Full Judgment
-1-
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 3RD DAY OF DECEMBER, 2025 BEFORE THE HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR WRIT PETITION NO. 10149 OF 2024 (T-RES) C/W WRIT PETITION NO. 22994 OF 2024 (T-RES) C/W WRIT PETITION NO. 34009 OF 2024 (T-RES) IN W.P.No.10149/2024 BETWEEN:
1. LTI MINDTREE LTD
A COMPANY REGISTERED UNDER THE COMPANIES ACT, 1956, PLOT NO. 25 TO 35P AND 151, SURVEY NO. 154 AND 157, KIADB INDUSTRIAL ESTATE, EPIP PHASE - 2, WHITEFIELD, BENGALURU RURAL - 560 066. REPRESENTED BY THROUGH KEDAR GADGIL, Digitally signed VICE PRESIDENT FINANCE, by CHANDANA AGED 51 YEARS. BM
Location: High 2. MR KEDAR GADGIL Court of VICE PRESIDENT - FINANCE, Karnataka LTI MINDTREE LTD. HAVING HIS OFFICE AT,L AND T TECHNOLOGY CENTER, GATE NO. 5, SAKI VIHAR ROAD, POWAI, MUMBAI - 400 076. …PETITIONERS ((BY SRI. UDAYA HOLLA, SENIOR ADVOCATE FOR SRI. PRAKASH SHAH, SENIOR ADVOCATE APPEARING FOR SRI. MOHAN MAIJYA.G.L, & SRI. MIHIR MEHTA & SRI. MOHIT RAVAL, ADVOCATES) -2- AND:
1. UNION OF INDIA THROUGH ITS SECRETARY, DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, NORTH BLOCK, NEW DELHI - 110 001.
2. THE PRINCIPAL COMMISSIONER OF CENTRAL TAX 7, GST COMMISSIONERATE, BENGALURU EAST, HAVING ITS OFFICE AT BMTC BUS STAND, OLD HAL AIRPORT ROAD, DOMMALURU, BENGALURU - 560 071.
3. THE JOINT COMMISSIONER OF CENTRAL TAX 7, GST COMMISSIONERATE, BENGALURU EAST, HAVING ITS OFFICE AT BMTC BUS STAND, OLD HAL AIRPORT ROAD, DOMMALURU, BENGALURU - 560 071. …RESPONDENTS (BY SRI. JEEVAN.J.NEERALGI, ADVOCATE) THIS W.P IS FILED UNDER ARTICLES 226 AND 227 OF THE
CONSTITUTION OF INDIA PRAYING TO CALLING FOR THE RECORDS PERTAINING TO THE PETITIONERS CASE AND AFTER GOING INTO THE VALIDITY AND LEGALITY THEREOF, TO QUASH AND SET ASIDE SHOW CAUSE NOTICE NO. 19/JC2/2024 (DIN 20240357000000222F1D) DATED IN W.P.No. 22994/2024 BETWEEN: LTI MINDTREE LTD., A COMPANY REGISTERED UNDER THE COMPANIES ACT 1956 6TH AND 7TH FLOOR, GOPALAN SEZ HOODI VILLAGE WHITEFIELD BENGALURU 560 066. REPRESENTED THROUGH SARVESH NAYAK - SENIOR DIRECTOR -TAX AGED ABOUT 38YEARS. …PETITIONER (BY SRI. UDAYA HOLLA, SENIOR ADVOCATE FOR SRI. PRAKASH SHAH, SENIOR ADVOCATE APPEARING FOR SRI. MOHAN MAIJYA.G.L, & SRI. MIHIR MEHTA & SRI. MOHIT RAVAL, ADVOCATES) -3- AND:
1. UNION OF INDIA THROUGH ITS SECRETARY DEPARTMENT OF REVENUE MINISTRY OF FINANCE NORTH BLOCK NEW DELHI 110 001.
2. THE PRINCIPAL COMMISSIONER OF CENTRAL TAX 7, GST COMMISSIONERATE BENGLAURU EAST HAVING HIS OFFICE AT 4TH FLOOR TTMC/BMTC OLD BUILDING OLD AIRPORT ROAD, DOMLUR BENGALURU 560 071.
3. THE JOINT COMMISSIONER OF CENTRAL TAX 7, GST COMMISSIONERATE BENGALURU EAST HAVING HIS OFFICE AT: 4TH FLOOR TTMC/BMTC OLD BUILDING OLD AIRPORT ROAD, DOMLUR BENGALURU - 560 007. …RESPONDENTS (BY SRI. JEEVAN.J.NEERALGI, ADVOCATE) THIS W.P. IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION
OF INDIA PRAYING TO DIRECTION UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA CALLING FOR THE RECORDS PERTAINING TO THE PETITIONERS CASE AND AFTER GOING INTO THE VALIDITY AND LEGALITY THEREOF, TO QUASH AND SET ASIDE SHOW CAUSE NOTICE NO. 75/2024/JC-III (DIN 20240857000000665456) DTD. 03.08.2024 ISSUED BY R-3 IN FORM DRC-01 (REF NO. ZD290824013670D) DTD. 03.08.2024 (ANNX-A). IN W.P.No. 34009/2024 BETWEEN:
1. LTI MINDTREE LTD A COMPANY REGISTERED UNDER THE COMPANIES ACT, 1956 PLOT NO. 25 TO 35P AND 151, SURVEY NOS. 154 AND 157, KIADB INDUSTRIAL ESTATE, -4- EPIP PHASE 2, WHITEFIELD, BENGALURU RURAL - 560066 REPRESENTED THROUGH MR. RAGHUNATH RAMAIAH SENIOR DIRECTOR-TAX.
2. MR. KEDAR GADGIL,
ERSTWHILE VICE PRESIDENT - FINANCE OF PETITIONER NO. 1, LTIMINDTREE LTD. HAVING HIS RESIDENCE AT A 401, CENTRE POINT CO. OP. HOUSING SOCIETY, SANT DYANESHWAR PATH, PANCHPAKHADI, THANE WEST - 400 602. …PETITIONERS (BY SRI. UDAYA HOLLA, SENIOR ADVOCATE FOR SRI. PRAKASH SHAH, SENIOR ADVOCATE APPEARING FOR SRI. MOHAN MAIJYA.G.L, & SRI. MIHIR MEHTA & SRI. MOHIT RAVAL, ADVOCATES) AND:
1. UNION OF INDIA THROUGH ITS SECRETARY, DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, NORTH BLOCK, NEW DELHI 110 001.
2. THE PRINCIPAL COMMISSIONER OF CENTRAL TAX 7, GST COMMISSIONERATE, BENGALURU EAST, HAVING HIS OFFICE AT 4TH FLOOR, TTMC/ BMTC BUS STAND, OLD HAL AIRPORT ROAD, DOMMALURU, BENGALURU - 560 071.
3. THE JOINT COMMISSIONER OF CENTRAL TAX
7, GST COMMISSIONERATE, BENGALURU EAST, HAVING HIS OFFICE AT 4TH FLOOR, TTMC/ BMTC BUS STAND, OLD HAL AIRPORT ROAD, DOMMALURU, BENGALURU - 560 071. …RESPONDENTS (BY SRI. JEEVAN.J.NEERALGI, ADVOCATE) -5- THIS W.P. IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION
OF INDIA PRAYING TO DECLARE THAT CLAUSE (V) OF SUB-SECTION (6) OF SECTION 2 OF THE INTEGRATED GOODS AND SERVICES TAX ACT, 2017 IS MAINFESTLY ARBITRARY, EXCESSIVE, DISCRIMINATORY, UNFAIR, UNREASONABLE AND ULTRA-VIRES ARTICLE 14 AND 19(1)(g) OF CONSTITUTION OF INDIA OR IN THE ALTERNATIVE THIS HONBLE COURT BE PLEASED TO READ IT DOWN TO SAVE IT FROM UNCONSTITUTIONALITY AND HOLD THAT CLAUSE (V) OF SUB-SECTION
(6) OF SECTION 2 OF INTEGRATED GOODS AND SERVICES TAX ACT,
2017 IS APPLICABLE ONLY TO CASES WHERE THE SERVICES TERMINATED AT THE MERE ESTABLISHMENT OF DISTINCT PERSON AND NOT WHERE THE SERVICES ARE FURTHER USED OR CONSUMED BY A UNRELATED OVERSEAS CUSTOMER/ENTITY.
THESE PETITIONS COMING ON FOR ORDERS, THIS DAY, ORDER
WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR
ORAL ORDER
In W.P.No.10149/2024, petitioner seeks for the following reliefs:- “ (i) This Hon’ble court be pleased to issue a Writ of Certiorari or a writ in the nature of Certiorari or any other writ,
order or directing under Article 226 of the Constitution of
India Calling for the records pertaining to the petitioner’s case and after going into the validity and legality thereof, to quash and set aside Show Cause Notice No.19/JC2/2024 (DIN 20240357000000222F1D) dated: 08.03.2024, vide Annexure-A passed by Respondent No.3.
(ii) this Hon’ble Court be pleased to issue a Writ of prohibition or a Writ in the nature of Prohibition or any other appropriate writ, order or direction under Article 226 of the -6-
Constitution of India prohibiting the Respondents by themselves, their subordinate, servants an agents from acting upon or taking any further proceedings in pursuance of Show Cause Notice No.19/JC2/2024 (DIN 20240357000000222F1D) dated: 08.03.2024 vide Annexure- A passed by Respondent No.3.
(iii) Cost of the writ petition may kindly be awarded in favor of the petitioner;
(iv) The petitioners be granted any other relief which it is found entitled to under the law and equity.” In W.P.No.22994/2024, petitioner seeks for the following reliefs:-
“ (i) This Hon'ble Court be pleased to issue a Writ of Certiorari or a writ in the nature of Certiorari or any other writ, order or direction under Article 226 of the Constitution of India calling for the records pertaining to the Petitioners' case and after going into the validity and legality thereof, to quash and set aside Show Cause Notice No. 75/2024/JC-III (DIN: 20240857000000665456) dated 03.08.2024 issued by Respondent no. 3 in Form DRC-01 (Ref No. ZD290824013670D) dated 03.08.2024 (Annexure "A");
(ii) This Hon'ble Court be pleased to issue a Writ of
Prohibition or a writ in the nature of Prohibition or any other appropriate writ, order or direction under Article 226 of the Constitution of India prohibiting the Respondents by themselves, their subordinate, servants and agents from acting upon or taking any further proceedings in pursuance -7- of Show Cause Notice No. 75/2024/JC-III (DIN: 20240857000000665456) dated 03.08.2024 issued by Respondent no. 3 in Form DRC-01 (Ref No. ZD290824013670D) dated 03.08.2024 (Annexure "A");
(iii) Cost of the writ petition may kindly be awarded in favour of the petitioners
(iv) The petitioners be granted any other relief which it is found entitled to under the law and equity.” In W.P.No.34009/2024, petitioner seeks for the following reliefs:-
“ (i) This Hon'ble Court be pleased to declare that clause (v) of sub section (6) of Section 2 of the Integrated Goods & Services The unfair, unreasonable and ultra-vires Article 14 and 19(1)(g) of Act, 2017 is manifestly arbitrary, excessive, discriminatory, Constitution of India or in the alternative this Hon'ble Court be pleased to read it down to save it from unconstitutionality and hold that clause (v) of sub-section (6) of Section 2 of Integrated Goods & Services Tax Act, 2017 is applicable only to cases where the services terminate at the "mere establishment of distinct person" and not where the services are further used or consumed by a unrelated overseas customer/entity.
(ii) This Hon'ble Court be pleased to issue a Writ of
Certiorari or a writ in the nature of Certiorari or any other writ, order of direction under Article 226 of the Constitution of India calling for the records pertaining to the Petitioners' -8- case and after going into the validity and legality thereof, to quash and set aside Order-in-Original No. 101/JC3/B- East/2024 (DIN 202409570000008189E7) dated 18.09.2024 (Annexure-A) Passed by Respondent No.3.
(iii) This Hon'ble Court be pleased to issue a Writ of
Prohibition or a writ in the nature of Prohibition or any other appropriate writ, order or direction under Article 226 of the Constitution of India prohibiting the Respondents by the themselves, their subordinate, servants and agents from acting upon or taking any further proceedings in pursuance of Order-in-Original No.101/JC3/B- East/2024(DIN 202409570000008189E7) dated: 18.09.2024 (Annexure-A) passed by Respondent No.3.;
(iv) Cost of the Writ petition may kindly be awarded in favor of the petitioner;
(v) The petitioners be granted any other relief which it is found entitled to under the law and equity.”
2. Briefly stated, the facts giving rise to the present petitions
are as under:- The Petitioners contend that the Petitioner No. 1, a company incorporated under the Companies Act, 1956, is a subsidiary of Larsen & Toubro Limited and since the year 1996, is engaged in the business of providing IT and IT Enabled services to customers abroad through Indian personnel and resources and also through its branches abroad, similar to the one under dispute in the present -9- case. Petitioner No. 2 at the relevant time was the Vice President - Finance (Finance Controller) of the Petitioner No.1, on whom penalty is sought to be imposed under Section 125 of the CGST Act. Since, most of the allegations/ findings are against the Petitioner No.1 i.e. the company, the reference to the term “Petitioner” hereinafter would mean Petitioner No.1 and Petitioner No. 2 is separately referred to wherever required for the purpose of this order. 2.1 The Petitioner was originally incorporated as L&T Information Technology Ltd, which was renamed in 2001-02 as Larsen & Toubro Infotech Limited. In November 2022, post the merger of Mindtree Ltd., the name of the Petitioner was changed to LTI Mindtree Limited. The Petitioner is headquartered in Mumbai, Maharashtra, India and has one of the Offshore Development Centers (‘ODCs’) in Bengaluru, in addition to other three business places across State of Karnataka. The Petitioner operates its business from the unit located in a Software Technology Park of India at Plot No. 25 to 35P and 151, Survey Nos. 154 and 157, KIADB Industrial Estate, EPIP Phase - 2, Whitefield, Bengaluru Rural - 560066 (“STPI Unit”) and an another unit located in a - 10 - Special Economic Zone at 6th & 7th Floor, Gopalan SEZ, Hoodi Village, Whitefield, Bengaluru - 560066 (“SEZ Unit”). 2.2 The Petitioner has foreign subsidiaries and branches in various countries across the globe. The Petitioner has branches located in USA, Denmark, France, Sweden etc. The Petitioner also has foreign subsidiaries in countries like Canada, Germany, China, Spain etc. The foreign branches are registered under the local laws of foreign lands and are required to comply with the laws of respective countries relating employment, taxation, and fiscal laws. Depending upon the administrative convenience and business requirements, the Petitioner either enters into a contract with the overseas customers through an overseas branch or directly through the head office in India. The Petitioner has assessed the above transaction of supplying IT and IT enabled services as “Export of service” as defined under Section 2(6) of the Integrated Goods and Services Tax Act, 2017 (for short “the IGST Act”) and consequently, a “zero-rated supply” as defined under Section 16 of the IGST Act. The Petitioner had exported the said services without payment of IGST under a Letter of Undertaking (“LUT”) as prescribed under Section 16(3) of the IGST Act. - 11 - 2.3 It is contended that in terms of Section 54(3) of the CGST Act read with Rule 89 of the Central Goods and Services Tax Rules, 2017 (“CGST Rules”), the Petitioner claimed the refund of the unutilized Input Tax Credit (“ITC”) attributable to the above “Export of services”. It is the specific case of the Petitioner and not disputed by the Respondents that under the service tax regime i.e. under the erstwhile Chapter-V of Finance Act, 1994, Service Tax Rules, 1994 and Cenvat Credit Rules, 2004, having pari-materia provisions, the same services provided by the Petitioner to its overseas customers under identical / similar circumstances were
held to be “Export of Services” under Rule 6A of the Service Tax
Rules, 1994 by the orders of the Commissioner (Appeals). The Petitioner was duly sanctioned the refund of unutilized Cenvat credit availed on inputs and input services used in “Export of Services” in compliance of the orders of the Commissioner (Appeals), which orders are accepted by the Respondents. 2.4 It is contended that the above position continued in the GST regime as well. Initially, the Respondents accepted that the services provided by the Petitioner to its overseas customers as “Export of Services” and duly sanctioned the refund claimed by the - 12 - Petitioner for the period April 2018 to January 2023, except for one refund claim pertaining to the period February 2023 to April 2023. The Petitioner contends that its services were consistently held to be zero rated supplies under the Finance Act, 1994 (30.06.2017), and even under GST till January 2023. In Maharashtra, a similar dispute was raised by the GST officers under the Maharashtra Goods and Services Tax Act, 2017 r/w CGST Act and IGST Act. The First Appellate Authority, in State of Maharashtra, after considering the submissions of the Petitioner has passed detailed Orders holding that the services supplied by the Petitioner to its overseas customers jointly with its overseas branch, qualifies as an “Export of Service” for the period 2017-18 to 2020-21. Thereafter, the Respondents while processing/verifying the refund claim filed by the Petitioner for the period February 2023 to April 2023, observed that the Petitioner had erred in assessing the supplies under the category of outward taxable supplies (zero rated) in as much as it had taken into account all such supplies made to its overseas branches as zero-rated turnover of services (export of service) and had wrongly availed the benefit of zero-rated supply of services without payment of IGST under the ‘letter of - 13 - undertaking’(LUT) filed by them under Rule 96A of the CGST Rules. 2.5 It is contended that the transactions pertaining to the export of services through overseas subsidiaries and direct exports from India to overseas customers have been allowed as “Exports” by the adjudicating authority without demur. Despite there being no difference in the nature of the activities undertaken and the services provided to the ultimate overseas customers, the transactions of export of services through overseas branches have only been disputed/disallowed by the adjudicating authority. Pursuant to the above, an investigation was initiated against the Petitioner for looking into the assessment of supplies made by the Petitioner, which were returned as zero rated supply under LUT without payment of IGST. A series of correspondences was exchanged between the Petitioner and the Respondents/ office of Respondent No. 2 during the said investigation. 2.6 The Petitioner was issued two show cause notices No.19/JC2/2024 dated 08.03.2024 (STPI unit) for the period July 2017 to September 2023 and No.75/2024/JC-III dated 03.08.2024 (SEZ unit) for the period July 2017 to December 2023 proposing to - 14 - treat the turnover of “zero rated supply”, declared by Petitioner in its returns, as “inter-state” supply and demand IGST on such supplies. The Petitioner was issued another show cause notice dated 20/JC2/2024 dated 08.03.2024 (STPI Unit) seeking to re- determine the refund admissible on the zero-rated supplies made by it and to recover the excess refund already granted. The said show cause notice dated 20/JC2/2024 dated 08.03.2024 has been adjudicated vide Order-in-Original No. 101/JC3/B-East/2024 dated 18.09.2024. The show cause notices dated 08.03.2024 and 03.08.2024 and Order dated 18.09.2024 proceed on the premise that Petitioner has supplied services to its own branch and both being mere establishments of distinct person, supply of services do not qualify as export of services for non-fulfillment of condition prescribed in clause (v) of Section 2(6) of the IGST Act. 2.7 Being aggrieved by the two impugned show cause notices and the impugned Order, the Petitioner has preferred the instant petitions as hereunder: Sl. W.P No. Particulars No.
1. 10149/2024 Challenging the legality and validity of the show cause notice no. 19/JC2/2024 dated 08.03.2024 issued to the STPI unit for the period July 2017 to September 2023 inter-alia - 15 - demanding the IGST on the alleged services provided by the Petitioner to its own branches.
2. 22994/2024 Challenging the legality and validity of
the show cause notice no. issued to SEZ unit for the period July 2017 to December 2023 inter-alia demanding the IGST on the alleged services provided by the Petitioner to its own branches.
3. 34009/2024 Challenging the Order-in-Original No.
101/JC3/B-East/2024 dated 18.09.2024, re-determining the admissible refund and demanding excess refund sanctioned to STPI unit for the period April 2018 to January 2023.
3. Heard learned Senior counsel appearing for the petitioner and learned counsel for the respondents - revenue and perused the material on record.
4. In addition to reiterating the various contentions urged in
the petition and referring to the material on record, learned Senior counsel for the petitioner has made the following submissions; a) There is no dispute that the Petitioner is the supplier of service and has satisfied all the conditions of Section 2(6) of the IGST Act for export of services including the receipt of convertible foreign exchange into India. The Respondents are disputing non-compliance of only last condition of clause (v) of - 16 - Section 2(6) of the IGST Act. The Respondents allege that the services are supplied by Petitioner to its branches and not the ultimate customer. b) The only issue to be considered by this Court as to who is the “recipient” of the offshore services provided by the Petitioner i.e. whether it is “overseas branch” of the Petitioner or the “overseas customer” of the Petitioner and in this context, it was contended that the Petitioner enters into master service agreement for providing of services to its overseas customers viz., on 14.01.2020, a Master Agreement was entered into between L & T Infotech Limited (Petitioner) and one of its clients, Schneider Electronic SAS, France (“Schneider”) for providing IT and IT Enabled Services by the Petitioner to Schneider. The above Agreement has been entered into through the foreign Branch of the Petitioner. In furtherance to the above Master Agreement, in January 2022, a Statement of Work (“SOW”) is issued by Schneider for execution of project Titan was signed by both Schneider and the Branch Office of the Petitioner at USA. - 17 - c) The Resource Engagement Model, set out in SOW, detailed work to be carried out through onsite as well as offshore resources. The Staffing Pattern is also indicated in the SOW, which clearly sets out that the Indian employees of the Petitioner and the employees of the branch office of the Petitioner were to carry out the work jointly. The work location, set out in SOW, indicates that the work is being carried out at both, Bengaluru, India as well as Nashville, USA. The SOW clearly sets out the employees who are based in Bengaluru and in US and the billing is done accordingly. d) On 20.12.2022, the Petitioner’s branch raised an Invoice on Schneider for the work carried out in terms of the SOW at Annexure C. The invoice was raised for both, the services provided by the overseas branch as well as the offshore location of the Petitioner in India. The invoice raised by the overseas branch on the US customer clearly sets out the name of the personnel who carried out the work. A perusal of the invoice indicates the names of Jinal Jethva and Rahul Gupta. The Annexure C to SOW, at Sl. No.35, names Ms. Jinal Jethva, who is based out of Bengaluru and Sl. No.7 Mr. - 18 - Rahul Gupta, who is also based out of Bengaluru. The rates in the invoice are as per SOW. e) On 31.01.2023, the Bengaluru office raised invoice on Petitioner’s overseas branch at USA for various works that the Petitioner’s India office has carried out for various overseas customers, details whereof are stated in the annexure to the invoice itself. Petitioner’s India office as well as the Petitioner’s overseas branch office have simultaneously provided services to the ultimate overseas customers and the overseas branch office of the Petitioner raised invoice on behalf of itself as well as India office, only for administrative convenience and at the specific request of the overseas customer. Consequently, the invoice dated 31.01.2023 raised by the India office of the Petitioner on the branch office of the Petitioner is for the work undertaken by the India office through its personnel. f) It is further submitted that the Petitioner that when it carries on the work for its overseas customers, some resources are provided by the Petitioner through its Indian personnel/ establishment (“Offshore location”)and some work is executed at the customer’s site/ office by its branch - 19 - office through personnel of branch office who are stationed outside India (“Onsite location”). The projects/ agreements entered into with the overseas customers are jointly executed by the Petitioner’s India office and its foreign branch. For administrative convenience and customer’s specification, the invoices are raised by the overseas branch office for the work carried out by the Indian personnel of the Petitioner as well as the resources and personnel provided by the branch office. The Branch office receives the consideration from the overseas customer, subsequent to which, the Petitioner raises invoice on its branch office for the services provided to overseas customer through the Indian personnel and receives the same. The Petitioner’s share of the above consideration is received from its overseas branch, in convertible foreign exchange and not in INR. The Petitioner earns the valuable convertible foreign exchange for India. g) It is further submitted that there is a clear division between the work carried out by the personnel in the US branch of the Petitioner and the personnel based out of Bengaluru, both in the SOW as well as in the invoice. The - 20 - ultimate overseas customer is the one who has received and consumed the services and is under obligation to pay the consideration in convertible foreign exchange. The internal work order between the Petitioner and overseas branches is an internal document that is prepared to demarcate the role and responsibility of the overseas branches as well as the Petitioner’s offices in India. h) The onsite branch is carrying out the responsibility delegated to it by the Petitioner, as the Petitioner is the head office of the entire business conglomerate, and the onsite branches have to carry out the task as per the instructions of the head office i.e. the Petitioner. Further, in case of any breach on the part of the overseas customer, the Petitioner shall have remedy against the overseas customer and not its branch and it is the overseas customer who would be liable to pay for the services received from the Petitioner and/or its branch and the payment is routed through the overseas branch for administrative convenience and the overseas branch is not the customer of the Petitioner. - 21 - i) The invoices raised by branch on the overseas customer and by Petitioner on its branch have to be read together and the said co-joint reading would provide the details of actual recipient as mandated under Rule 46 of the CGST Rules are duly complied with by the Petitioner. All the documents will have to be read together, and cumulatively viz. master agreement, statement of work and the invoice raised by both branch offices of the Petitioner on the overseas customer and the invoice raised by the Petitioner on its branch office for the work carried out from India. j) The Petitioner has relied upon various clauses of the agreement to submit that it is more than apparent that the recipient of the services jointly provided by the Petitioner and its foreign branch is the ultimate customer and not the concerned branch office of the Petitioner. Due to the inherent nature of the work involved, the employees of the Petitioner are directly working on the IT infrastructure of the overseas customers, no service can be said to have been rendered by the Petitioner to its overseas branches. In fact, no such services are required by the overseas branch for its - 22 - consumption. It is submitted that merely because software services are intangible, does not mean that it is not possible to indicate which of the personnel based in Bengaluru and which of the personnel based in US are providing software services. k) It is submitted that reliance placed on Note 6 of GSTR 9C, is wholly misplaced. Note 6 of GSTR 9C is by the Chartered Accountant of the Petitioner and not of the Petitioner. Therefore, the said remarks being in the nature of opinion/ interpretation of the Chartered Accountant, it cannot be relied upon against the Petitioner. Further, the very Note 6 clearly states that the supply made by the Petitioner from India is “zero rated supply” without any payment of tax. It is not open for the Respondents to rely upon one part of the statement and to ignore the other. The statement has to be read as a whole and reading the statement as a whole makes it clear that the supply by the Petitioner from India is “zero rated supply” without payment of tax, which is “export of services” and entitled to all the benefits of zero rated supply. The accounting procedure followed by the Petitioner cannot - 23 - decide the taxability of any transaction and that “substance of the transaction should be preferred over form”. l) It is therefore submitted that in the facts and circumstances of the present cases, the embargo prescribed under clause (v) of Section 2(6) to the establishment of distinct entities under Explanation-1 to Section 8 is not applicable, as the supply of services is between the Petitioner and overseas customers and that the services are jointly provided by the Petitioner and its overseas branches to its overseas customers. It is submitted that condition contained in sub-clause (v) would be applicable only to situations where the services terminate at and consumed by the branch and not where the services are used or consumed by a non- related end customer. m) It is also submitted that upon conjoint and harmonious reading of Section 2(14) and 2(15) of the IGST Act, the location of the recipient of service and provider of service is the entity or the establishment most directly concerned with the supply. In the present case, the supplier of the service is the Petitioner, and the recipient of the service is the overseas - 24 - customer and that the business model of the Petitioner is compliant with the guidelines of RBI and also that the foreign branches have their own infrastructure in the form of necessary resources i.e. manpower, space, various registrations for providing onsite IT services to overseas customers. n) The Petitioner further submitted that under identical provisions under the Finance Act, 1994 (i.e. service tax regime), the said services were considered as export by the Respondents. Even under the GST regime, for its units located in the State of Maharashtra, the Learned Commissioner (Appeals) has categorically held that the said services supplied to the customers through the overseas branch qualify as an export of service. o) The definition of “export of services” both in Rule 6A of Service Tax Rules and Section 2(6) of the IGST Act are pari- materia and the mode and services rendered by the Petitioner remain the same, there is no justification to treat the same differently under GST regime. The agreements entered into before the GST regime were executed even post GST regime - 25 - as mode and provision of services remained the same. There is no justification to treat them differently merely because of change of law. Even under the GST regime, initially the services provided by the Petitioner to its overseas customers through and jointly with its overseas branches has been considered as “Export of Services” and the Petitioner has been granted the refund of ITC attributable to “Export of Services” from April 2018 to January 2023. p) It is also submitted that the principle of consistency shall apply in the present matter and hence, the view taken during the erstwhile service tax regime should prevail even under the GST regime. This is more so when even the refund for period upto January 2023 were sanctioned by Respondents and Maharashtra GST authorities have taken the view that the services supplied by Petitioner qualify as “Export of Services”. q) Alternatively, the Petitioner submits that providing of services to its foreign branches is in anyway exempt from payment of IGST in terms of Entry No.10F of the Notification No. 9/2017-IT (Rate) dated 28.06.2017 as amended by - 26 - Notification No. 15/2018-IT (Rate) dated 26.07.2017. The benefit of the above exemption cannot be denied to the Petitioner and that once assessment is reopened it has to be considered afresh in all aspects and cannot be restricted. r) It is submitted that none of the ingredients prescribed for invocation of Section 74 of the CGST Act can be found in the present case and hence, the entire proceedings having been initiated under wrong provisions are without jurisdiction and that the remedy available under the CGST Act is not efficacious in light of the facts of the present case. The impugned show cause notices and order are arbitrary, without jurisdiction and violative of principle of consistency. Further, perusal of the show cause notice clearly indicates that the authorities have already predetermined the issue and have come to a definite conclusion that the overseas establishment / branch is getting services from the Petitioner and providing the same to the overseas customer and the Petitioner is not entitled to benefit of export of service. In the order impugned in the connected writ petition in W.P.No.34009/2024, the Adjudicating Authority has come to the conclusion that the - 27 - Petitioner is not entitled to the benefit of export of service. Thus, relegating the Petitioner before the Adjudicating Authority for two show cause notices would be a useless charade. s) It is submitted that while the impugned show cause notices are issued by Joint Commissioner, GST Commissionerate, Bengaluru East, the statement of objections on behalf of the Respondents is filed by Commissioner, GST Commissionerate, Bengaluru East, who is an officer senior to Joint Commissioner. Once, the senior officer has indicated his mind that the transaction under dispute does not qualify as export, Joint Commissioner - the Adjudicating Authority is not expected to take contrary view, rendering the exercise of adjudication empty formality. t) The issue involved in the present case is one of interpretation of Section 2(6)(v) of the IGST Act r/w Explanation-1 to Section 8 of the IGST Act, which is a pure question of law. The service tax authorities under the erstwhile regime and the Appellate authority under Maharashtra GST has already held that the transaction in dispute qualifies as - 28 - “Export of Services”. This is the practice that has been followed by the Petitioner for the last 30 years and the Authorities have held and consistently accepted that the Petitioner is entitled to the export benefit. Thus, taking a sudden contrary view is clearly an abuse of process of law and without jurisdiction. u) In support of his submissions, learned Senior Counsel placed reliance upon the following judgments:
(i) K.C.P. Limited v. State of Andhra Pradesh - 1993
(88) STC 374 (AP);
(ii) Delhi Stock Exchange Association Ltd. v. Commissioner of Income-Tax, Delhi -1961 (41) ITR 495(SC)
(iii) Tuticorin Alkali Chemicals & Fertilizers Ltd. v. Commissioner of Income Tax, Madras, - 1997
(6) SCC 117(SC)
(iv) Kedarnath Jute Manufacturing Company Limited v. Commissioner of Income-Tax (Central), Calcutta - 1972 (3) SCC 252(SC)
(v) Wipro GE Health Care Pvt. Ltd., v. The Assistant Commissioner of Commercial Taxes, - 2025
(12) TMI 633(Karnataka)
(vi) Genpact India Pvt. Ltd. Vs Union of India & Ors., - 2023 (68) GSTL 3 (P&H) - 29 -
(vii) Wipro GE Health Care Pvt. Ltd., Versus Assistant Commissioner of Commercial Taxes - 2025 (12) TMI 633 - Karnataka High Court (viii) Infodesk India Pvt. Ltd. Vs Union of India - 2025
(12) TMI 435 - Gujarat HC
5. Per contra, learned counsel for the respondents -
revenue would reiterate the various contentions urged in the statement of objections and submit that the present petitions are not maintainable, since the Petitioner has approached this Court directly at the stage of show cause notice, whereas alternate remedy of adjudication is available to the Petitioner and that the Petitioner should exercise the same and approach the Adjudicating Authority with all its defence, which shall be considered and appropriate orders shall be passed thereafter. 5.1 It was submitted that invoking of writ jurisdiction of this Court de-hors the adjudicatory mechanism stipulated under the statute and the Petitioners cannot be permitted to convert the writ petitions into adjudicatory proceedings and therefore, the present writ petitions are liable to be rejected. 5.2 It was contended that the Petitioner is treating the supplies made to their overseas branches as export of services in - 30 - contravention of Section 2(6)(v) of the IGST Act r/w Section 8 of the IGST Act. As per the documentary evidence collected during the investigation, the customer abroad places export orders on the foreign branch of the Petitioner and the foreign branch subcontracts/out sources part of the work to Petitioner and foreign branch pays consideration to Petitioner for performing the subcontracted work. The facts relating to raising invoices on its overseas branches against specific work orders to the branches, are dealt with in the present proceedings, and the same was distinct in the appellate proceedings in the service tax regime. In case of service tax regime, the recipient of supply was not very clear as is in the present cases supported by documentary evidence. 5.3 There is no dispute regarding recipient of the supply in current case as per provisions of the CGST/KGST/IGST Act and hence, the Respondents are empowered to proceed in the matter and the adjudicating authority be allowed to consider the merits of the case. The Petitioner cannot argue preconceived mindset without actually following statutory procedures and there is no material to demonstrate that the Respondents are proceeding in - 31 - the matter with pre-conceived mindset and the said argument is raised only for sake of maintaining the present writ petition, without any evidence and the concept of joint supply advanced by the Petitioner is completely contrary to the facts and has no basis in law. The said argument of joint supply is only advanced to claim public money as refund and to avail export benefits fraudulently. 5.4 It was contended that the concept of distinct person is relevant in the present case as the transaction is between the Petitioner and its branch and the concept of joint supply is contrary to the statutory scheme laid down under GST Acts and the offshore activities are carried out by the Petitioner as part of outsourcing and branch is the recipient of supply in that case and mentioning of Petitioner's location in some SOW does not make any difference to workflow. The Petitioner is selectively picking and choosing one or two lines from some SOWs without revealing full facts, when in fact the SOWs submitted by the Petitioner in their annexure clearly shows, that overseas branch is the supplier of service to overseas customer. 5.5 It was contended that the material on record indicates that the entire scheme to evade taxes was well planned and - 32 - executed with an intention to evade taxes and the Petitioner is guilty of suppression, willful mis-statement and fraud and the current case is within Explanation 2 to Section 74 of the CGST Act. If every self-assertion of the Petitioner on facts and law is accepted, the entire provisions of the statute are rendered otiose, and ineffective. The very legislative intent is defeated if such contentions are accepted without proper adjudication resulting in huge loss to the public exchequer and hence, there is a requirement of adjudication in the present cases. It was therefore submitted that there was no merit in the petitions and the same are liable to be dismissed.
6. I have given my anxious consideration to the rival submissions and perused the material on record.
7. The main question/issue that arises for consideration in
these petitions is, whether the services provided by the Petitioner to its overseas customers jointly and through its overseas branch qualifies as an “Export of Service” under the CGST/KGST Act and whether the services provided by the Petitioner to its overseas - 33 - customers qualifies as an “Export of Service” under Section 2(6) of the IGST Act.
8. Before adverting to the rival contentions, it would be
necessary to refer to the relevant statutory provisions of IGST Act as hereunder: Section 2(6) of the IGST Act -“export of services” means the supply of any service when, -
(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;
(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
(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” Explanation 1 in Section 8 of the IGST Act, reads thus: “Explanation 1. - For the purposes of this Act, where a person has, (i) an establishment in India and any other establishment outside India;
(ii) an establishment in a State or Union territory and any other establishment outside that State or Union territory; or - 34 -
(iii) an establishment in a State or Union territory and any other establishment [* * *] registered within that State or Union territory, then such establishments shall be treated as establishments of distinct persons.” Section 2(14) of IGST Act - “location of the recipient of services” means, -
(a) where a supply is received at a place of business for which the registration has been obtained, the location of such place of business;
(b) where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment;
(c) where a supply is received at more than one
establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and
(d) in absence of such places, the location of the usual place of residence of the recipient; Section 2(14) of IGST Act - “location of the supplier of services” means, -
(a) where a supply is made from a place of business for which the registration has been obtained, the location of such place of business;
(b) where a supply is made from a place other than the place of business for which registration has been obtained (a - 35 - fixed establishment elsewhere), the location of such fixed establishment;
(c) where a supply is made from more than one
establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the provision of the supply; and
(d) in absence of such places, the location of the usual place of residence of the supplier; Section 2(23) of the IGST Act -“zero-rated supply” shall have the meaning assigned to it in Section 16 of the IGST Act”.
Section 16(1) of the IGST Act reads thus: “16. Zero rated supply.-(1) "zero rated supply" means any of the following supplies of goods or services or both, namely:-
(a) export of goods or services or both; or
(b) supply of goods or services or both for authorised operations to a Special Economic Zone developer Or a Special Economic Zone unit.”
9. Section 2(6) of the IGST Act lays down the conditions to be fulfilled for qualification of a service as “export of services”.
10. It is an undisputed fact that even as per the
Respondents, apart from conditions specified in clause (v) of Section 2(6) of the IGST Act, the Petitioner has fulfilled all the conditions for the supplies to qualify as export of services. It is - 36 - alleged in the impugned show cause notices and held in the impugned order that the overseas branches of the Petitioner has supplied the services to the overseas customers and in turn sub- contracted part of the work to the Petitioner. It is further held that the Petitioner and its foreign branches are merely ‘establishments of distinct entity’ and hence, the condition prescribed under clause
(v) of Section 2(6) of the IGST Act is not satisfied. The
Respondents have placed reliance on the invoicing pattern and the declaration made in Form GSTR-9C to substantiate their case that the overseas branches have sub-contracted the part of the scope of work to the Petitioner and the Petitioner has provided its services to its own overseas branches.
11. In this context, it is relevant to refer to the MSA, SOWs,
Work Orders, Invoices etc. issued by the Petitioner to ascertain the recipient of the services provided by the Petitioner and its overseas branches. The relevant extract of the MSA is reproduced below: Scope of Agreement This Agreement establishes a framework that will enable Supplier to provide various Services to Schneider Electric and its Affiliates. The specific Services that Supplier will provide to Schneider Electric will be marked below and - 37 -
described in an applicable appendix to this Agreement and/or a Statement of Work (or other mutually agreed upon ordering document), signed by the parties or their Affiliates, or otherwise accepted by Supplier. Statement of Work (or other mutually agreed upon ordering document) may be entered into by Affiliates of the Parties, taking into account the location of the Services to be provided and any local laws, regulation or tax considerations and will incorporate the terms of this Agreement and constitute a binding contract between the signing entities to such Statement of Work. In particular, the Parties agree that for provision of any services to an Affiliate of Schneider Electric resident in the U.S., it shall be supported by a Statement of Work (or other mutually agreed upon ordering document) entered into by such US Affiliate of Schneider Electric with invoices issued to and paid by such US Affiliate of Schneider Electric. For avoidance of doubt, neither party shall be jointly and severally liable for Statement of Work (or other mutually agreed upon ordering document) entered into by their Affiliates respectively, nor shall either Parties’ Affiliates be jointly and severally liable among themselves. The parties agree that the terms of this Agreement and its Appendices will govern all Services and in case of contradiction or inconsistency, the terms of this Agreement and these Appendices shall control over any conflicting terms of Statement of Work, other pre-printed terms or ordering documents.
Purpose - Background Information - 38 - Schneider Electric is leading a digital transformation program in North America, known as Titan, to re-imagine business capabilities by leveraging modern technologies to expend margin, drive customer value and increase employee engagement.
One of the goals of Titan is to transform the Partner/Industry/Energy business units and replace the legacy ERP’s and their ecosystems (i.e., Q2C) with modern technologies including SAP S/4 and Salesforce. SAP S/4 will hold the digital core (simple, lean, sharable), but it is not the only focus of Titan. The Titan program also incorporates a full suite of tools required for the business solution including processes.
Services and Scope of Services These Services include the following specific skills and related tasks: ☐ Project Management ☐ Run Support ☐ Consulting ☐ Security Penetration Testing ☒ Software Development ☐ Security Consulting or Audit ☐ Software Configuration ☐ GDPR Consulting or Audit ☒ Testing ☐ Strategy Development ☒ Quality Assurance ☐ Knowledge Transfer ☐ Training ☒ Post Go Live Support ☐ Other - 39 - In-Scope Services under this SOW include the following: • The Scope of this SOW is limited to resource engagement on a “time and material” basis to fulfill any
capacity and skill gaps within the Titan Project team in order
to support program deliverables. • The requirements and roles and responsibilities will be identified by the Titan PMO and will be shared with LTI on an on-going basis in order to fulfill any skill gaps. Any roles not defined in this SOW will be discussed independently and must be mutually agreed through a signed Change Order. Out-of-Scope Services under this SOW include the following: • Any functionality or activities that are not specifically mentioned in the “In Scope” section will be considered as excluded from LTI’s scope of work.
12. Under the above MSA, a SOW issued by Schneider
providing therein the detailed scope of services, the phase wise completion schedule, phase wise responsibility matrix, details of Offshore Service Location in India which will undertake the offshore activities. The consideration is charged on hourly rate and time spent on the project, the fee schedule containing the hourly rate of various personnel assigned on the project is also mentioned in the Statement of Work / Project Order. - 40 -
13. The relevant extract of the SOW is reproduced below:
“RESPONSIBILITIES 4.1 Supplier’s personnel 4.1.1 Reasonably prior to assigning an individual to perform Services under any Statement of Work and to the extent practical under the circumstances, Supplier will (i) notify Schneider Electric of the proposed assignment, (ii) introduce the individual to appropriate Schneider Electric representatives, (iii) provide a reasonable opportunity for Schneider Electric representatives to interview the individual if so requested and (iv), consistent with applicable law, provide Schneider Electric with a resume and such other information about the individual as may be reasonably requested by Schneider Electric. If Schneider Electric lawfully and in good faith objects to the proposed assignment, Supplier will not assign the individual to that position and will propose to Schneider Electric the assignment of another individual of suitable ability and qualifications”
“APPENDIX G : RATE CARDS & YEARLY VOLUME REBATE STRUCTURE A. RATE CARDS - 41 - “RESOURCE ENGAGEMENT MODEL Schneider Electric will communicate the required skills / expertise in writing as defined in section “9. Modification” of this SOW. LTI will confirm the lead time needed to fulfil the role. Schneider Electric will maintain the right to accept or reject the LTI proposed staffing.
• LTI will provide Schneider Electric with six (6) weeks’ notice prior to rolling off resources. • Schneider Electric will facilitate onboarding logistics for the LTI project team (e.g. badge, contractor onboarding process, office/seat assignments (as required and allowed under Covid 19 restrictions), internet access and required on-boarding) prior to the initiation of services under this SOW as required. In the current Coronavirus global pandemic environment, the requirements for on-boarding an LTI resource will be mutually agreed between the Parties as the ability to work from SE offices may be limited. • Unless explicitly stated otherwise, all offshore resources will be required to be co-located with the Titan team at Schneider Electric offices in Bangalore, India but pursuant to the country of India Coronavirus (Covid 19) global pandemic regulations. • Overlap with the onshore team - Resourcing of LTI’s offshore personnel will be executed according to the needs of the Titan Program as specified and will be centrally managed by Schneider Electric. • Schneider Electric requires identified offshore resources to be available until 10:00 PM IST which will provide overlap hours with onshore team in Schneider Electric’s North America Region. LTI and Schneider Electric will be responsible to plan and ensure resources are utilized effectively and efficiently. - 42 -
• For specific roles (e.g. Basis Team Member), LTI will staff resources in offshore / nearshore locations in the US CST Time Zone. • LTI resources will be charged based on working days consisting of 8 hours per day. No additional charges (e.g. over time, travel allowance, weekend work) will be considered and accepted by Schneider Electric. Weekend / holiday work can be compensated as time off based upon mutual agreement with the SE scrum team. Weekend work needs must be agreed upon in advance by Schneider Electric and may be required for critical program deliverables. • If compensated time off is not possible Schneider Electric will be charged as per the agreed upon rate card as applicable. • LTI team resources will be pre-screened and evaluated by LTI organization leads and then reviewed and approved by Schneider Electric before being onboarded to the Titan Program. • For any gap identified in terms of skills and behaviors by Schneider Electric, LTI will have two (2) weeks to locate and on- board a suitable replacement who will be reviewed and approved by SE. • Schneider Electric will not accept the cost of resources terminated due to skill/ behavior gaps. In such cases, LTI will ensure and be responsible for resource transition and knowledge transfer. The resources will not be charged to Schneider during the transition period. • LTI will align to Titan project management principles, sprint cadence, tools (Jira Align, Testing, SAP Charm) and methodologies (Scaled Agile). The required on-boarding will be managed by Schneider Electric”
“PRICE - 43 -
The Services under this SOW will be delivered under the following payment structure: ☐ Fixed Fee ☒ Time & Material (not-to-exceed) ☐ Time & Material (not-to-exceed) with Fixed Bid maximum price guaranteed delivery ☐ Other described as follows: • For Time & Material not-to-exceed SOW’s, the following conditions apply: • Supplier will be paid up to, but not in excess of, the not-to- exceed value of this Statement of Work. • The total fees to be paid to Supplier cannot be increased beyond the not-to-exceed value unless the Parties execute a written Change Order. • Supplier shall be paid based on actuals incurred. • Each invoice will provide a detailed breakdown of the hours worked by each consultant by day over the specific invoice period. • The LTI consultant rates are based on the scope and assumptions stated in this SOW and on the rate card negotiated in the Agreement. The rates are valid for a period of twelve (12) months from the effective date of this SOW. Thereafter, the rates mentioned above may be revised but such revision of rates shall not be higher than the change in the applicable U.S. Consumer Price Index (“CPI”) for the corresponding period. For the avoidance of doubt, the rates may not be adjusted more than once annually. - 44 -
• The rates used in this SoW are exclusive for Titan 2022 requirements. For all other projects MSA rates will be followed. Total value of SOW: Type of Cost Cost (USD) Services (Monthly billing based on $3,612,768 actuals incurred) Travel - Other Costs - Total $3,612,768 SUPPLIER RESOURCE LOADING (STAFFING) Supplier’s resource loading for this SOW follows: Rates Start Total
# Name Skill Role Location ($) Date Hrs Total ($)
1 Santhan Itha Automation Development Bangalore $25 3- 1944 $48,600
Testing Team Member Jan2 Sagar Mainframe Development Bangalore $30 3- 1944 $58,320
Bhelande Team Member Jan-
. . . . . . . . .
. . . . . . . . .
. . . . . . . . .
. . . . . . . . .
. . . . . . . . .
. . . . . . . . .51 Sunil Patil / OTC Functional Bangalore $38 3- 1944 $73,872
Iftikar Backfill Analyst Jan-
New Position 3-
-Sales and Functional Jan52 Distribution OTC Analyst Bangalore $38 22 1944 $73,872
53 Sandeep PP Functional Bangalore $38 3- 1944 $73,872
Patil Analyst Jan54 New SAP PI PI Development Bangalore $33 1- 1792 $59,136
Team Member Feb-- 45 - Supplier is expected to report actuals incurred under this SOW: ☐ Yes ☒ No If yes, on the following frequency (the format of the reporting to be mutually agreed between the Parties): ☐ Weekly ☐ Every 2 Weeks ☐ Monthly PRIMARY WORK LOCATION(S) Supplier Work Locations: • Bengaluru, India • Nashville, TN, USA SE Work Locations: • Bengaluru, India • Nashville, TN, USA”
14. The SOW provides for the work to be carried out both
by the US branch employees and the personnel from India. The primary work locations in the SOW are Bengaluru, India and Nashville, USA. The rates appearing in the SOW clearly sets out the rates of the employees working from India and those working from US, basis which the invoicing is done. In the invoices issued by the branch of the Petitioner to Schneider, the time spent by each employee of the Petitioner in India and its branch office along with their names are specified therein. When the names in the said - 46 - annexure to invoice are compared with the SOW, the location of the employee is easily identifiable. The relevant extract of the invoice and SOW is given below: Extract of Rates as per SOW Extract of annexure to invoice
15. The invoice issued by Petitioner on its branch is for the
work undertaken at Petitioner’s India office for various overseas clients, details whereof are stated in the invoice itself. On conjoint reading of all the above documents, it is clear that the work is jointly executed by both i.e. the Petitioner’s India office as well as the Petitioner’s branch office for the ultimate overseas customer. As per the MSA read with the SOW, there is only one recipient of service i.e., the ultimate overseas customer. It is the ultimate - 47 - overseas customer who receives services under the MSA read with SOW from the Petitioner and from foreign branch of Petitioner.
16. Circular No. 161/17/2021-GST dated 20.09.2021 is not
applicable to the facts of the present cases, as the services are provided by the Petitioner to the ultimate overseas customer, being the service recipient which is not distinct establishment as prescribed under clause (v) of Section 2(6) of the IGST Act. The nature of services supplied by Petitioner is such that Petitioner cannot first supply the same to its branches and the branches thereafter consolidate all the services and further provide the services to overseas customers. This will defeat the purpose and commercial expediency because of which the contract is given to the Petitioner. The consideration for the services supplied by the Petitioner to the overseas customers, which is received from onsite branch of the Petitioner, is in convertible foreign exchange and not in Indian Rupees. The branch is merely collecting the consideration for the Petitioner in respect of the offshore services rendered by Petitioner.
17. The contract for services to be supplied is executed
between the Petitioner and the overseas customer. It is merely an - 48 - internal agreement, basis which the onsite branch of the Petitioner would be responsible for collection of the payments from the overseas customer in respect of the offshore services rendered by Petitioner. The onsite branch is carrying out the responsibility delegated to it by the Petitioner, as the Petitioner is the head office of the entire business conglomerate and the onsite branches have to carry out the tasks as per the instructions of the head office i.e. the Petitioner. The branch raising the invoice on overseas customers and receiving consideration by itself cannot be sufficient to conclude that the foreign branch has rendered the services to the overseas customers and the Petitioner has rendered services to the foreign branch. The general test of ‘substance over form’ has to be applied to the facts of the case in hand. The raising of invoice cannot be a sole determinative factor to decide who is the supplier of service.
18. The Andhra Pradesh High Court in the case of KCP Limited’s case (supra) has held as under:
In our view, the second aspect relied upon by the appellate authorities, viz., the adoption of a particular accounting procedure which is normally adopted for a sale, is not very material. It may be that by reason of a mistaken legal impression, the petitioner - 49 - effected entries in the account books just as it is done for a sale transaction. But it is a well-settled principle of law that the true nature of transaction is not determined by the method in which the entries are made in the account books.
19. The Apex Court in the case of Kedarnath Jute Manufacturing’s case supra, has held as under:
8. The main contention of the learned Solicitor-General is
that the assessee failed to debit the liability in its books of accounts and, therefore, it was debarred from claiming the same as deduction either under section 10(1) or under Section 10(2)(xv) of the Act. We are wholly unable to appreciate the suggestion that if an assessee under some misapprehension or mistake fails to make an entry in the books of account and although, under the law, a deduction must be allowed by the Income-tax Officer, the assessee will lose the right of claiming or will be debarred from being allowed that deduction. Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter. The assessee who was maintaining accounts on the mercantile system was fully justified in claiming deduction of the sum of 1,49,776 being the amount of sales tax which it was liable under the law to pay during the relevant accounting year. It may be added that the liability remained intact even after the assessee had taken appeals - 50 -
to higher authorities or courts which failed. The appeal is consequently allowed and the judgment of the High Court is set aside. The question which was referred is answered in favour of the assessee and against the revenue. The assessee will be entitled to costs in this court and in the High Court.
20. This Court in the case of Wipro GE Health Care’s case supra, has held as under:
“26. It is therefore clear that by applying the general test of ‘substance over form’, irrespective of the nomenclature used in the invoice, the facts of the case show that the transaction is an export of service. Therefore, the place of supply for such composite services is the location of the service recipient as per Section 13(2) of the IGST Act i.e., the location of the foreign entity in the present case.”
21. It is thus clear that it is necessary to consider more
closely what the contract provides for and intention of the parties entering into the contract. In the instant case, as per the contract, Petitioner supplies the services to the overseas customers, and the said work is partially executed by the Petitioner’s India office and partially by branch office. The original contract entered into between the parties and the terms agreed therein shall be paramount and the invoicing pattern/ auditor’s note/ understanding - 51 - in Notes in Form GSTR - 9C cannot vary the contract and do not have a contractual effect and due regard must be given to number of substantive factors such as nature and purpose of documents, circumstances of its use and the parties understanding. Further, if the Petitioner was not paid for the services they rendered in the current project, it would be the overseas customer whom it would sue in the court of law and not the onsite branch of the Petitioner and hence, the overseas customer is liable to pay for the services received from the Petitioner and its branch for respective supplies.
22. Further, a perusal of Section 2(14) and 2(15) of the
IGST Act and upon its harmonious reading, it is clear that the location of the recipient of service and provider of service is the entity or the establishment who is most directly concerned with the supply and applying the same to present case it is clear that the supplier of the service is the Petitioner, and the recipient of the service is the overseas customer. In view of the above, there can be no doubt that in the facts and circumstances obtaining in the instant cases, the Petitioner and its branch have jointly supplied the services to overseas customers, and overseas customers are the ultimate recipient of the services and all the conditions for export of - 52 - services are satisfied and accordingly, the transactions under dispute are correctly assessed by Petitioner as zero-rate supplies.
23. In addition thereto, in the service tax regime i.e., under the Finance Act, 1994, the term “Export of Service” was defined under the Rule 6A of the Service Tax Rules, 1994, which reads thus: “RULE 6A. Export of services. - (1) The provision of any service provided or agreed to be provided shall be treated as export of service when,-
(a) the provider of service is located in the taxable territory,
(b) the recipient of service is located outside India,
(c) the service is not a service specified in the section 66D of the Act,
(d) the place of provision of the service is outside India,
(e) the payment for such service has been received by the provider of service in convertible foreign exchange, and
(f) the provider of service and recipient of service are not merely establishments of a distinct person in accordance with item (b) of Explanation 3 of clause (44) of section 65B of the Act.”
24. Further, the item (b) of Explanation-3 to Section 65B(44) of the Finance Act, 1994, reads thus: Explanation 3.- For the purposes of this Chapter,- - 53 - …………
(b) an establishment of a person in the taxable territory and any of his other establishment in a non-taxable territory shall be treated as establishments of distinct persons.
25. Section 2(6) of the IGST Act - “Export of Service” and
Explanation 1 in Section 8 of the IGST Act are already reproduced above. The issue in the present cases is restricted to the applicability of clause (v) of Section 2(6) of the IGST Act, which is identical to clause (f) of Rule 6A of the Service Tax Rules. Under the Service tax regime, the very same services provided by the Petitioner were considered as “Export of Services” and consistently refund was granted to the Petitioner prior to the implementation of GST. During adjudication of one of the refund claims filed by the Petitioner for the period October to December 2012, an identical dispute was raised by the Service Tax Authorities. By Order dated 08.04.2016, the Commissioner of Service Tax (Appeals) specifically observed that the services provided by the Petitioner through its branches also qualify as “Export of Service” as the “recipient” of service in all these cases is the ultimate overseas customer and not the foreign branch of the Petitioner. - 54 -
26. The said Order dated 08.04.2016 passed by the
Commissioner of Service Tax (Appeals) is not challenged by the Respondents. The said contention is further fortified on the ground that for the period subsequent to the period covered under the above Order dated08.04.2016 i.e. July 2014 to June 2017, the Petitioner has been granted refund of unutilized Cenvat Credit by considering the output services provided by the Petitioner as “Export of Services”. If it was the case of the Department that correct facts have not been appreciated by the Learned Commissioner of Service Tax (Appeals) or if certain facts have been suppressed by the Petitioner, nothing prevented the Department from challenging the said order dated 08.04.2016 or grant of refund. Further, as stated above, even for the subsequent periods, the Respondents did not dispute that the services provided by the Petitioner do not qualify as “Export of Service” and granted refunds to the Petitioner without any demur. It follows there from that there is no change in the facts and statutory provisions i.e. with regard to the scope and ambit of “Export of Services” under the service tax regime vis-a-vis the GST regime and the services provided under the MSA’s executed with the customers - 55 - remain the same prior to and post the implementation of GST and the Respondents cannot be allowed to take a different view for different periods.
27. The Punjab and Haryana High Court while evaluating a
similar dispute in the case of Genpact India Pvt. Ltd. Vs Union of India & Ors., 2023 (68) GSTL 3 (P&H), where the benefit of “Export of Services” was denied on the ground that the Petitioner therein qualifies as an “intermediary”, has held as follows:
“In the pre-GST regime the term “intermediary services” was defined under Rule 2 (f) of the Place of Provision of Service Rules 2012. Under the 2012 Rules “intermediary services” were defined to mean a broker/an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the 'main' service) or a supply of goods, between two or more persons, but does not include a person who provides the main service on his account.
A perusal of the definition of “intermediary” under the service tax regime vis-a-vis the GST regime would show that the definition has remained similar. Even as per circular dated 20.09.2021 issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs (GST Policy Wing), the scope of “intermediary” services has been dealt in para 2 thereof. In - 56 -
para 2.2 it stands clarified that the concept of “intermediary” was borrowed in GST from the Service Tax Regime. The circular after making a reference to the definition of “intermediary” both under Rule 2 (f) of the Place of Provision of Service Rules 2012 and under Section 2 (13) of the IGST Act clearly states that there is broadly no change in the scope of “intermediary” services in the GST regime vis-a-vis the service tax regime except addition of supply of securities in the definition of “intermediary” in the GST law.
We also find that in the impugned order dated 15.02.2021 (Annexure P-18) there has been a clear misreading of the ruling in the case of Infinera (supra) while observing that there has been a material change in the definition of “intermediary” under the GST regime. To the contrary a bare perusal of the ruling in the case of Infinera (Supra) which stands reproduced by the Appellate Authority in the impugned order itself would show that the definition of the term “intermediary” had been noticed both under the pre- GST regime as also under the GST regime and it had been observed as under:-
“From the above definitions, in essence, there does not seem to be any difference between the meaning of the term “intermediary” under the GST regime and pre-GST regime. In the pre-GST regime, an intermediary referred to a person who facilitates the provision of a main service between two or more person but did not include a person who provided the main service on his account. Similarly, in the GST regime, an intermediary refers to a person who facilitates the - 57 -
supply of goods or services or both between two or more persons but excludes a person who supplies such goods or services or both on his own account. Accordingly, in the light of such position wherein there is no change in the legal position i.e. with regard to the scope and ambit of “intermediary” services under the service tax regime
vis-a-vis the GST regime and there being no change of facts
as it is the MSA of 2013. (Annexure P-1) which continues to operate, the department cannot take a different view for different periods. In M/s Radhasoami Satsang Soami Bagh, Agra Versus Commissioner of Income Tax (1992) 1 SCC 659, even though it had been observed that res judicata dopes not apply to income tax proceedings, yet it was observed as follows:-
16. We are aware of the fact that strictly speaking res
judicata does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year.
17. On these reasonings in the absence of any material
change justifying the Revenue to take a different view of the matter - and if there was no change it was in support of the assessee - we do not think the question should have been - 58 -
reopened and contrary to what had been decided by the Commissioner of Income-tax in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under Sections 11 and 12 of the Income Tax Act of 1961”.
In Bharat Sanchar Nigam Ltd. Vs. Union of India (2006) 3 SCC 1, the Hon'ble Supreme Court had reiterated that where facts and law in a subsequent assessment year are the same, no authority whether quasi-judicial or judicial can generally be permitted to take a different view. Paragraph 20 of the judgment would be relevant to the issue at hand and is reproduced hereunder:- “20. The decisions cited have uniformly held that res judicata does not apply in matters pertaining to tax for different assessment years because res judicata applies to debar Courts from entertaining issues on the same cause of action whereas the cause of action for each assessment year is distinct. The Courts will generally adopt an earlier pronouncement of the law or a conclusion of fact unless there is a new ground urged or a material change in the factual position. The reason why Courts have held parties to the opinion expressed in a decision in one assessment year to the same opinion in a subsequent year is not because of any principle of res judicata but because of the theory of precedent or the precedential value of the earlier - 59 -
pronouncement. Where facts and law in a subsequent assessment year are the same, no authority whether quasi- judicial or judicial can generally be permitted to take a different view. This mandate is subject only to the usual gateways of distinguishing the earlier decision or where the earlier decision is per incuriam. However, these are fetters only on a coordinate bench which, failing the possibility of availing of either of these gateways, may yet differ with the view expressed and refer the matter to a bench of superior strength or in some cases to a bench of superior jurisdiction.
The principle of consistency as such ought to apply in the present matter as well and we find merit in the stand taken on behalf of the petitioner that the view taken in the order in original dated 25.01.2018 (Annexure P-2) holding the petitioner to be not an “intermediary” under the MSA, should prevail even under the GST regime.”
28. In the subsequent judgment passed in the case of Genpact India Pvt. Ltd. Vs Principal Commissioner of CGST & C.Ex., Gurugram -2023 (77) GSTL 512 (P&H), the Punjab & Haryana High Court has held as under: “6. Learned Counsel for the petitioner has further stated that the respondents have implemented the judgment dated
11-11-2022 passed in CWP-6048-2021 by detailed order
and also decided to file SLP in the Hon’ble Supreme Court. Finally refund for an amount of Rs. 21,98,06,002/-for the - 60 - period April, 2019 to June, 2019 has been sanctioned by the Deputy Director Division East-II, Central Tax GST Gurugram. It is further stated therein that as per the letter dated 8-5-2023 issued by CBIC, the respondents have decided not to file SLP against the judgment dated 11-11- 2022 passed in CWP-6048-2021.
7. Hence, this Court is of the view that since the
respondents have taken conscious decision not to file SLP against the judgment dated 11-11-2022 passed in CWP- 6048-2021, the ratio of Genpact India (P.) Ltd.’s case (supra) is directly applicable in this case.”
29. It is clear from the ratio of the above judgment that the
GST authorities cannot take a different view from the view taken during service tax regime. It is pertinent that the first judgment in the case of Genpact (supra) has been accepted by the Respondents. This Court has considered a similar dispute with regard to denial of benefit of “Export of Services” on the ground that the place of supply of the services therein was in India in the case of Wipro GE Health Care’s case (supra), wherein this Court
held as under:
“2.1 Petitioner contends that the activities being performed by it prior to introduction of GST from 01.07.2017 were governed by the erstwhile Finance Act 1994, during which period, the refund of unutilized credit with respect to export - 61 -
of services carried out by the petitioner for the period from October 2012 to December 2012 was examined by the Deputy Commissioner of Service Tax who passed a detailed Order-in-Original No. 256/2014 dated12.01.2014 granting refund claim by the petitioner by recognizing that the services provided by the petitioner were export of services and passed speaking orders sanctioning refund in favour of the petitioner. So also, after coming into force of the GST from July 2017 onwards, petitioner continued to file applications for refund of accumulated Input Tax Credit
(ITC) in accordance with the provisions contained in
Section 54 of the CGST Act r/w Rule 89 of the CGST Rules. It is contended that even in relation to the periods from 2017 July onwards upto September 2021 post implementation of GST, the respondent granted and sanctioned refunds in favour of the petitioner. However, for the period from October 2021 to November2021, respondents partially rejected the refund claim by the petitioner by passing the impugned orders dated 13.03.2023 on the ground that the services provided by the petitioner do not amount to “export of service”. The respondents came to the conclusion that the conditions for export of services under Section 2(vi) of the IGST Act, 2017 had not been fulfilled and that the services provided by the petitioner do not qualify as export of services as the place of supply was in India and that the supplier of service and recipient are merely establishment of a distinct person and hence, cross charge invoices had been raised. Respondent also held that the petitioner was entitled to refund pertaining - 62 -
to export of goods. However the said amounts was adjusted towards tax liable to be paid for local supply of services at 18% GST and accordingly, the respondent created a demand of Rs.24,54,73,142/- by passing the impugned orders dated 13.03.2023 after adjusting the refund admissible on account of export of goods. Aggrieved by the impugned orders at Annexures-A, B and C dated 13.03.2023, petitioner has preferred the instant W.P. No.7317/2023seeking the aforesaid reliefs.”
“28. Further, with regard to the contention of the petitioner that the respondent - Revenue had previously examined the nature of the services provided by the petitioner and granted refund considering the same to be export of services, despite no changes in the petitioner’s operational methods or the applicable legal framework, the respondent has arbitrarily treated these services as domestic rather than export. In this context, in Genpact (1)’s case supra,the Hon’ble Division Bench of Punjab and Haryana Court held as under:- ……………………………………”
29. The aforesaid judgment of the Punjab and Haryana
High Court has attained finality as isclear from the subsequent judgment in Genpact (2)’s case supra, wherein the decision of therevenue / Department not to challenge the judgment in Genpact (1) before the Apex Courthas been recorded as hereunder:- …………………………” - 63 -
30. Apart from the above, the Respondents for the period
July 2017 till January 2023 had not disputed that the services provided by the Petitioner qualify as an “Export of Service”. As stated above, even the First Appellate Authority in Maharashtra under the GST regime have held that the same services provided by the Petitioner to its overseas customers through their foreign branches qualify as an “Export of Service”. It is a settled position in law that uniformity and consistency in taxing statute are the core to the judicial discipline. It is therefore clear that having accepted the very services as export of services since inception, the Respondents cannot be allowed take different view and deny refund following well enshrined principles of consistency and judicial discipline. In the case of Prl. Commissioner of Income Tax v. Maruti Suzuki India Limited - 2019 (7) TMI 1449(SC), the Apex Court held as under:
34. We find no reason to take a different view. There
is a value which the court must abide by in promoting the interest of certainty in tax litigation. The view which has been taken by this Court in relation to the respondent for AY 2011- 12 must, in our view be adopted in respect of the present appeal which relates to AY 2012-13. Not doing so will only result in uncertainty and displacement of settled - 64 -
expectations. There is a significant value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable.”
31. In view of the above settled principles, the issuance of
show cause notices and passing of the impugned Order alleging/ holding that the services provided by the Petitioner do not qualify as “Export of Services” is untenable and unsustainable in law. It is also important to bear in mind that the Petitioner has planned its business in a manner that its services are zero rated supplies and would be entitled to benefits of zero rated supplies. Allowing the Respondents to alter their position would seriously prejudice the Petitioner.
32. The petitioner also contends that the impugned show
cause notices are wholly without jurisdiction as the foundational jurisdictional facts to trigger invoke Section 74 of the CGST Act in that a plain reading of Explanation 2 to Section 74 will indicate that the sine qua non for an allegation of ‘willful suppression’ under Section 74 of the CGST Act, to be made out is the non-declaration - 65 - of facts or information which an Assessee is required to declare in its return or any other document furnished under the Act etc., or a failure on the part of the Assessee to furnish information sought by a Proper Officer in writing. It is the specific contention of the Petitioner that the impugned Show cause notices and Order issued under Section 74 of the CGST Act, on the ground of ‘willful suppression’ are illegal and arbitrary being manifestly violative of the law for want of satisfaction of the jurisdictional fact of Section 74 of the CGST Act and that the impugned show cause notice is wholly without jurisdiction or authority of law as the foundational jurisdictional facts to trigger/ invoke Section 74 of the CGST Act i.e., existence of willful suppression to evade/ avoid payment of GST has not been satisfied by the Respondents.
33. The Petitioner has been claiming refund of unutilized
ITC on account of export of services and disclosed the correct details in the returns filed in Form GSTR-1, 3B and 9/9C and also in the Form RFD-11/LUT at the time of availing benefit of zero rated supplies. In fact, in the present case, the Respondent no. 3 is placing reliance on the Notes to the GSTR - 9C filed by the Petitioner and Form RFD-11/ LUT filed by the Petitioner. A bare - 66 - perusal of the allegation in the show cause notice viz. consistent allegation of taking undue benefit of letter of undertaking and making wrong declaration to claim zero rated supplies made in the show cause notices, it is amply clear that the department was completely and fully aware of all facts relating to the nature of services provided by the Petitioner, the recipient of the services, the remitter of consideration in overseas currency. The entire gamut of transaction, which is now sought to be disputed by the Respondents, is known to the department past several years. The material on record also indicates that no positive steps are taken by the Petitioner to withhold any information. In the absence of anything to show that the Petitioner had failed to disclose relevant information, the very invocation of Section 74 of the CGST Act on grounds of willful suppression has failed. The Petitioner made full and proper disclosures of its turnover in returns, refund claims and also furnished all relevant information/details as sought by the office of 2nd respondent in relation to the turnover assessed by it as zero rated supply. It is established that the Petitioner cannot be said to be guilty of suppressing any information either to evade payment of tax or claim any undue benefit. - 67 -
34. In the case of ITW Signode India Ltd. Vs CCE - 2003
(158) ELT 403 (S.C.), wherein the Apex Court has held as follows: “Limitation :
57. Having answered the reference, we are of the opinion
that this Court in the peculiar facts and circumstances of this case at this stage need not go into the question as to whether the processes undertaken by the appellant would amount to manufacture or whether the classification of goods under sub-heading 7308.90 is correct, in view of the fact that the question as regard limitation and availability of Modvat had not been considered.
58. It is not in dispute that in terms of Section 11A a show
cause notice for short-levy could have been issued only within six months from the relevant date. Only in the event, such short-levy was imposed on account of fraud, collusion, wilful mis-statement or suppression of facts with an intent to evade payment of duty on the part of the manufacturer, the extended period of limitation of five years could be invoked.
59. The appellant herein in paragraph 15 of reply dated 2nd June, 1987 categorically stated that such classification has been made to the knowledge of the Department. It was contended :
“On the contrary all the processes were carried out openly and they itself had come up for detailed consideration and eventually the decision was taken under Assistant Collector’s
order dated 14-7-83 after due application of mind and it
would, therefore, be incredible to allege as is sought to be - 68 - done that the department was not in a position to get first- hand knowledge of the various processes adopted.” The appellant further had contended :
“We deny each and every allegation contained in the show cause notice. We submit that from the legal point of view the classification cannot be changed as proposed in the show cause notice, nor does the factual position warrant modification of the classification. When Heading/Sub-heading 7211.31 is specific (cold rolled strips), the goods cannot be consigned to 7308.90 which is not specific and is a residuary item. As long as the subject goods were not classifiable under T.I. 68 when it existed, they cannot attract the corresponding sub-heading 7308.90. We also submit that Rule 9(2) cited in the show cause notice is not applicable since there was no clandestine clearances.”
60. It is, therefore, evident that the contention of the
appellant was that Rule 9(2) cited in the show cause notice was not applicable. But, unfortunately, despite the same it had not been adverted to by the tribunal. We must notice that the appellant herein succeeded before the Appellate Collector. The Revenue went up in appeal. The Tribunal was, therefore, bound to take the aforementioned question into consideration inasmuch a finding of fact was required to be arrived at that the period of limitation for issuing such notices under Section 11A of the Act would depend upon the question as to whether such short-levy was due to any act of fraud, collusion, wilful, mis-statement or suppression of facts,
- 69 - the extended period of limitation of five years could not have been invoked.
61. Such an extended period of limitation can be invoked
only on a positive act of fraud etc. on the part of assessee is found. Such a positive act must be in contradistinction to mere inaction like non-taking of licence etc. It has to be pleaded and established. [See Padmini Products (supra), P & B Pharmaceuticals Ltd. (supra) and Pushpam Pharmaceuticals Ltd. (supra)] Even in Easland Combines (supra) this Court held : “It is settled law that for invoking the extended period of limitation duty should not have been paid, short levied or short paid or erroneously refunded because of either fraud, collusion, wilful misstatement, suppression of fact or
contravention of any provision or rules. This Court has held
that these, ingredients postulate a positive act and, therefore, mere failure to pay duty and/or take out a licence which is not due to any fraud, collusion or wilful misstatement or suppression of fact or contravention of any provision is not sufficient to attract the extended period of limitation.”
62. The question of limitation involves a question of
jurisdiction. The findings of fact on the question of jurisdiction would be a jurisdictional fact. Such a jurisdictional question is to be determined having regard to both fact and law involved therein. The Tribunal, in our opinion, committed a manifest error in not determining the said question, particularly, when in the absence of any finding of fact that such short-levy of
- 70 - excise duty related to any positive act on the part of the appellant by way of fraud, collusion, wilful mis-statement or suppression of facts, the extended period of limitation could not have been invoked and in that view of the matter no show cause notice in terms of Rule 10 could have been issued.”
35. In the case of Continental Foundation Joint Venture v. Commissioner of Central Excise, Chandigarh - (2007) 216 ELT 177 (SC), the Apex Court held that:
“the expression “suppression” has been used in the proviso to section 11A of the Act accompanied by very strong words as ‘fraud’ or “collusion” and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the tax authorities invokes the extended period of limitation under section 11A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a willful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct.”.
36. In Cosmic Dye Chemical v. Collector of Central
Excise, Bombay 1995 (75) ELT 721 (SC), the Apex Court held
that: - 71 -
“Now so far as fraud and collusion are concerned, it is evident that the requisite intent, i.e., intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word “willful” preceding the words “mis- statement or suppression of facts” which means with intent to evade duty. The next set of words “contravention of any of the provisions of this Act or Rules” are again qualified by the immediately following words “with intent to evade payment of duty. It is, therefore, not correct to say that there can be a suppression or mis-statement of fact, which is not willful and yet constitutes a permissible ground for the purpose of the proviso to section 11A. Mis-statement or suppression of fact must be willful.”
37. This Court, following the above decisions, in case of M/s. NCS Pearson Inc. Vs. Union of India & Ors., - 2025 (9) TMI 1205 (Kar) held as under:
17. As stated supra, it is the specific contention of
the petitioner that the impugned SCN dated 12.02.2024 issued under Section 74 of the CGST Act, by the 2nd respondent on the ground of 'wilful suppression' is illegal and arbitrary being manifestly violative of the law for want of satisfaction of the jurisdictional fact of Section 74 of the CGST Act and that the impugned show cause notice is - 72 -
wholly without jurisdiction or authority of law as the foundational jurisdictional facts to trigger / invoke Section 74 of the CGST Act i.e., existence of wilful suppression to evade / avoid payment of GST in relation to Type - III tests has not been satisfied by the respondents who seek the invoke the benefit of the extended period of limitation under Section 74 of the CGST Act. In this context, it is relevant to state that the question of limitation involves a question of jurisdiction and that a finding of fact on the question of
jurisdiction would be a jurisdictional fact and issues
concerning limitation go to the very root of the matter and an authority cannot clothe itself with jurisdiction by deciding the jurisdictional fact incorrectly or by assuming the jurisdictional fact wrongly.
18. In the case of Carona Ltd. vs. Parvathy Swaminathan & Sons - (2007) 8 SCC 559, the Apex Court
held as under:
Jurisdictional fact
26. The learned counsel for the appellant company submitted
that the fact as to “paid-up share capital” of rupees one crore or more of a company is a “jurisdictional fact” and in absence of such fact, the court has no jurisdiction to proceed on the basis that the Rent Act is not applicable. The learned counsel is right. The fact as to “paid-up share capital” of a company can be said to be a “preliminary” or “jurisdictional fact” and said fact would confer jurisdiction on the court to consider the question whether the provisions of the Rent Act were applicable. The question, however, is whether in the present case, the learned counsel for the appellant tenant is right in submitting that the “jurisdictional fact” did not exist and the Rent Act was, therefore, applicable. - 73 -
27. Stated simply, the fact or facts upon which the jurisdiction of
a court, a tribunal or an authority depends can be said to be a “jurisdictional fact”. If the jurisdictional fact exists, a court, tribunal or authority has jurisdiction to decide other issues. If such fact does not exist, a court, tribunal or authority cannot act. It is also well settled that a court or a tribunal cannot wrongly assume existence of jurisdictional fact and proceed to decide a matter. The underlying principle is that by erroneously assuming existence of a jurisdictional fact, a subordinate court or an inferior tribunal cannot confer upon itself jurisdiction which it otherwise does not posses.
28. In Halsbury's Laws of England (4th Edn.), Vol. 1, Para 55, p.
61; Reissue, Vol. 1(1), Para 68, pp. 114-15, it has been stated: “Where the jurisdiction of a tribunal is dependent on the existence of a particular state of affairs, that state of affairs may be described as preliminary to, or collateral to the merits of, the issue. If, at the inception of an inquiry by an inferior tribunal, a challenge is made to its jurisdiction, the tribunal has to make up its mind whether to act or not and can give a ruling on the preliminary or collateral issue; but that ruling is not conclusive.” The existence of a jurisdictional fact is thus a sine qua non or condition precedent to the assumption of jurisdiction by a court or tribunal. Jurisdictional fact and adjudicatory fact
29. But there is distinction between “jurisdictional fact” and
“adjudicatory fact” which cannot be ignored. An “adjudicatory fact” is a “fact in issue” and can be determined by a court, tribunal or authority on “merits”, on the basis of evidence adduced by the parties. It is no doubt true that it is very difficult to distinguish “jurisdictional fact” and “fact in issue” or “adjudicatory fact”. Nonetheless the difference between the two cannot be overlooked.
30. In Halsbury's Laws of England (4th Edn.), Vol. 1, Para 55, p.
61; Reissue, Vol. 1(1), Para 68, pp. 114-15, it is stated: “There is often great difficulty in determining whether a matter is collateral to the merits or goes to the merits. The distinction may still be important; for an erroneous decision on the merits of the case will be unimpeachable unless an error of law is apparent on the face of the record of the determination or unless a right of appeal lies to a court in respect of the matter alleged to have been erroneously determined. An error of law or fact on an issue collateral to the merits may be impugned on an application for an order of certiorari to quash the decision or in any - 74 -
other appropriate form of proceedings, including indirect or collateral proceedings. Affidavit evidence is admissible on a disputed issue of jurisdictional fact, although the superior courts are reluctant to make an independent determination of an issue of fact on which there was a conflict of evidence before the inferior tribunal or which has been found by an inspector after a local inquiry.”
31. In R. v. Fulham, Hammersmith and Kensington Rent
Tribunal, ex p Philippe [(1950) 2 All ER 211 (DC)] it was held that the question whether premium for renewal of tenancy was or was not paid was a jurisdictional fact and, therefore, was held to be a condition precedent for the lawful exercise of jurisdiction by a Rent Tribunal. In Brittain v. Kinnaird [(1819) 1 B&B 432 : (1814-23) All ER Rep 593] however, the factum as to possession of a “boat” with gunpowder on board was held to be a part of the offence charged and thus a finding of fact or adjudicatory fact. It was stated: “The logical basis for discriminating between these cases and other falling on opposite sides of the line, is not easily discernible.” (emphasis supplied)
32. Likewise, the fact whether the petitioner was an “adult” in adoption proceedings was not held to be a “jurisdictional fact” (Eversole v. Smith [159 SW 2nd 35] ).
33. In Chaube Jagdish Prasad v. Ganga Prasad Chaturvedi [AIR
1959 SC 492 : 1959 Supp (1) SCR 733] , the question was whether the landlord was entitled to enhancement of rent. Under the Act, he was not entitled to such rent unless a “new construction” had been made after 30- 6-1946. It was held by this Court that the question whether construction was new or not was a “jurisdictional fact” and if the court wrongly decided the said fact and thereby conferred jurisdiction not vested in it, the High Court could interfere with the order. The Court stated (at AIR p. 498, para 21) that “once it had the power it could determine whether the question of the date of construction was rightly or wrongly decided”. (See also Arun Kumar v. Union of India [(2007) 1 SCC 732] .)
34. But, in Roshan Lal Mehra v. Ishwar Dass [AIR 1962 SC 646 :
(1962) 2 SCR 947] this Court held that the Rent Controller had jurisdiction to fix standard rent for new construction made after 24-3-
1947. The question was as to when the construction was made. The - 75 -
Rent Controller recorded a finding of fact that the construction was put up after 24-3-1947. The finding was confirmed by the District Judge. But the High Court interfered in revision.
35. Setting aside the decision of the High Court, this Court
stated: (Roshan Lal Mehra case [AIR 1962 SC 646 : (1962) 2 SCR 947] , AIR p. 659, para 17) “17. … It is clear from the orders of the Rent Controller and of the District Judge in appeal that the question whether the second floor was newly constructed or not was really a question of fact, though undoubtedly a jurisdictional fact on which depended the power of the Rent Controller to take action under Section 7-A. If the Rent Controller had wrongly decided the fact and assumed jurisdiction where he had none, the matter would be open to reconsideration in revision. The High Court did not, however, go into the evidence, nor did it say that the finding was not justified by the evidence on record. The High Court referred merely to certain submissions made on behalf of the landlord and then expressed the opinion that what was done to the second floor was mere improvement and not a new construction. We think that the High Court was in error in interfering with the finding of fact by the Rent Controller and the District Judge, in support of which finding there was clear and abundant evidence which had been carefully considered and accepted by both the Rent Controller and the District Judge.”
36. It is thus clear that for assumption of jurisdiction by a court or
a tribunal, existence of jurisdictional fact is a condition precedent. But once such jurisdictional fact is found to exist, the court or tribunal has power to decide adjudicatory facts or facts in issue.
19. In the case of Raza Textiles vs. Income Tax Officer - AIR 1973 SC 1362, the Apex Court held as under:
3. Aggrieved by that order the appellant went up in appeal to the
Appellate Assistant Commissioner. The Appellate Assistant Commissioner rejected the appeal on the ground that the same was not maintainable. He took the view that an appeal lay only under Section 30(1-A). But, before such an appeal can be entertained the appellant must satisfy two conditions, namely, (1) he had deducted the tax due from the non-resident in accordance with the provisions of sub-section (3-B); and (2) that he had paid the sum deducted to the Government. The appellant having not complied with those two conditions, the Appellate
Assistant Commissioner held that the appeal was incompetent. The order
- 76 -
of the Appellate Assistant Commissioner was confirmed by the Tribunal. Thereafter, the appellant moved the High Court under Article 226 of the Constitution. That application came up before a Single Judge. The Single Judge after going into the matter in dated came to the conclusion that Messrs Nathirmal and Sons is not a non-resident firm and that being so the appellant was not required to act under Section 18(3-B). He accordingly set aside the order impugned. The revenue went up in appeal against the order of the learned Single Judge to the Appellate Bench. That Bench allowed the appeal with the observations, “in the present case the question before the Income Tax Officer, Rampur, was whether the firm Nathirmal and Sons was non-resident or not. There was material before him on this question. He had jurisdiction to decide the question either way. It cannot be said that the officer assumed jurisdiction by a wrong decision on this question of residence”. The Appellate Bench appears to have been under the impression that the Income Tax Officer was the sole Judge of the fact whether the firm in question was resident or non-resident. This conclusion in, our opinion, is wholly wrong. No authority, much less a quasi-judicial authority, can confer jurisdiction on itself by deciding a jurisdictional fact wrongly. The question whether the Jurisdictional fact has been rightly decided or not is a question that is open for examination by the High Court in an application for a writ of certiorari. If the High Court comes to the conclusion, as the learned Single Judge has done in this case, that the Income Tax Officer had clutched at the Jurisdiction by deciding a jurisdictional fact erroneously, then the assessee was entitled for the writ of certiorari prayed for by him. It is incomprehensible to think that a quasi-judicial authority like the Income Tax Officer can erroneously decide a jurisdictional fact and thereafter proceed to impose a levy on a citizen. In our opinion, the Appellate Bench is wholly wrong in opining that the Income Tax Officer can “decide either way”.
20. In the case of ITW Signode India Ltd. vs. Collector of Central Excise (2004) 3 SCC 48, the Apex Court held as under: - 77 - Limitation
63. Having answered the reference, we are of the opinion that
this Court in the peculiar facts and circumstances of this case, at this stage need not go into the question as to whether the processes undertaken by the appellant would amount to manufacture or whether the classification of goods under Sub-Heading 7308.90 is correct, in view of the fact that the question as regards limitation and availability of MODVAT had not been considered.
64. It is not in dispute that in terms of Section 11-A, a show-
cause notice for short-levy could have been issued only within six months from the relevant date. Only in the event such short-levy was imposed on account of fraud, collusion, wilful misstatement or suppression of facts with an intent to evade payment of duty on the part of the manufacturer, the extended period of limitation of five years could be invoked.
65. The appellant herein in para 15 of reply dated 2-6-1987
categorically stated that such classification has been made to the knowledge of the Department. It was contended: “On the contrary, all the processes were carried out openly and they themselves had come up for detailed consideration and eventually the decision was taken under the Assistant Collector's order dated 14-7-1983 after due application of mind and it would, therefore, be incredible to allege as is sought to be done that the Department was not in a position to get first-hand knowledge of the various processes adopted.” The appellant had further contended: “We deny each and every allegation contained in the show-cause notice. We submit that from the legal point of view the classification cannot be changed as proposed in the show-cause notice, nor does the factual position warrant modification of the classification. When Heading/Sub-Heading 7211.31 is specific (cold-rolled strips), the goods cannot be consigned to Sub-Heading 7308.90 which is not specific and is a residuary item. As long as the subject goods were not classifiable under TI 68 when it existed, they cannot attract the corresponding Sub- Heading 7308.90. We also submit that Rule 9(2) cited in the show-cause notice is not applicable since there was no clandestine clearance.”
66. It is, therefore, evident that the contention of the appellant
was that Rule 9(2) cited in the show-cause notice was not applicable. But, unfortunately, despite the same it had not been adverted to by the Tribunal. We must notice that the appellant herein succeeded before the - 78 -
Appellate Collector. The Revenue went up in appeal. The Tribunal was, therefore, bound to take the aforementioned question into consideration inasmuch as a finding of fact was required to be arrived at that the period of limitation for issuing such notices under Section 11-A of the Act would depend upon the question as to whether such short-levy was due to any act of fraud, collusion, wilful misstatement or suppression of facts, (sic) the extended period of limitation of five years could not have been invoked.
67. Such an extended period of limitation can be invoked only if a
positive act of fraud etc. on the part of the assessee is found. Such a positive act must be in contradistinction to mere inaction like non-taking of licence etc. It has to be pleaded and established. (See Padmini Products [(1989) 4 SCC 275 : 1989 SCC (Tax) 616 : (1989) 43 ELT 195] , P&B Pharmaceuticals Ltd. [(2003) 3 SCC 599 : (2003) 153 ELT 14] and Pushpam Pharmaceuticals Co. [1995 Supp (3) SCC 462 : (1995) 78 ELT 401] )
68. Even in Easland Combines [(2003) 3 SCC 410 : (2003) 152
ELT 39] this Court held : (SCC pp. 424-25, para 31) “31. It is settled law that for invoking the extended period of limitation duty should not have been paid, short-levied or short-paid or erroneously refunded because of either fraud, collusion, wilful misstatement, suppression of facts or contravention of any provision or rules. This Court has held that these ingredients postulate a positive act and, therefore, mere failure to pay duty and/or take out a licence which is not due to any fraud, collusion or wilful misstatement or suppression of fact or contravention of any provision is not sufficient to attract the extended period of limitation.”
69. The question of limitation involves a question of jurisdiction.
The finding of fact on the question of jurisdiction would be a jurisdictional fact. Such a jurisdictional question is to be determined having regard to both fact and law involved therein. The Tribunal, in our opinion, committed a manifest error in not determining the said question, particularly, when in the absence of any finding of fact that such short- levy of excise duty related to any positive act on the part of the appellant by way of fraud, collusion, wilful misstatement or suppression of facts, the extended period of limitation could not have been invoked and in that - 79 -
view of the matter no show-cause notice in terms of Rule 10 could have been issued.
21. In the instant case, a perusal of the material on
record will indicate that the 2nd respondent has decided the jurisdictional facts in relation to the alleged wilful suppression by the petitioner erroneously/incorrectly by attempting to vest itself with the jurisdiction under Section 74 of the CGST Act and saddle a GST liability upon the petitioner for the period under dispute, which is impermissible in law and consequently, the very issuance of the impugned SCN dated 12.02.2024 under Section 74 of the CGST Act is illegal and violative of Article 265 of the Constitution inasmuch as the impugned SCN seeks to realize monies from the petitioner under the guise of tax without the authority of the law and the impugned SCN deserves to be quashed.
22. The impugned SCN also fails to consider and
appreciate that the issue of classification of Type-III Tests had not attained finality on account of W.P.No.3555/2021 preferred by the petitioner against the order of the AAAR pending adjudication before the Division Bench of this Court, in which there is an interim order in favour of the petitioner as stated supra; despite the sub-judice nature of the issue of classification and taxability of Type-III Tests pending before this Court, and interim orders having been granted in favour of the petitioner, the 2nd respondent has issued the impugned SCN relating to Type-III Tests, even though this very issue/question relating to classification and taxability of such supply of service was pending - 80 -
consideration of this Court and the impugned SCN deserves to be quashed on this score also.
23. A perusal of the impugned SCN will indicate that
Section 74 of the CGST Act cannot be invoked in cases involving the mere omission to pay tax or the mere omission to give correct information, without there being any intention to evade tax; the allegations of wilful suppression of appropriate GST not being paid and the failure of the petitioner to mention the value of services correctly in the GSTR-5A returns and failing to apply the correct GST rate, ignores the fact that the very mens rea element of consciously or deliberately suppressing information/details for the purpose of evading the payment of tax which forms the sine qua non of Section 74 of the CGST Act, is not satisfied in the instant case; the jurisdictional fact for invoking the stringent provisions of Section 74 of the CGST Act, that is of wilful suppression with a view to evade payment of tax are neither satisfied nor fulfilled in the impugned SCN, which deserves to be quashed on this ground also.
24. In the case of Cosmic Dye Chemical vs.
Collector of Central Excise, Bombay - (1995) 6 SCC 117, the Apex Court held that the word ‘wilful’, which precedes suppression, requires the existence of an intent to evade duty as hereunder:
6. Now so far as fraud and collusion are concerned, it is
evident that the requisite intent, i.e., intent to evade duty is built into these very words. So far as misstatement or suppression of facts are concerned, they are clearly qualified by the word ‘wilful’ preceding the - 81 -
words “misstatement or suppression of facts” which means with intent to evade duty. The next set of words “contravention of any of the provisions of this Act or rules” are again qualified by the immediately following words “with intent to evade payment of duty”. It is, therefore, not correct to say that there can be a suppression or misstatement of fact, which is not wilful and yet constitutes a permissible ground for the purpose of the proviso to Section 11-A. Misstatement or suppression of fact must be wilful.
25. In the case of Eastland Combines vs. CCE -
(2003) 3 SCC 410, the Apex Court held that wilful
suppression postulates a positive act and that a mere failure to pay duty which is not due to any suppression of facts is not sufficient to attract the extended period of limitation and that the mere default or failure of the assessee to pay duty, without the existence of any intent to wilfully suppress information/details in itself would attract the extended period of limitation as hereunder:
31. It is settled law that for invoking the extended period of
limitation duty should not have been paid, short-levied or short-paid or erroneously refunded because of either fraud, collusion, wilful misstatement, suppression of facts or contravention of any provision or rules. This Court has held that these ingredients postulate a positive act and, therefore, mere failure to pay duty and/or take out a licence which is not due to any fraud, collusion or wilful misstatement or suppression of fact or contravention of any provision is not sufficient to attract the extended period of limitation.
26. Similarly, in the case of Anand Nishikawa Co.
Ltd. vs. Commissioner of Central Excise Meerut - (2005) 7 SCC 749, the Apex Court held that a mere failure to declare does not amount to wilful suppression as hereunder: - 82 -
26. In Tata Iron & Steel Co. Ltd. v. Union of India [(1988) 3
SCC 403 : 1988 SCC (L&S) 381 : (1988) 35 ELT 605] this Court held
that when the classification list continued to have been approved regularly by the Department, it could not be said that the manufacturer was guilty of “suppression of facts”. As noted herein earlier, we have also concluded that the classification lists supplied by the appellant were duly approved from time to time regularly by the Excise Authorities and only in the year 1995, the Department found that there was “suppression of facts” in the matter of post-forming manufacturing process of the products in question. Furthermore, in view of our discussion made herein earlier, that the Department has had the opportunities to inspect the products of the appellant from time to time and, in fact, had inspected the products of the appellant. Classification lists supplied by the appellant were duly approved and in view of the admitted fact that the flow-chart of manufacturing process submitted to the Superintendent of Central Excise on 17-5- 1990 clearly mentioned the fact of post-forming process on the rubber, the finding on “suppression of facts” of CEGAT cannot be approved by us. This Court in the case of Pushpam Pharmaceuticals Co. v. CCE [1995 Supp (3) SCC 462] while dealing with the meaning of the expression “suppression of facts” in the proviso to Section 11-A of the Act held that the term must be construed strictly, it does not mean any omission and the act must be deliberate and wilful to evade payment of duty. The Court further held: (SCC pp. 463-64, para 4) “In taxation, it [‘suppression of facts’] can have only one meaning that the correct information was not disclosed deliberately to escape payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression.” (emphasis supplied)
27. Relying on the aforesaid observations of this Court in the
case of Pushpam Pharmaceuticals Co. v. CCE [1995 Supp (3) SCC 462] we find that “suppression of facts” can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty. When facts were known to both the parties, the - 83 -
omission by one to do what he might have done and not that he must have done, would not render it suppression. It is settled law that mere failure to declare does not amount to wilful suppression. There must be some positive act from the side of the assessee to find wilful suppression. Therefore, in view of our findings made hereinabove that there was no deliberate intention on the part of the appellant not to disclose the correct information or to evade payment of duty, it was not open to the Central Excise Officer to proceed to recover duties in the manner indicated in the proviso to Section 11-A of the Act. We are, therefore, of the firm opinion that where facts were known to both the parties, as in the instant case, it was not open to CEGAT to come to a conclusion that the appellant was guilty of “suppression of facts”.
In Densons Pultretaknik v. CCE [(2003) 11 SCC 390] this Court held
that mere classification under a different sub-heading by the manufacturer cannot be said to be wilful misstatement or “suppression of facts”. This view was also reiterated by this Court in CCE v. L.M.P. Precision Engg. Co. Ltd. [(2004) 9 SCC 703]
27. So also, in Continental Foundation Joint
Venture vs. Commissioner of Central Excise, Chandigarh -(2007) 216 ELT 177 (SC), it was held by the Apex Court that mere omission to give correct information is not suppression of facts, unless it was deliberate to stop the payment of duty and that when the facts are known to both the parties, omission by one party to do what he might have done would not render it to be suppression as hereunder:
12. The expression “suppression” has been used in the proviso to Section 11-A of the Act accompanied by very strong words as “fraud” or “collusion” and, therefore, has to be construed strictly.
Mere omission to give correct information is not suppression of facts
unless it was deliberate to stop (sic evade) the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render - 84 -
it suppression. When the Revenue invokes the extended period of limitation under Section 11-A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a wilful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct.
28. As stated earlier, though the respondents allege
in the impugned SCN that the petitioner failed to mention the value of services correctly in the GSTR - 5A returns and apply the correct GST rate on the consideration received, the mere omission to mention the value of services correctly in the returns and/or apply the correct GST rate would not be tantamount to wilful suppression, in light of the principles laid down in the aforesaid judgments, particularly when the respondents-Revenue had in their knowledge the complete gamut of transactions of supply of Type-III tests by the petitioner, thereby leading to the sole conclusion that an intention to evade payment of tax could in no manner be imputed or attributable to the petitioner and the impugned SCN deserves to be quashed.
29. In the case of Commissioner, Central Excise and Customs vs. Reliance Industries Ltd., - 2023 SCC OnLine SC 767, the Apex Court held as under:-
14. In Pushpam Pharmaceuticals Co. v. CCE [Pushpam
Pharmaceuticals Co. v. CCE, 1995 Supp (3) SCC 462] , this Court, while dealing with a similar fact circumstance wherein the extended period of limitation under the abovementioned proviso had been invoked, held that since the expression “suppression of facts” is used in the company of terms such as fraud, collusion and wilful misstatement, it cannot therefore refer to an act of mere omission, and must be interpreted as - 85 -
referring to a deliberate act of non-disclosure aimed at evading duty, that is to say, an element of intentional action must be present.
15. Similarly, in CCE v. Chemphar Drugs &
Liniments [CCE v. Chemphar Drugs & Liniments, (1989) 2 SCC 127 : 1989 SCC (Tax) 245] , this Court, while dealing with a similar situation of invocation of extended period of limitation under Section 11-A of the Act, this Court held as under : (SCC p. 131, para 9) “9. … In order to make the demand for duty sustainable beyond a period of six months and up to a period of 5 years in view of the proviso to sub-section (1) of Section 11-A of the Act, it has to be established that the duty of excise has not been levied or paid or short-levied or short- paid, or erroneously refunded by reasons of either fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability, before (sic beyond) the period of six months. Whether in a particular set of facts and circumstances there was any fraud or collusion or wilful misstatement or suppression or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case. The Tribunal came to the conclusion that the facts referred to hereinbefore do not warrant any inference of fraud. The assessee declared the goods on the basis of their belief of the interpretation of the provisions of the law that the exempted goods were not required to be included and these did not include the value of the exempted goods which they manufactured at the relevant time. The Tribunal found that the explanation was plausible, and also noted that the Department had full knowledge of the facts about manufacture of all the goods manufactured by the respondent when the declaration was filed by the respondent. The respondent did not include the value of the products other than those falling under Tariff Item 14E manufactured by the respondent and this was in the knowledge, according to the Tribunal, of the authorities. These findings of the Tribunal have not been challenged before us or before the Tribunal itself as being based on no evidence.”
23. We also find no merits in the other argument urged by the
learned counsel for the Revenue that the Tribunal's order in IFGL Refractories [IFGL Refractories Ltd. v. CCE, 2000 SCC OnLine CEGAT 1771 : (2001) 134 ELT 230] could not have constituted a valid basis for the belief entertained by the assessee in view of the fact that the relevant valuation provisions had undergone amendments in the year 2000. The argument of the Revenue's counsel was that in view of the amendments to Section 4 and Rule 6 of the Valuation Rules the ratio of the Tribunal's - 86 -
decision in IFGL case [IFGL Refractories Ltd. v. CCE, 2000 SCC OnLine CEGAT 1771 : (2001) 134 ELT 230] was no longer relevant for the period under consideration in these appeals. We have no hesitation in rejecting this contention for two independent reasons. Firstly, this contention too has not been urged in the civil appeal filed by the Revenue and has been urged only during the course of the hearing before this Court. On this count alone the contention deserves to be ignored. Secondly, we also find this contention to be diametrically opposite to what the Revenue itself has been contending on merits right from the show-cause notice till the appeal filed before this Court.
24. On merits, the Revenue's case throughout had been that the
issue of valuation is covered against the assessee by the judgment of this Court in IFGL Refractories [CCE v. IFGL Refractories Ltd., (2005) 6 SCC 713] . Even in the order of CESTAT under challenge the Tribunal has proceeded on the basis that the principle of valuation laid down by this Court in IFGL Refractories [CCE v. IFGL Refractories Ltd., (2005) 6 SCC 713] holds good and remains valid even under the amended valuation provisions for the period post July 2000. We therefore find it strange that for the purposes of justifying its case on limitation, the Revenue wishes to take a position exactly contrary to what it has taken in the show-cause notice on merits. We cannot allow the Revenue to blow hot and cold in the same breath by relying upon IFGL case [CCE v. IFGL Refractories Ltd., (2005) 6 SCC 713] on merits while at the same time arguing that the same had no relevance for the purposes of examining the plea for a bona fide belief.
25. We are in full agreement with the finding of the Tribunal that
during the period in dispute it was holding a bona fide belief that it was correctly discharging its duty liability. The mere fact that the belief was ultimately found to be wrong by the judgment of this Court does not render such belief of the assessee a mala fide belief particularly when such a belief was emanating from the view taken by a Division Bench of the Tribunal. We note that the issue of valuation involved in this particular matter is indeed one where two plausible views could co-exist. In such cases of disputes of interpretation of legal provisions, it would be totally unjustified to invoke the extended period of limitation by considering the - 87 -
assessee's view to be lacking bona fides. In any scheme of self- assessment it becomes the responsibility of the assessee to determine his liability of duty correctly. This determination is required to be made on the basis of his own judgment and in a bona fide manner.
30. In the instant case, as stated supra, in the light of
pendency of W.P.No.3555/2021 preferred by the petitioner before this Court assailing the order of the AAAR, the very issue/question relating to classification of Type-III tests supplied by the petitioner as OIDAR services, remains in a significant state of flux inasmuch as at the very initial stage of the litigation, the AAR vide its order dated 22.05.2020
held that Type-III tests were outside the purview of OIDAR
services which was reversed by the AAAR, thereby indicating that the very classification of Type-3 tests as OIDAR services was uncertain and in a constantly fluid state and thus an interpretative issue which has not attained finality and the classification and taxability of Type-III Tests continues to be in a state of flux, even as of the present day; it follows there from that when there is a scope for doubt concerning the interpretation of legal provisions and the entire facts have been placed before the Revenue Authorities, the assessee cannot be attributed with any suppression or misstatement of facts with intent to evade duty and hence, cannot be saddled with demand by invoking the extended period of limitation and impugned SCN deserves to be quashed.
31. The respondents placed reliance upon the decision of the Gujarat High Court in Commissioner of Central Excise vs. Neminath Fabrics Pvt. Ltd., -2010 - 88 -
(256) ELT 369 (Guj.) to justify the invocation of the
extended period of limitation under Section 74 of the CGST Act by submitting that the concept of knowledge cannot be an appropriate defence; in this context, it is relevant to state that the said judgment is circumscribed and applicable only to cases wherein 'suppression' is established or admitted as can be seen from the relevant portion of the judgment as hereunder:
"18. The Proviso comes into play only when suppression etc. is established or stands admitted. It would differ from a case where fraud, etc. are merely alleged and are disputed by an assessee. Hence, by no stretch of imagination the concept of knowledge can be read into the provisions because that would tantamount to rendering the defined term "relevant date" nugatory and such an interpretation is not permissible."
32. The aforesaid judgment in Neminath’s case
supra was considered by the CESTAT in Amway India Enterprises Pvt. Ltd. vs. Commissioner of Central Excise, New Delhi - 2017 (3) GSTL 69 (Tri.-Del), wherein it was held as under: "7. The show cause notice in this case has been issued by the Department alleging 'wilful and intentional suppression' of facts by the appellant. It is trite in law that the suppression (intentional and deliberate) can never be said to exist when material and relevant fact forming the basis of the demand were already within the knowledge of the department. Accordingly, the pre conditions for applicability of the proviso to Section 73(1) ibid cannot be said to be made and in such eventuality, the extended period of limitation cannot be invoked and the demand to be confined to the normal period of one year.
10. On a collective reading of the decisions cited by both the counsels, it is clear that the consistent position of law with regard to - 89 -
applicability of the proviso to Section 73(1)/Section 11A ibid has been that suppression cannot be established where material facts were within the knowledge of the Revenue. Accordingly, where there is no suppression, the pre-condition for applicability of proviso to Section 73(1) cannot be said to be met and hence, extended period of limitation contemplated therein cannot be invoked. On the contrary, where the ingredients for invoking proviso to Section 73(1) are established or admitted and thus the pre-conditions for applicability of such proviso stands satisfied, and only in such cases, the period of 5 years is required to be computed from the date when the evasion came to the knowledge of the Department."
33. In the instant case, the material on record clearly
indicates the allegation of suppression made by the respondents are neither admitted nor established and on the other hand, the same are seriously/specifically disputed and denied by the petitioner and the said allegation remains merely an allegation and nothing more; it is therefore clear that the judgment of Gujarat High Court in Neminath’s case supra is not applicable to the facts of the instant case and as such, the said contention of the respondents cannot be accepted. In fact, it must also be stated here that initially the Type III tests were held to be outside the purview of OIDAR by the AAR, which was reversed in appeal by the AAR and therefore, the issue itself is not without doubt and when conflicting views are available with the revenue itself entertaining two views, it is impermissible to allege that the petitioner had suppressed any information with an intention to evade payment of taxes; the petitioner having approached the revenue for an advance ruling with all data - 90 -
available cannot be foisted with a demand alleging suppression of facts.
34. The aforesaid discussion clearly establishes that
the impugned Show Cause Notice dated 12.02.2024 issued under Section 74 of the CGST Act, by the 2nd respondent is illegal and arbitrary being manifestly violative of the law for want of satisfaction of the jurisdictional facts contemplated in Section 74 of the CGST Act and that the impugned show cause notice is wholly without jurisdiction or authority of law as the foundational jurisdictional facts to trigger / invoke Section 74 of the CGST Act i.e., existence of wilful suppression to evade / avoid payment of GST in relation to Type - III tests has not been satisfied by the respondents and the impugned show cause notice deserves to be quashed.
38. No suppression can be alleged in cases where the
required disclosures are made in the returns filed and the entire demand is based on the disclosures made by the assessee. The Apex Court in the case of Lipi Boilers Limited vs Commissioner of Central Excise, Aurangabad - (2025) 36 Centax 210 (S.C.), has held as follows: “79. Judged by these principles laid down by this Court on the application of the proviso to Section 11A(1) of the Act, 1944, we find that the assessee is justified to contend that the extended period of limitation could not have been - 91 -
invoked in the present case since the assessee bona fide believed that the bought out items are not to be included in the assessable value of the boiler. A perusal of the show cause notice would show that the revenue itself admits that the assessee had filed the RT-12 returns with the revenue, which means that the revenue had the material particulars on record which it could have acted upon within the normal one year period. There is nothing on record to indicate that any material information had been suppressed by the assessee with any intention to evade payment of central excise duty.
80. Therefore, in the absence of any deliberate act on the
part of the assessee with an intention to evade being established by the revenue, the essential precondition of wilful suppression with intent to evade duty is not satisfied. Consequently, the invocation of the extended period of limitation under the proviso to Section 11A(1) is held to be not tenable in law.”
39. In view of aforesaid, the impugned Show Cause Notices
and Order issued under Section 74 of the CGST Act are illegal and arbitrary and manifestly violative of the law for want of satisfaction of the jurisdictional facts contemplated in Section 74 of the CGST Act and hence, wholly without jurisdiction or authority of law as the foundational jurisdictional facts to trigger/ invoke Section 74 of the CGST Act i.e., existence of wilful suppression to evade/ avoid - 92 - payment of GST has not been satisfied by the Respondents and the impugned show cause notices and Order deserves to be quashed.
40. The Petitioner in W.P.No.34009/2024, challenges the
Order dated 18.09.2024 confirming the recovery of the refund
purportedly sanctioned erroneously to them and that the Orders of an Adjudicating Authority cannot be challenged by the powers vested in another Adjudicating Authority under Section 73/74 of the CGST Act and the only remedy available is to challenging the said refund order by way of an appeal before the Appellate Authority.
41. Section 107(2) of CGST Act reads thus: Appeals to Appellate Authority.
107. (1) xxxxxxxxx
“(2) The Commissioner may, on his own motion, or upon request from the Commissioner of State tax or the Commissioner of Union territory tax, call for and examine the record of any proceedings in which an adjudicating authority has passed any decision or order under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, for the purpose of satisfying himself
as to the legality or propriety of the said decision or order
and may, by order, direct any officer subordinate to him to apply to the Appellate Authority within six months from the - 93 - date of communication of the said decision or order for the determination of such points arising out of the said decision or order as may be specified by the Commissioner in his
order.”
42. The above sub-section provides for filing of appeal by
the Department before the Appellate Authority within six months from the date of communication of order and as per Section 107(4) of the CGST Act, the Appellate Authority is empowered to condone the delay only for a period of one month. Undisputedly, the refund sanctioning orders have attained finality in the absence of any challenge to the same by the Department by way of an appeal to Appellate Authority. The impugned Order has rendered finding that appeal under Section 107 of the CGST Act is limited to the findings in the Form RFD - 06, compared with the documents/ information furnished in the refund application. The said contentions urged by the respondents cannot be accepted, since at the time of processing the refund claim, the Petitioner submitted various documents which includes copies of the FIRC’s clearly disclosing that the remitter as “overseas branch”. Having sanctioned refund after considering the said FIRCs, there is no reason to dispute the refund sanctioned to the Petitioner. It is therefore clear that by - 94 - issuing the present SCN, the Department has sought to circumvent the appellate remedy made available and seek to recover the refund sanctioned to the Petitioner even after the expiry of the appeal period. It is settled law that no demand can be made inconsistent with or contrary to the assessment/refund orders.
43. The Gujarat High Court in the case of Patanjali Foods Ltd. v. Union of India - 2025 (97) G.S.T.L. 24 (Guj.) has held as under:
“12. In view of the discussion hereinabove, the present petition succeeds and is accordingly allowed. The impugned Para 2(2) of the Circular No. 181/13/2022-GST, dated 10-11-2022 is struck down. Further it is undisputed that the respondents had granted refund to the petitioner after passing a sanction order dated 12-1-2024. However, by way of a show cause notice under Section 73 of the CGST Act in Form GST-DRC-01, the respondents had issued a demand notice under Section 73 of the CGST Act which eventually resulted in passing of the impugned Order- in-Original dated 10-9-2024 where, the demand of Rs. 1,70,07,091/- was confirmed along with a penalty of Rs. 17,00,709/-. Therefore, it will be seen that against the petitioner’s refund application dated 5-12-2023, there has been an adjudication of the same by order dated 12-1-2024, by which the petitioner’s refund application was accepted and the refund sanction granted. It is further not in dispute - 95 -
that no appeal under Section 107 or Revision under Section 108 of the CGST Act, 2017 has been preferred by the respondents, challenging the adjudication of the petitioner’s
refund application and the consequent refund order
sanctioned on 12-1-2024. Therefore, in the opinion of this Court, the grant of refund to the petitioner by order dated 12-1-2024 had become final and no show cause notice could be issued by the respondents to take away the benefits of a quasi judicial order in the petitioner’s favour. Thus, the Order-in-Original dated 10-9-2024, by which the show cause notice dated 2-5-2024 was adjudicated, is illegal and unsustainable and the same deserves to be quashed and set aside. The Order-in-Original dated 10-9- 2024 is therefore, quashed and set aside. Rule is made absolute to the aforesaid extent. No order as to costs.”
44. The Apex Court in the case of Commissioner of CGST and Central Excise (J&K) Vs M/s Saraswati Agro Chemicals Pvt. Ltd. in SLP (Civil) Diary Nos. 18051/2023, has made the following observations:
“In substance, the High Court has stated that the decision in SRD Nutrients (P) Limited (supra) had attained finality and was binding on the parties thereto. Therefore, the subsequent decision of this Court overruling SRD Nutrients
(P) Limited (supra) in the case of M/s Unicorn Industries cannot have a bearing on past decisions which had attained finality although they had followed SRD Nutrients (P) Limited - 96 -
(supra), which was subsequently overruled in M/s Unicorn Industries. Otherwise a pandora’s box would be opened and there would be no end to litigation, which is against public policy. That is exactly what is sought to be done by the reference
order dated 27.09.2021. When we read the reference order
in light of the what has been discussed, we find that the reference order was unnecessary. In the circumstances, the Special Leave Petitions are dismissed”
45. The impugned Order seeking to recover refund
sanctioned and granted, being contrary to valid and subsisting orders, is devoid of jurisdiction and authority of law and the same deserves to be set aside on this ground also.
46. The Respondents have contended that the present
Petitions are premature and not maintainable and the Petitioner should be relegated to avail alternative remedy of adjudicating the show cause notices or filing an appeal against the Order-in-Original in one of the Petitions and the first two writ petitions, viz., W.P.No. notices, while in W.P.No.34009/2024, the Petitioner has challenged the adjudication order arising out of identical dispute which has - 97 -
held against the Petitioner and the Adjudicating Authority has thus
upheld the proposal in the show cause notices referred to supra and therefore, approaching the Adjudicating Authority in respect of the first two matters would not arise in the facts and circumstances of the instant cases.
47. Further, a perusal of the show cause notice impugned in
W.P.No.10149/2024 especially paragraph 8.2.2 would clearly indicate that the authorities have already predetermined the issue and have come to a definite conclusion that the overseas establishment / branch is getting services from the Petitioner and providing the same to the overseas customer and therefore, the Petitioner is not entitled to benefit of export of service and the Authority has come to the definite conclusion that the case of the Petitioner that there is joint supply of services to the foreign entity as put forward by the petitioner is only to willfully escape the
payment of IGST and has thereby come to a definite conclusion
that the service to the foreign entity is only by the branch office of the Petitioner and also that the foreign branch of the Petitioner sub- contracts the work to the Petitioner and the foreign branch pays consideration to the Petitioner for performing sub-contracted work. - 98 -
48. In the case of Siemens Limited vs. State of Maharashtra and others-2006 (12) SCC 33, the Apex Court has
held that when decision is pre-meditated and the show cause
notice is really in the form of a demand order, the show cause notice is liable to be interfered with by this Court. A similar view has been taken by the Apex Court in the matter of K.I.Shepherd and others vs. Union of India-1987(4) SCC 431. Under these circumstances, the said contentions urged by the respondents cannot be accepted.
49. In view of the aforesaid discussions, I am of the
considered opinion that the services provided by the Petitioner to its overseas customers jointly and through its overseas branch qualifies as an “Export of Service” under the CGST/KGST Act and that the petitioner having fulfilled the conditions prescribed under Section 2(6)(v) of the IGST Act, the services provided by the Petitioner to its overseas customers qualifies as an “Export of Service” under Section 2(6) of the IGST Act and consequently, the impugned show cause notices and order are illegal, arbitrary and without jurisdiction or authority of law and contrary to the provisions - 99 - contained in the CGST/KGST Act as well as the IGST Act and the same deserve to be quashed.
50. In the result, I pass the following:-
ORDER
(i) W.P.No.10149/2024 is hereby allowed.
(ii) The impugned show cause notice at Annexure-A dated 08.03.2024 issued by the 3rd respondent and all further proceedings pursuant thereto are hereby quashed.
(iii) W.P.No.22994/2024 is hereby allowed.
(iv) The impugned show cause notice at Annexure-A dated 03.08.2024 issued by the 3rd respondent and all further proceedings pursuant thereto are hereby quashed.
(v) W.P.No.34009/2024 is hereby allowed.
(vi) The impugned Order-in-Original at Annexure-A dated
18.09.2024 passed by the 3rd respondent and all further proceedings pursuant thereto are hereby quashed. Sd/- (S.R.KRISHNA KUMAR) JUDGE SV/SRL List No.: 3 Sl No.: 5