners<\/p>\n6. Council For Respondents<\/strong> : Mr. Pradeep Jetly, Senior Advocate<\/p>\n7. Date of pronouncement <\/strong>: 09.06.2022 <\/p>\n8. Facts :<\/strong> The petitioner is a Company incorporated under the Company’s Act, 2013. The petitioner is engaged in providing production services to ‘A Suitable Company Ltd’ located in London United Kingdom (U.K.) (ASCL for short). <\/p>\nFor 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. Wherein the 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.<\/p>\nFor providing the production services to ASCL, the petitioner received and utilised various inputs\/ input services on which appropriate CGST\/MGST\/IGST services were paid as charged by the vendors. In cases, where the services were received from service provider\/ vendor located outside India, CGST+MGST or IGST on such supplies was paid by the petitioner.<\/p>\nThe petitioner filed its first refund application for the period from April to July, 2019 on 31st March, 2020. The said claim was allowed by the respondent no 4 The Assistant Commissioner.<\/p>\nThe Petitioner filed another refund claim of Rs. 1,43,56,999\/-for the subsequent period of August 2019 to October, 2019. Thereafter, the Petitioner received a show cause notice (SCN for short). 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. <\/p>\nBeing 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 been passed on to the client i.e. ASCL and that it amounted to unjust enrichment. The Appellate Authority held that the burden of the GST has been shifted to the service recipient, the petitioner cannot be a beneficiary, as any refund to the petitioner would amount to unjust enrichment. The Appellate Authority placed reliance on the Constitution Bench judgment of the Supreme Court in the case of Mafatlal Industries vs Union of India (1997) 5 SCC 536.<\/p>\nIt 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.<\/p>\nBeing 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. <\/p>\n9. Nature of Issue : <\/u><\/strong> <\/p>\n10. Industry : Not industry specific<\/strong> <\/p>\n11. Held : <\/strong>The petitioner submitted that the principle of unjust enrichment does not apply to export services. Being a zero rated supply, the principle of unjust enrichment does not apply to the services rendered by the petitioner. Clause 4.10 of the agreement clearly stipulates that if refund is received, it shall be deducted from the expenses of production. He further submitted that there are judgments of this court indicating that the principle of unjust enrichment does not apply to export services.<\/p>\nRespondents submitted that the Petitioner has admitted that even in case of alleged unjust enrichment by the petitioner, the credit notes will nullify the effect of the same. GST law does not contemplate any mechanism for paying back the GST by way of issuance of credit note. He further submitted that the petitioner has admitted that when the refund is obtained, the GST collected from the recipient would be paid back. This itself shows that the incident of tax has been passed on to the recipient. He, therefore, submitted that the Adjudicating Authority and the Appellate Authority have rightly held that the petitioner is not entitled to the refund of GST as the incidence of tax has passed on to the recipient and there is unjust enrichment.<\/p>\nThe Petitioner has placed on record a copy of the agreement. It shows that the ASCL is located outside of India and the petitioner company is located in India. And the production services are rendered by the petitioner in the U.K. It is, thus, clear that the services rendered by the petitioner fall within the expression ‘export of services’.<\/p>\nThe court observed that Section 54(8)(e) of the CGST Act states refund cannot be claimed when incidence of tax has been passed on to the recipient or any other person. Section 54(8)(e) of the CGST Act states thus:- Notwithstanding anything contained in sub section(5) , the refundable amount shall, instead of being credited to the Fund, be paid to the applicant if such amount is relatable to – (e) if the tax and interest , if any, or any other amount paid by the applicant , if he had not passed on the incidence of such tax and interest to any other person.<\/p>\nThus, the applicant is entitled to the refund of the amount if the incidence of tax has not been passed on to the recipient of the services. If the incidence of tax has been passed on, petitioner is not entitled to the refund.<\/p>\nAgreement executed between the petitioner and the ASCL shows that the approved production budget includes all costs in connection with the production services including the amount of Indian Goods and Services Tax Act. This shows that GST is included in all costs in connection with production services. Petitioner is a service provider and ASCL is the service recipient.<\/p>\nClause 4.10 of the agreement shows that if the amount of GST is refunded, then the same will be deducted from the total cost in connection with the production services. This clearly shows that the incidence of tax has not been passed to the recipient ASCL. Respondent No. 3 has treated alternative argument of the petitioner as admission. It was contended by the petitioner before Respondent no 3 that without admitting that the incidence of tax has passed on, credit notes were issued for the value of GST, the incidence of tax cannot be transferred. This alternative argument cannot be treated as an admission.<\/p>\nThis court relying on the Apex court judgment which 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.<\/p>\nIn 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.<\/p>\nTherefore, 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). Rule is made absolute on above terms.<\/p>\n12. In favour of :<\/strong> Petitioner <\/p>\n13. Case Law Refereces : 1. <\/strong>Mafatlal Industries vs Union of India (1997) 5 SCC 536<\/p>\n14. Relevant Act\/ Rules\/ Forms :<\/strong><\/p>\n1. <\/strong>Section 2(6) of Integrated Goods And Services Tax Act \n 2.<\/strong> Section 54 of the Central Goods and Services Tax Act (CGST Act) \n3.<\/strong> Section 16 of the Integrated Goods and Services Tax Act, 2017<\/p>\n15. Database Citation<\/strong> : <a href=\"https:\/\/klickongstworld.com\/uploads\/Referencer\/1655287909.pdf\" target=\"_blank\" rel=\"noopener\">HC-GW-399-2022-MH<\/a><\/strong><\/p>\n<\/body> \n<\/html><\/p>\n","protected":false},"excerpt":{"rendered":"\/2022\/02\/Bombay-High-Court-DH-2-152468371-1588593985.jpg<\/p>\n","protected":false},"author":1,"featured_media":526,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"_links":{"self":[{"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/posts\/7495"}],"collection":[{"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/comments?post=7495"}],"version-history":[{"count":6,"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/posts\/7495\/revisions"}],"predecessor-version":[{"id":7510,"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/posts\/7495\/revisions\/7510"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/media\/526"}],"wp:attachment":[{"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/media?parent=7495"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/categories?post=7495"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/tags?post=7495"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}

{"id":7495,"date":"2022-06-15T10:09:30","date_gmt":"2022-06-15T09:09:30","guid":{"rendered":"https:\/\/www.klickongstworld.com\/blog\/?p=7495"},"modified":"2022-06-15T11:31:16","modified_gmt":"2022-06-15T10:31:16","slug":"when-services-are-rendered-abroad-cgst-will-not-apply-bombay-high-court","status":"publish","type":"post","link":"https:\/\/www.klickongstworld.com\/blog\/when-services-are-rendered-abroad-cgst-will-not-apply-bombay-high-court\/","title":{"rendered":"When services are rendered abroad, CGST will not apply- Bombay High Court"},"content":{"rendered":"

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\nUntitled Document<\/title> \n<\/head><\/p>\n<body><\/p>\nA division bench of the Bombay High Court comprising Justice S.V. Gangapurwala & Justice M.G.Sewlikar has held that petitioner is entitled to the refund of the amount if the incidence of tax has not been passed on to the recipient of the services. If the incidence of tax has been passed on, petitioner is not entitled to the refund. Accordingly, the bench has allowed a refund claim quashing the orders of the GST authorities by holding that the authorities could not establish that the incident of tax has been passed on to the recipient ASCL located in London.<\/p>\n1. Petitioner : <\/strong>JAR PRODUCTIONS PRIVATE LIMITED<\/p>\n2. Respondents : <\/strong>THE UNION OF INDIA & ORS. \n <\/strong> \n 3. Appeal Type\/ No. : <\/strong>WRIT PETITION NO. 1143 OF 2021 <\/strong><\/p>\n4. CORAM : <\/strong>1. HON’BLE Justice S.V. Gangapurwala, \n2. Justice M.G.Sewlikar <\/p>\n5. Council For Petitioners<\/strong> : Mr. Prasad Paranjape a\/w Mohit Raval i\/b Lumiere Law Partners<\/p>\n6. Council For Respondents<\/strong> : Mr. Pradeep Jetly, Senior Advocate<\/p>\n7. Date of pronouncement <\/strong>: 09.06.2022 <\/p>\n8. Facts :<\/strong> The petitioner is a Company incorporated under the Company’s Act, 2013. The petitioner is engaged in providing production services to ‘A Suitable Company Ltd’ located in London United Kingdom (U.K.) (ASCL for short). <\/p>\nFor 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. Wherein the 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.<\/p>\nFor providing the production services to ASCL, the petitioner received and utilised various inputs\/ input services on which appropriate CGST\/MGST\/IGST services were paid as charged by the vendors. In cases, where the services were received from service provider\/ vendor located outside India, CGST+MGST or IGST on such supplies was paid by the petitioner.<\/p>\nThe petitioner filed its first refund application for the period from April to July, 2019 on 31st March, 2020. The said claim was allowed by the respondent no 4 The Assistant Commissioner.<\/p>\nThe Petitioner filed another refund claim of Rs. 1,43,56,999\/-for the subsequent period of August 2019 to October, 2019. Thereafter, the Petitioner received a show cause notice (SCN for short). 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. <\/p>\nBeing 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 been passed on to the client i.e. ASCL and that it amounted to unjust enrichment. The Appellate Authority held that the burden of the GST has been shifted to the service recipient, the petitioner cannot be a beneficiary, as any refund to the petitioner would amount to unjust enrichment. The Appellate Authority placed reliance on the Constitution Bench judgment of the Supreme Court in the case of Mafatlal Industries vs Union of India (1997) 5 SCC 536.<\/p>\nIt 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.<\/p>\nBeing 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. <\/p>\n9. Nature of Issue : <\/u><\/strong> <\/p>\n10. Industry : Not industry specific<\/strong> <\/p>\n11. Held : <\/strong>The petitioner submitted that the principle of unjust enrichment does not apply to export services. Being a zero rated supply, the principle of unjust enrichment does not apply to the services rendered by the petitioner. Clause 4.10 of the agreement clearly stipulates that if refund is received, it shall be deducted from the expenses of production. He further submitted that there are judgments of this court indicating that the principle of unjust enrichment does not apply to export services.<\/p>\nRespondents submitted that the Petitioner has admitted that even in case of alleged unjust enrichment by the petitioner, the credit notes will nullify the effect of the same. GST law does not contemplate any mechanism for paying back the GST by way of issuance of credit note. He further submitted that the petitioner has admitted that when the refund is obtained, the GST collected from the recipient would be paid back. This itself shows that the incident of tax has been passed on to the recipient. He, therefore, submitted that the Adjudicating Authority and the Appellate Authority have rightly held that the petitioner is not entitled to the refund of GST as the incidence of tax has passed on to the recipient and there is unjust enrichment.<\/p>\nThe Petitioner has placed on record a copy of the agreement. It shows that the ASCL is located outside of India and the petitioner company is located in India. And the production services are rendered by the petitioner in the U.K. It is, thus, clear that the services rendered by the petitioner fall within the expression ‘export of services’.<\/p>\nThe court observed that Section 54(8)(e) of the CGST Act states refund cannot be claimed when incidence of tax has been passed on to the recipient or any other person. Section 54(8)(e) of the CGST Act states thus:- Notwithstanding anything contained in sub section(5) , the refundable amount shall, instead of being credited to the Fund, be paid to the applicant if such amount is relatable to – (e) if the tax and interest , if any, or any other amount paid by the applicant , if he had not passed on the incidence of such tax and interest to any other person.<\/p>\nThus, the applicant is entitled to the refund of the amount if the incidence of tax has not been passed on to the recipient of the services. If the incidence of tax has been passed on, petitioner is not entitled to the refund.<\/p>\nAgreement executed between the petitioner and the ASCL shows that the approved production budget includes all costs in connection with the production services including the amount of Indian Goods and Services Tax Act. This shows that GST is included in all costs in connection with production services. Petitioner is a service provider and ASCL is the service recipient.<\/p>\nClause 4.10 of the agreement shows that if the amount of GST is refunded, then the same will be deducted from the total cost in connection with the production services. This clearly shows that the incidence of tax has not been passed to the recipient ASCL. Respondent No. 3 has treated alternative argument of the petitioner as admission. It was contended by the petitioner before Respondent no 3 that without admitting that the incidence of tax has passed on, credit notes were issued for the value of GST, the incidence of tax cannot be transferred. This alternative argument cannot be treated as an admission.<\/p>\nThis court relying on the Apex court judgment which 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.<\/p>\nIn 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.<\/p>\nTherefore, 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). Rule is made absolute on above terms.<\/p>\n12. In favour of :<\/strong> Petitioner <\/p>\n13. Case Law Refereces : 1. <\/strong>Mafatlal Industries vs Union of India (1997) 5 SCC 536<\/p>\n14. Relevant Act\/ Rules\/ Forms :<\/strong><\/p>\n1. <\/strong>Section 2(6) of Integrated Goods And Services Tax Act \n 2.<\/strong> Section 54 of the Central Goods and Services Tax Act (CGST Act) \n3.<\/strong> Section 16 of the Integrated Goods and Services Tax Act, 2017<\/p>\n15. Database Citation<\/strong> : <a href=\"https:\/\/klickongstworld.com\/uploads\/Referencer\/1655287909.pdf\" target=\"_blank\" rel=\"noopener\">HC-GW-399-2022-MH<\/a><\/strong><\/p>\n<\/body> \n<\/html><\/p>\n","protected":false},"excerpt":{"rendered":"\/2022\/02\/Bombay-High-Court-DH-2-152468371-1588593985.jpg<\/p>\n","protected":false},"author":1,"featured_media":526,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"_links":{"self":[{"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/posts\/7495"}],"collection":[{"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/comments?post=7495"}],"version-history":[{"count":6,"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/posts\/7495\/revisions"}],"predecessor-version":[{"id":7510,"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/posts\/7495\/revisions\/7510"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/media\/526"}],"wp:attachment":[{"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/media?parent=7495"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/categories?post=7495"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.klickongstworld.com\/blog\/wp-json\/wp\/v2\/tags?post=7495"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}