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2019 (11) TMI 476

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..... 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 (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. 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? - HELD THAT:- The question on determination of the place of supply has not been covered in the set of questions, on which the advance ruling ca .....

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..... 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 model of the valuable stones & jewellery made available for the purchase thereof. The uniqueness of Segoma s technology is the ability to capture and display 3D real-life images of diamonds and gemstones to the extent that through these interactive images, an observer can identify their colour, clarity and cut. This grants buyers the confidence to rely on these images and make the right choice when deciding whether to make a purchase. H. Customers of R2Net give diamond on returnable basis to Segoma India. Segoma Israel does not have role in receiving diamond. Segoma India issues memo of receipt of diamonds to customers of R2Net. Segoma India takes photos of diamonds and upload photos of diamond on software of Segoma Israel. I. Segoma India charges Segoma Israel for providing above service of photo .....

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..... 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. Since there is a Consideration flow in the transaction i.e. payment is made by Segoma Israel in Foreign currency to Segoma Imaging India, the recipient of service cannot be other than Segoma Israel. 6. Further the benefits of the services have accrued to Segoma Israel which could upload and condition the photographs taken by Segoma India. A Service is not necessarily, a single, discrete, identifiable activity; on the contrary, it is a series of invisibles that caters to the needs of a recipient; it is upon the consumption of the service by the recipient that service is deemed to have become taxable, as Segoma Israel is the recipient of service, it shall fall outside the purview of 13 (3) (a) which has been alleged in the observations of AAR. 7. Further where services of Photography is provided by Segoma .....

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..... ndia, 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 goods physically required for rendering services can be provided by any other person other than the recipient of the service, as it envisages that it is sufficient for the recipient of service to make them physically available to the service provider for rendering the services even if the service receiver is not in control of the said goods or not in any physical possession. 14. Therefore, let us first understand the Rules of Interpretation from the above context: Interpretation of Statutes is required for two basic reasons viz. to ascertain: Legislative Language - Legislative language may be complicated for a layman, and hence may require interpretation; and Legislative Intent - The intention of legislature or Legislative intent assimilates two aspects: i. the concept of meaning , i.e., what the w .....

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..... 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 as they are. It should be taken into note that the rule can be applied only when the meanings of the words are clear i.e. words should be simple so that the language is plain and only one meaning can be derived out of the statute. 20. In Municipal board v State transport authority, Rajasthan = 1962 (11) TMI 66 - SUPREME COURT, the location of a bus stand was changed by the Regional Transport Authority. An application could be moved within 30 days of receipt of order of regional transport authority according to section 64 A of the Motor vehicles Act, 1939. The application was moved after 30 days on the contention that statute must be read as 30 days from the knowledge of the order . The Supreme Court held that literal interpretation must be made and hence rejected the application as invalid. Lord Atk .....

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..... uences 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 provide a special meaning for a term, which is usually to be found in the interpretation section. ii. Technical words are given ordinary technical meaning if the statute has not specified any other. iii. Words will not be inserted by implication. iv. Words undergo shifts in meaning in course of time. v. It should always be remembered that words acquire significance from their context. When it is said that words are to be understood first in their natural ordinary and popular sense, it is meant that words must be ascribed that natural, ordinary or popular meaning which they have in relation to the subject matter with reference to which and the context in which they have been used in the Statute. In the statement of the rule, the epithets natural, ordinary , literal , grammatical and popular are employed .....

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..... n 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 time of lodgment of an appeal. Another important point regarding the rule of literal construction is that exact meaning is preferred to lose meaning in an Act of Parliament. In the case of Pritipal Singh V. Union of India (AIR 1982 SC 1413, P. 1419(1982)) = 1982 (8) TMI 216 - SUPREME COURT, it was held that there is a presumption that the words are used in an Act of Parliament correctly and exactly and not loosely and inexactly. 26. Rationale for this Rule Proponents of the plain meaning rule claim that it prevents courts from taking sides in legislative or political issues. They also point out that ordinary people and lawyers do not have extensive access to secondary sources. In probate law the rule is also favored because the testator is typically not around to indicate what interpretation of a will .....

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..... ous 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 of service by expanding the service recipient to person other than the recipient itself. 30. Further as per the 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; .......................... There being a Consideration flown into the said transaction i.e. payment is made by Segoma Israel (Service recipient ) to Segoma Imaging Technologies India Pvt. Ltd (Service Provider) the recipient of service is undoubtedly being M/s. Segoma Israel. 31. In light of the above-mentioned submission s and case law cited we have correctly interpreted the conditions of Place of supply for Exports are satisfied for s .....

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..... t 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 subsidiary in India of a Singapore based Company. The applicant provided marketing and incidental services to another Group companies located in US and China. In consideration, of the above services, the Applicant used to earn convertible foreign currency. Apart from other questions related to exports, the question before the Authority for Advance Rulings (AAR) was whether the services provided by the Indian company to another group companies out of India, be regarded as services provided by one establishment to other establishment and therefore, whether disqualify as exports as per clause (f) of Rule 6A. 1.2 Ruling The transaction between two entities can be considered not to be exports only if the transaction is between two establishments of the same person. AAR held that the group companies base .....

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..... ean 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 be struck down. Personal Hearing 38. A personal Hearing in the matter was conducted 14.03.2019, wherein Shri Madhukar Khandekar, representative of the Appellant, reiterated their written submissions. Shri Manoj Ohekar, Deputy Commissioner of State Tax, appearing as jurisdictional officer, reiterated the same submissions, which he had been made before the Advance Ruling Authority. Discussions and Findings 39. We have gone through the entire case records and submissions, written as well as oral, made by the Appellant as well as the respondent. We have also perused the AAR Order, wherein the members of the Advance Ruling Authority have observed that the photography activity, being performed by the Appellant on the diamonds sent by the vendors of the R2Net, will attract CGST and SGST due to the reason .....

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..... erusal 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 service is liable to SGST under the Maharashtra SGST Act, 2017 and CGST under the CGST Act, 2017 or IGST under the IGST Act, 2017. And second question asked by the Appellant is, whether the said supply can be treated as export within the meaning of Section 2(23) read with Section 2(6) of the IGST Act, 2017. Therefore, in order to answer both these questions, we first have to examine our jurisdiction, which have, clearly, been laid out in the Section 97(2) of the CGST Act, 2017, which is being reproduced herein under: (2) The question on which the advance ruling is sought under this Act, shall be in respect of,- (a) Classification of any goods or services or both under the Act; (b) Applicability of a notification issued under the provisions of the Act; (c) Determination of time and value of the goods or .....

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