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2019 (11) TMI 476

..... GST Act - performance based service - place of supply of services - recipient of service - challenge to AAAR Decision. HELD THAT:- The AAR observed that since the service performed by the Appellant viz.-photography service is in relation to the performance on goods, in this case the diamonds, which are being made available to the supplier of the service for the performance of the said service, the place of the supply of service will be the location where the service is actually performed. Since the goods are made available to the supplier of the service in the state of Maharashtra, the place of supply in the present case will be Maharashtra - Further, since the location of the supplier of the service is in Maharashtra and the place of the supply of the service is also in Maharashtra, it was held by the AAR that the said supply of the Appellant will be treated as an Intra - State supply in accordance with the provision of Section 8(2) of the IGST Act, 2017. The AAR, while answering the second question asked by the Appellant, wherein the Appellant had asked whether the supply made by them will be a zero rated supply i.e. export within the meaning of Section 2(23) read with Section 2 .....

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..... ferred to as the Appellant ) against the Advance Ruling No. GST-ARA-30/2018-19/B-92 dated 20.08.2018 = 2018 (12) TMI 650 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA. BRIEF FACTS OF THE CASE A. Segoma Imagining Technologies India Pvt Ltd (hereinafter referred as Segoma India) is Indian private limited company set up under the Indian Companies Act. B. Segoma India is 100% Subsidiary of Segoma Ltd (hereinafter referred as Segoma Israel) which is based in Israel. C. Segoma Israel is subsidiary of R2Net which is based in US. D. R2Net has agreement with customers for listing Diamonds online on website www.jamesallen.com. E. As per agreement between R2Net and customers of R2Net, R2NET lists on the system only those diamonds that are photographed with R2Net s proprietary Diamond Display Technology. Customer agrees to send its diamonds and/or gemstones to be photographed in R2Net s photography centers on a regular basis. F. R2Net has appointed Segoma Israel for photography service. Inturn, Segoma Israel has made agreement with Segoma India to do photography service. G. Segoma Imaging Technologies has developed a method of providing potential buyer(s) with what could be simplified as a 3D mo .....

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..... the non-applicability of condition no: iii) and v) of section 2(6) Export of services of the IGST Act as per the grounds of appeal mentioned hereunder: 3. This, being a performance-based service falling u/s 13 (3) The place of supply of the following services shall be the location where the services are actually performed, namely: - Services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services;.... Since the goods are physically made available by the Diamond dealers / Traders who are not recipient of service, it does not satisfy condition as mentioned in Sec 13 (3) (a), further the export condition no: (ii) Segoma Israel is recipient of service, has been accepted by the learned AAR. 4. Definition of Recipient of Service as per Sec 2 (93) of CGST: (93) recipient of supply of goods or services or both means - (a) Where a consideration is payable for the supply of goods or services or both, the person who is liable to pay the consideration; (b) .......................... (c) .......................... 5. Sinc .....

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..... ) The place of supply of the following services shall be the location where the services are actually performed, namely:- (a) services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services: Provided that when such services are provided from a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services: Provided further that nothing contained in this clause shall apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs and are exported after repairs without being put to any other use in India, than that which is required for such repairs; .............................. 12. In the above context, The Learned Authority has stated that recipient of the service who wants to avail services has to make goods physically available on direct or indirect directions to the service provider and it does not matter who owned the goods. 13. The Learned Authority are of the view that the .....

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..... t points to remember in the context of interpreting Statutes: Statute must be read as a whole in Context Statute should be Construed so as to make it Effective and Workable - if statutory provision is ambiguous and capable of various constructions, then that construction must be adopted which will give meaning and effect to the other provisions of the enactment rather than that which will give none. The process of construction combines both the literal and purposive approaches. The purposive construction rule highlights that you should shift from literal construction when it leads to absurdity. 19. In construing Statutes, the cardinal rule is to construe its provisions Literally and grammatically giving the words their ordinary and natural meaning. This rule is also known as the Plain meaning rule. The first and foremost step in the course of interpretation is to examine the language and the literal meaning of the statute. The words in an enactment have their own natural effect and the construction of an act depends on its wording. There should be no additions or substitution of words in the construction of statutes and in its interpretation. The primary rule is to interpret words .....

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..... the legislator may have been different, or the result is harsh or undesirable. The literal rule is what the law says instead of what the law means. Some laws are meant for all citizens (e.g., criminal statutes) and some are meant only for specialists (e.g., some sections of the tax code). A text that means one thing in a legal context might mean something else if it were in a technical manual or a novel. So, the plain meaning of a legal text is something like the meaning that would be understood by competent speakers of the natural language in which the text was written who are within the intended readership of the text and who understand that the text is a legal text of a certain type. (Prof. Larry Solum s Legal Theory Lexicon). 22. A literal construction would not be denied only because the consequences to comply with the same may lead to a penalty. The courts should not be over zealous in searching for ambiguities or obscurities in words which are plain. (Tata Consultancy Services V. State of A.P. (2005) 1 SCC 308) = 2004 (11) TMI 11 - SUPREME COURT. Understanding the literal rule: The literal rule may be understood subject to the following conditions - i. Statute may itself pro .....

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..... t no further. The onus of showing that the words do not mean what they say lies heavily on the party who alleges it. [41] 25. For determination of the meaning of any word or phrase in a statute, the first question is what is the natural and ordinary meaning of that word or phrase in its context in the statute but when that natural or ordinary meaning indicates such result which cannot be opposed to have been the intention of the legislature, then to look for other meaning of the word or phrase which may then convey the true intention of the legislature. In the case of Suthendran V. Immigration Appeal Tribunal, the question related to Section 14(1) of the Immigration Act, 1971, which provides that a person who has a limited leave under this Act to enter or remain in the United Kingdom may appeal to an adjudication against any variation of the leave or against any refusal to vary it. The word a person who has a limited leave were construed as person should not be included who has had such limited leave and it was held that the section applied only to a person who at the time of lodging of his complaint was lawfully in the United Kingdom, in whose case, leave had not expired at the ti .....

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..... ness or discrimination, the courts have wide powers to substitute their own astuteness. Understanding words, phrases and sentences of a statute in their ordinary and natural meanings. In simple words, read the law as it is written without adding or deleting any words written in Law. This rule will not be applicable in following circumstances: i. If Language is Ambiguous i.e. two interpretations is possible. ii. If the literal interpretation defeats the actual intention of legislation. In view of the above discussions, we would like to state that there have been additions or substitution of words direct or indirect directions in the construction of statutes by the Learned AAR Authority. 28. The Learned AAR Authority has since contradicted their own submission where, the language is clear and unambiguous used by legislature then the plain and natural meaning of the words should be supplied to the language used and resort to any rule of interpretation to unfold the intention is permissible only where there is any ambiguity . 29. We humbly submit that, the Learned AAR Authority has inserted the words by implication which is open to interpret the meaning of the sentence by the recipient .....

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..... te registration No. hence Segoma India cannot be considered a Branch office or representational office of Segoma Israel as the transactions are made Principal to Principal, and it is this transaction between Segoma India and Segoma Israel that is claimed as a Zero rated export supply and a transaction between distinct persons as per the IGST Act. Case laws: 34. Tandus Flooring India Pvt Ltd. Ruling No. AAR/ ST/ 03/2013 dated 26-8-2013. 2014 (33) S.T.R. 33 (A.A.R.) = 2013 (8) TMI 806 - AUTHORITY FOR ADVANCE RULINGS The services provided out of the taxable territory are not taxable in India in terms of section 66B of the Finance Act, 1994. However, the same are treated as export only if satisfy conditions laid down under Rule 6A of Service Tax Rules, 1994. One of the conditions of Rule 6A provides that if the services are provided by an establishment of a person in the taxable territory to another establishment of the same person in the nontaxable territory, such transaction will not qualify as exports (clause (f)). Consequently, even though such transactions may not be taxable in India, may not be entitled to export linked reliefs. In the given case, the applicant was a wholly owned .....

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..... d value of the goods or service or both; (d) Admissibility of input tax credit of tax paid or deemed to have been paid; (e) Determination of the liability to pay tax on any goods or services or both; (f) Whether the applicant is required to be registered under GST; (g) Whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term. From the above, the GST Act 97 (2) Limits AAR to decide issues earmarked for it which does not cover the examination of Place of Supply, since AAR is constituted under the respective State/ UT and not Central Act. 37. Utility Powertech Ltd. In re (AAR Chhattisgarh)... = 2018 (7) TMI 882 - AUTHORITY FOR ADVANCE RULINGS, CHHATTISGARH This would mean that the ruling given by the AAR will be applicable only within the Jurisdiction of the Concerned state in our case it is Maharashtra State GST, it is for this reason that question on determination of Place of supply cannot be addressed by AAR and hence applicability of Place of supply cannot be taken by AAR for lack of jurisdiction and hence Order of AAR is infructuous and liable to .....

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..... as intra-State Supply: 40. In view of the findings, the AAR, while answering the second question asked by the Appellant, wherein the Appellant had asked whether the supply made by them will be a zero rated supply i.e. export within the meaning of Section 2(23) read with Section 2 (6) of the IGST Act, 2017, held that the supply of the Appellant will not qualify as export of service, as the two of the 5 conditions prescribed for the export of a services, as laid out in Section 2(6) of the IGST Act, 2017, are not being satisfied by the Appellant in as much as (i) the place of the supply of the service is not outside India and also, (ii) the supplier of service and the recipient of service are merely establishments of a distinct person in accordance with explanation 1 in section 8 of IGST Act. 41. On perusal of the above facts and circumstances of the case, the moot issue, before us, is whether we have jurisdiction to decide the nature of the levy i.e. CGST and SGST or IGST, to be imposed on any supply of goods or services or both or not. Because the first question asked by the Appellant in their application before the Advance Ruling Authority is, whether the supply of photography ser .....

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