TMI Blog2021 (6) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... y make laws for the whole or any part of the state. Further, no law made by Parliament shall be deemed to be invalid on the ground that it would have extra-territorial operation. It is apparent that section 9 of the CGST Act cannot be invoked to levy tax on cross-border transactions i.e., export of services. Likewise from the scheme of the IGST Act it is evident that the same provides for levy of IGST on inter-state supplies. Import and export of services have been treated as inter-state supplies in terms of section 7(1) and section 7(5) of the IGST Act. On the other hand sub-section (2) of section 8 of the IGST Act provides that where location of the supplier and place of supply of service is in the same state or union territory, the said supply shall be treated as intra-state supply. However, by artificially creating a deeming provision in the form of section 13(8)(b) of the IGST Act, where the location of the recipient of service provided by an intermediary is outside India, the place of supply has been treated as the location of the supplier i.e., in India. This runs contrary to the scheme of the CGST Act as well as the IGST Act besides being beyond the charging sections of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... establishments in India. However, petitioner provides services only to the principal located outside India and in lieu thereof receives consideration in convertible foreign currency from the principal located outside India. For providing such services, ordinarily an agreement is entered into with the overseas customers. 6. In terms of such agreement petitioner solicits purchase orders for its foreign customers. As a matter of fact petitioner undertakes activities of marketing and promotion of goods sold by its overseas customers in India. 7. The Indian purchaser i.e., the importer directly places a purchase order on the overseas customer of the petitioner for supply of the goods which are then shipped by the overseas customer to the Indian purchaser. Such goods are cleared by the Indian purchaser from the customs. The overseas customer raises sale invoice in the name of the Indian purchaser who directly remits the sale proceeds to the overseas customer. Upon receipt of such payment, the overseas customer pays commission to the petitioner against invoice issued by the petitioner. The entire payment is received by the petitioner in India in convertible foreign exchange. 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stomers. Since the year 2015-16 petitioner is bearing net tax burden of about 40% of the total revenue leading to significant drop in net revenue of the petitioner. According to the petitioner, its tax burden has gone up from 28% in the year 2012 to 43.81% in the year 2017. The tax burden has increased post implementation of goods and services tax (GST) and is impacting the whole revenue earning of the petitioner. 13. It is in such circumstances that the present writ petition has been filed assailing the constitutional validity of section 13(8)(b) of the IGST Act read with section 8(2) of the said Act on the various grounds urged in the writ petition which can be broadly summed up as under:- 1. Levy of tax on export of service is ultra vires Article 269A of the Constitution of India. 2. Section 8(2) and section 13(8)(b) of the IGST Act are ultra vires section 9 of the CGST Act which is the charging section. 3. GST is a destination based tax on consumption. Therefore, services provided by a service provider in India to a service receiver located outside India which is treated as export of service cannot be taxed; for taxing a service it is not the place of performan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdship. Generally value addition of the service provided by an intermediary is at the place where the intermediary is located. Thus to eliminate any ambiguity between the place of supply of intermediary services provided in relation to goods and services and to bring both at par, place of supply for both was made the location of intermediary. If place of supply was to be made the location of recipient, place of supply for all intermediaries located in taxable territory providing service to a person whose usual place of residence is outside India would be the location of the recipient i.e., outside India and thus such services would have gone outside the tax net. 14.2. It is further stated that the issue of place of supply of intermediaries was discussed during the stage of drafting of GST laws and the above reasoning was adopted by the GST Council. In addition, it was found that with respect to intermediary services in relation to goods and services including stocks, transportation of goods etc., the services are actually performed and enjoyed at the place where the underlying arranged supply is made. Taxing such services provided by Indian service providers to foreign companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct from 01.07.2017. Therefore, reference to the 2012 Rules is wholly irrelevant and completely out of context. Referring to impost of service tax it is contended that taxable territory was defined under section 65B(52) of the Finance Act, 1994 as the territory to which provisions of the said Act applied; section 64(1) of the Finance Act, 1994 provided that Chapter V thereof extended to the whole of India except the State of Jammu and Kashmir. Therefore, any service provided outside India could not be subjected to service tax. Thus, the Finance Act, 1994 did not have extraterritorial operation. With effect from 01.07.2012 a new scheme of taxation was introduced. All services were made subject to service tax except those placed in the negative list or specifically exempt. The Place of Provision of Service Rules, 2012 was introduced with effect from 01.07.2012. This set of rules provided for determining the place of provision of the services. In other words, if the place of provision of service was India, the service would be taxable. On the other hand, if the place of provision of service was not India then the said service would not be taxable. 15.1. Petitioner has meticulously r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is contrary to all principles of interpretation besides being unconstitutional and ultra vires the IGST Act itself. Therefore the aforesaid provision is liable to be struck down as ultra vires to the fundamental principle of destination based consumption tax. 15.5. By giving various illustrations, petitioner has stated that levy ofGST on export of services has created an exodus of such intermediaries from India. While it will not have any impact on import of goods into India, it would only lead to extinguishment of intermediaries from India. 15.6. Asserting that GST would be levied twice on the same commission, once by the petitioner on the commission and then by the importer (Indian purchaser of the goods) on the said commission, which is a clear case of double taxation. 15.7. Finally petitioner asserts that the world over intermediary servicesare treated as export of services and are accordingly not subject to VAT / GST. In the circumstances petitioner seeks and prays that the writ petition be allowed in full. 16. Opening his arguments Mr. Raichandani, learned counsel for the petitioner submits that the factual position in this case is undisputed. Petitioner is engage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a value added tax; a tax on services provided and consumed within the territory of India. Therefore it cannot have any extra-territorial operation or nexus. In this connection learned counsel has referred to the decision of the Supreme Court in All India Federation of Tax Practitioners Vs. Union of India, 2007 (7) STR 625. He has also extensively referred to the 139th Parliamentary Committee Report with regard to place of supply of services. On the strength of the above, Mr. Raichandani contends that section 13(8)(b) of the IGST Act is evidently contrary to the fundamental principle of destination based consumption tax. 16.5. Another limb of argument of learned counsel for the petitioner isthat levy of CGST and MGST on export of service by intermediary is arbitrary, unreasonable and discriminatory. He submits that petitioner has been denied a level playing field vis-a-vis other exporters of services. Besides it incentivises the foreign customer to set up liaison office in India at the cost of an intermediary like the petitioner. Though all service providers like the petitioner should be treated in the same manner, this is not so. Service providers like marketing agents, mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services out of the territory of India by treating the same as a local supply. Hence, section 13(8)(b) of the IGST Act is ultra vires Articles 246A and 269A of the Constitution. 16.8. Referring to Article 286, learned counsel for the petitioner submits that clause (1) is very clear in as much as it provides that no law of a state shall impose or authorize the imposition of a tax on the supply of goods or services or both where such supply takes place outside the state or in the course of import of the goods or services or both into the territory of India or export of goods or services out of the territory of India. He submits that this is a prohibitive bar and is couched in negative language. In so far clause (2) is concerned, Parliament may by law formulate principles for determining a supply of goods or of services or both in any of the ways mentioned in clause (1). Thus no state has authority to levy local tax on export of services. Section 13(8)(b) of the IGST Act has deemed an export to be a local supply. This is violation of Article 286(1). In support of the above submission, Mr. Raichandani has placed reliance on the following decisions:- a. State of Travancore - Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxed at the hands of the petitioner and following the destination based principle it would be an import of service from India for the foreign service recipient and would be taxed at his hands in the importing country. In support of his above submission learned counsel has placed reliance on the following decisions:- a. BSNL Vs. Union of India, 2006 (2) STR 161; b. Adani Power Ltd. Vs. Union of India, 2015 (330) ELT 883 (Guj.); and c. Union of India Vs. Adani Power Ltd., 2016 (331) ELT 129. 17. Leading the arguments on behalf of the respondents, Mr. Anil C. Singh, learned Additional Solicitor General submits that there is always a presumption in favour of constitutionality of a statute. Burden lies heavily on the person who challenges the validity of a statute. It is a settled proposition that for declaring a statute as unconstitutional, Court has to see whether there is legislative competence to enact the statute or not and whether the impugned provision is violative of any of the fundamental rights enshrined in Part III of the Constitution or not. According to Mr. Singh, the impugned provision cannot be assailed or struck down on the above two tests. Elab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Gauhati High Court in Rehena Begum Vs. State of Assam, Writ Petition (C) No.6968 of 2013 decided on 21.07.2015 , he submits that in the case of an all India statute a view taken by a High Court as to its constitutionality or otherwise would be applicable throughout the territory of India and therefore, should be followed. 17.3. In such circumstances learned Additional Solicitor General submits that there is no merit in the writ petition and therefore, the writ petition should be dismissed. 18. Replying to the general submissions made by the learned Additional Solicitor General on constitutionality of a statute Mr. Raichandani submits that there can be no doubt or dispute about the said propositions canvassed by Mr. Singh. However, each challenge has to be decided having regard to the facts and circumstances of each case and there can be no straight jacket formula. In this connection learned counsel for the petitioner has placed reliance on State of UP Vs. Deepak Fertilizers Petrochemical Corporation Ltd., (2007) 10 SCC 342. 18.1. Mr. Raichandani submits that substance of the impugned provision has to be looked into to determine as to whether in pith and substanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ni submits that it has been rendered sub silentio. The challenge to section 13(8)(b) of the IGST Act that it is ultra vires Article 286 read with Article 246A and Article 269A of the Constitution was neither canvassed before nor considered by the Gujarat High Court. There is no discussion on Articles 14 and 19(1)(g) as well. He therefore submits that this Court may take a view different from and independent of the Gujarat High Court. 19. Both the sides have filed written submissions. 20. Submissions made by learned counsel for the parties have received the due consideration of the Court. 21. Before we proceed to deal with goods and services tax (GST) and integrated goods and services tax (IGST), we may note what the Supreme Court had said on two of the legacy taxes i.e., value added tax (VAT) and service tax which have since been replaced and subsumed by GST. In All India Federation of Tax Practitioners (supra), the question for consideration before the Supreme Court was the constitutional status of the levy of service tax and the legislative competence of Parliament to impose service tax under Article 246(1) read with entry 97 of List I of the seventh schedule to the Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s ours); service tax is a value added tax. It was held as under:- 6. At this stage, we may refer to the concept of Value Added Tax (VAT), which is a general tax that applies, in principle, to all commercial activities involving production of goods and provision of services. VAT is a consumption tax as it is borne by the consumer. 7. In the light of what is stated above, it is clear that Service Tax is a VAT which in turn is destination based consumption tax in the sense that it is on commercial activities and is not a charge on the business but on the consumer and it would, logically, be leviable only on services provided within the country. Service tax is a value added tax. 8. As stated above, service tax is VAT. Just as excise duty is a tax on value addition on goods, service tax is on value addition by rendition of services. Therefore, for our understanding, broadly services fall into two categories, namely, property based services and performance based services. Property based services cover service providers such as architects, interior designers, real estate agents, construction services, mandap walas etc. Performance based services are services provided by ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad. For providing such services respondent received consideration in convertible foreign exchange. A show cause notice was issued to the respondent by the Directorate General of Central Excise Intelligence, Mumbai Zonal Unit alleging that the services provided by the respondent were performed in India though test reports thereof were sent outside India. Since the services were performed in India, there was no export of services. Respondent was therefore called upon to pay service tax. This demand was disputed by the respondent. However, the adjudicating authority passed the order in original confirming the demand and imposing penalty. 23.1. It is this order of the adjudicating authority which was challenged by the respondent in appeal before the Central Excise and Service Tax Appellate Tribunal, Mumbai (CESTAT). CESTAT by the order impugned allowed the appeal. As a result the demand was dropped, so also the penalty. 23.2. This decision of CESTAT was challenged in appeal before the High Court by the adjudicating authority. This Court noted that CESTAT had found as a finding of fact that the clients of the respondent were located abroad. The test reports might have been prepare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of KSH International Pvt. Ltd. v. Commissioner and B.A. Research India Ltd. The case of the present respondent was said to be covered by orders in these two cases. To our mind, once the Hon'ble Supreme Court has taken the view that Service Tax is a value added tax which in turn is destination based consumption tax in the sense that it taxes noncommercial activities and is not a charge on the business, but on the consumer, then, it is leviable only on services provided within the country. It is this finding and conclusion of the Hon'ble Supreme Court which has been applied by the Tribunal in the facts and circumstances of the present case. 25. The view taken by the Tribunal therefore, cannot be said to be perverse or vitiated by an error of law apparent on the face of the record. If the emphasis is on consumption of service then, the order passed by the Tribunal does not raise any substantial question of law. 23.4. This Court held that though the reports of test and analysis were done in India, those were sent abroad because the clients of the respondent were foreign clients. They paid the respondent for such services in foreign convertible currency. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operation cannot directly be enforced in another state but such a law is not invalid and is saved by Article 245(2) of the Constitution. But clause (2) does not mean that law having extra-territorial operation can be enacted which has no nexus at all with India. Unless such contingency exists, Parliament shall be incompetent to make law having extra-territorial operation. 26. Article 246 deals with subject matter of laws made by Parliament and by the legislatures of states. Clause (1) says that notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I of the seventh schedule to the Constitution. As per clause (2), notwithstanding anything in clause (3), Parliament and subject to clause (1) the legislature of any state also have power to make laws with respect to any of the matters enumerated in List III of the seventh schedule to the Constitution. In terms of clause (3), legislature of any state has exclusive power to make laws for such state or any part thereof with respect to any of the matters enumerated in List II of the seventh schedule to the Constitution which is however subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r determining the place of supply and when a supply of goods or of services or both takes place in the course of inter-state trade or commerce. 29. By the said Constitution (101st Amendment) Act, 2016, Article 279A was inserted in the Constitution of India providing for Goods and Services Tax Council i.e., GST Council which is headed by the Union Finance Minister as the chairperson. Clause (4) provides that GST Council shall make recommendations to the union and to the states on various aspects including on model GST laws, principles of levy, apportionment of GST levied on supplies in the course of inter-state trade or commerce under Article 269A and the principles that govern the place of supply [Article 279A(4)(c)]. 30. Parliament enacted the Central Goods and Services Tax Act, 2017 (already referred to as the CGST Act hereinabove) to make a provision for levy and collection of tax on intra-state supply of goods or services or both by the central government and for matters connected therewith or incidental thereto. As per section 1(2), the CGST Act extends to the whole of India except the State of Jammu and Kashmir. 31. Section 2 of the CGST Act provides for definition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quor for human consumption on the value determined under section 15 of the CGST Act and at such rate as may be notified by the central government on the recommendation of the GST Council and collected in such manner as may be prescribed and paid by the taxable person. 34. Similar provisions are there in the Maharashtra Goods and Services Tax Act, 2017 (already referred to as the 'MGST Act' hereinabove) which is an act to make provisions for levy and collection of tax on intra-state supply of goods or services or both in the state of Maharashtra and matters connected therewith or incidental thereto. Here also section 7 deals with scope of supply whereas section 9 is the charging section. 35. That brings us to the Integrated Goods and Services Tax Act, 2017 (already referred to as the 'IGST Act' hereinabove). The IGST Act has been enacted to make provision for levy and collection of tax on interstate supply of goods or services or both by the central government and for matters connected therewith or incidental thereto. As per section 1(2), the IGST Act shall extend to the whole of India except the State of Jammu and Kashmir. 36. Section 2 provides for definit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he location of the usual place of residence of the recipient; 38.1. From the above what is deducible is that location of the recipient of services would mean where a supply is received at a place of business for which registration has been obtained, the location of such place of business; where a supply is received at a place other than the place of business for which registration has been obtained i.e., a fixed establishment elsewhere, the location of such fixed establishment; 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 in the absence of such places, the location of the usual place of residence of the recipient. 39. Sub-section (15) of section 2 defines the expression 'location of the supplier of services' to mean where a supply is made from a place of business for which registration has been obtained, the location of such place of business; where a supply is made from a place other than the place of business for which registration has been obtained i.e., a fixed establishment elsewhere, the location of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly. 42. Section 8 deals with intra-state supply. As per sub-section (2), subject to the provisions of section 12, supply of services where the location of the supplier and the place of supply of services are in the same state or in the same union territory shall be treated as intra-state supply. As per the proviso, intra-state supply of services shall not include supply of services to or by a special economic zone developer or a special economic zone unit. Explanation 1 clarifies that where a person has an establishment in India and any other establishment outside India; an establishment in a state or union territory and any other establishment outside that state or union territory; or an establishment in a state or union territory and any other establishment in a state or union territory and any other establishment being a business vertical registered within that state or union territory then such establishment shall be treated as establishments of distinct persons. As per Explanation 2, a person carrying on a business through a branch or an agency or a representational office in any territory shall be treated as having an establishment in that territory. 43. While section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... December, 2017 and was laid on the table of Lok Sabha on the same day. After referring to the definition of 'export of services' as defined under section 2(6) of the IGST Act, it was noted that service providers providing services to overseas suppliers of goods earn commission in convertible foreign exchange; but IGST @ 18% is leviable on such commission because the government does not recognize their services as export of services. Section 13(8) provides that place of supply of services will be the location of the service supplier and not the location of overseas customers. Even in cases where both the supplier and the buyer are located outside India, commission earned for such transaction also attract IGST @ 18%. In view of the fact that GST is a destination based consumption tax, the Parliamentary Standing Committee made the following recommendations:- Provide that place of supply of Indian intermediaries of goods will be the location of service recipient i.e., customers located abroad (and not the location of such intermediaries as is currently provided), so that intermediary services will be treated as exports; or Providing an exemption to Indian intermed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 101st Amendment) Act, 2016. While Article 246A deals with special provision with respect to GST, Article 269A provides for levy and collection of GST in the course of inter-state trade or commerce. From a careful and conjoint reading of the two Articles it is quite evident that the Constitution has only empowered Parliament to frame law for levy and collection of GST in the course of inter-state trade or commerce, besides laying down principles for determining place of supply and when such supply of goods or services or both takes place in the course of inter-state trade or commerce. Thus the Constitution does not empower imposition of tax on export of services out of the territory of India by treating the same as a local supply. 48. At this stage we may refer to Article 286 of the Constitution of India. Article 286 lays down restrictions as to imposition of tax on the sale or purchase of goods. Article 286 being relevant is extracted as under:- 286. Restrictions as to imposition of tax on the sale or purchase of goods - (1) No law of a State shall impose, or authorise the imposition of, a tax on the supply of goods or services or both, where such supply takes place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and there is no dispute that the supply takes place outside the State of Maharashtra and outside India in the course of export. However, what we notice is that section 13(8)(b) of the IGST Act read with section 8(2) of the said Act has created a fiction deeming export of service by an intermediary to be a local supply i.e., an inter-state supply. This is definitely an artificial device created to overcome a constitutional embargo. Question for consideration is whether creation of such a deeming provision is permissible or should receive the imprimatur of a constitutional court? 50. In State of Travancore - Cochin (supra), the state was in appeal before the Supreme Court against the decision of the High Court quashing the assessments under the United State of Travancore and Cochin Sales Tax Act. The respondents in each case claimed exemption from assessment in respect of the sales effected by them on the ground inter alia that such sales took place in the course of export of the goods out of the territory of India. Sales tax authorities rejected the contention as in their view the sales were completed before the goods were shipped and could not therefore be considered to have t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Such a sale cannot be dissociated from the export without which it cannot be effectuated, and the sale and resultant export form parts of a single transaction. Of these two integrated activities, which together constitute an export sale, whichever first occurs can well be regarded as taking place in the course of the other. Assuming without deciding that the property in the goods in the present cases passed to the foreign buyers and the sales were thus completed within the State before the goods commenced their journey as found by the Sales Tax Authorities, the sales must, nevertheless, be regarded as having taken place in the course of the export and are, therefore, exempt under article 286(1) (b). That clause, indeed, assumes that the sale had taken place within the limits of the State and exempts it if it took place in the course of the export of the goods concerned. 50.3. Accordingly it was held that whatever else may or may not fall within Article 286(1)(b), sales and purchases which themselves occasion the export or the import of the goods, as the case may be, out of or into the territory of India would come within the exemption. Agreeing with the conclusion of the High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cording to their literal derivations. Lexicologically they do not have any reference to goods in 'transit' a word derived from transire bearing a meaning similar to transport, i.e., to go across. The dictionary meaning of the words 'import' and 'export' is not restricted to their derivative meaning but bear other connotations also. According to Webster's International Dictionary the word import means to bring in from a foreign or external source; to introduce from without; especially to bring (wares or merchandise) into a place or country from a foreign country in the transactions of commerce; opposed to export. Similarly export according to Webster's International Dictionary means to carry away; to remove; to carry or send abroad especially to foreign countries as merchandise or commodities in the way of commerce; the opposite of import . The Oxford Dictionary gives a similar meaning to both these words. * * * * * 20. The respondent also relied on Muller v. Baldwin (1874) 9 Q.B. 457 where it was held that coals exported from the Port must be taken to have been used in its ordinary meaning of carried out of the Port and therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India or any part of it? 53.1. In so far question No.1 was concerned, the answer was in the affirmative i.e., Parliament being constitutionally restricted from enacting extra-territorial legislation but such restriction was made subject to certain exigencies, such as, it should have a real connection to India which should not be illusory or fanciful. In so far the second question was concerned, the answer was an emphatic no. Supreme Court held as under:- 76. We now turn to answering the two questions that we set out with: (1) Is the Parliament constitutionally restricted from enacting legislation with respect to extra-territorial aspects or causes that do not have, nor expected to have any, direct or indirect, tangible or intangible impact(s) on or effect(s) in or consequences for: (a) the territory of India, or any part of India; or (b) the interests of, welfare of, wellbeing of, or security of inhabitants of India, and Indians? 77. The answer to the above would be yes. However, the Parliament may exercise its legislative powers with respect to extra-territorial aspects or causes, - events, things, phenomena (howsoever commonplace they may be), re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to extraterritorial aspects or causes that have an impact on or nexus with India as explained above in the answer to Question No.1 above. Such laws would fall within the meaning, purport and ambit of the grant of powers to Parliament to make laws for the whole or any part of the territory of India , and they may not be invalidated on the ground that they may require extraterritorial operation. Any laws enacted by Parliament with respect to extra- territorial aspects or causes that have no impact on or nexus with India would be ultra-vires, as answered in response to Question No.1 above, and would be laws made for a foreign territory. 53.2. In Sondur Gopal (supra) reiterating the above position Supreme Court clarified that clause (2) of Article 245 does not mean that law having extra-territorial operation can be enacted which has no nexus at all with India. Unless such contingency exists, Parliament shall be incompetent to make laws having extra-territorial operation. Referring to an earlier decision of the Supreme Court in M/s. Electronics Corporation of India Limited Vs. Commissioner of Income Tax, AIR 1989 SC 1707, it was held that unless a nexus with something in Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of both the Acts. 55. Coming to the judgment of the Gujarat High Court in Material Recycling Association of India (supra), we find that Gujarat High Court while holding that section 13(8)(b) of the IGST Act cannot be said to be ultra vires or unconstitutional in any manner, however kept it open for the respondents to consider the representation made by the petitioner so as to redress its grievance in a suitable manner and in consonance with the CGST Act and the IGST Act. This is how Gujarat High Court dealt with the challenge:- 65. ... The petitioner has tried to submit that the services provided by a broker outside India by way of intermediary service should be considered as export of services but the legislature has thought it fit to consider such intermediary services; the place of supply would be the location of the supplier of the services. In that view of the matter, it would be necessary to refer to the definition of export of services as contained in section 2(6) of the IGST Act, 2017 which provides that export of service means the place of service of supply outside India. Conjoint reading of section 2(6) and 2(13), which defines export of service and inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct has no real connection or nexus with the taxing regime in India introduced by the GST system; rather it runs completely counter to the very fundamental principle on which GST is based i.e., it is a destination based consumption tax as against the principle of origin based taxation. 57. Mr. Singh, learned Additional Solicitor General had argued that the decision of the Gujarat High Court should be followed by this Court and for this purpose had relied upon the decision of the Supreme Court in Kusum Ingots Alloys (supra) as well as of the Gauhati High Court in Rehena Begum (supra). In Kusum Ingots Alloys (supra) the question before the Supreme Court was whether the seat of the Parliament or the legislature of a state would be a relevant factor for determining the territorial jurisdiction of a High Court to entertain a writ petition under Article 226 of the Constitution of India. In the context of the issue involved Supreme Court examined the expression 'cause of action', clause (2) of Article 226 of the Constitution of India and section 20(c) of the Civil Procedure Code whereafter it was held that even if a small fraction of cause of action accrues within the jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritorial jurisdiction of that High Court it may at best have only persuasive effect. By no amount of stretching of the doctrine of stare decisis, can judgments of one High Court be given the status of a binding precedent so far other High Courts or courts or tribunals outside the territorial jurisdiction of that High Court are concerned. 60. That apart, from a practical and pragmatic point of view if what the learned Additional Solicitor General argued is accepted then decision of one High Court declaring constitutionality of an all India statute would foreclose adjudication by other High Courts which would neither be in the interest of administration of justice nor in the public interest. Furthermore, there is a fundamental difference in the present case in as much as unlike in Rehena Begum (supra), here the Gujarat High Court has held the particular provision as intra vires and constitutional. 61. In so far the general submissions made by Mr. Singh as to presumption in favour of constitutionality of a statute and that burden lies on the person who challenges constitutionality, there can be no dispute to such propositions. As a matter of fact these are well settled principle ..... X X X X Extracts X X X X X X X X Extracts X X X X
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