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TMI Blog2021 (6) TMI 563X X X X Extracts X X X X X X X X Extracts X X X X ..... ge of perusing the erudite judgment and order in the above matter delivered by my learned respected Brother Shri Justice Ujjal Bhuyan. I am unable to share the conclusion arrived at by him holding that Section 13(8) (b) of the Integrated Goods and Services Tax Act, 2017 ("IGST Act") offends Articles 245, 246A, 269A and 286(1)(b) of the Constitution of India and is also ultra vires the IGST Act besides being unconstitutional. For reasons discussed in the following paragraphs, I am of the opinion that Section 13(8)(b) cannot be considered to be unconstitutional or ultra vires the IGST Act. Section 13(8)(b) of the IGST Act would in my view be constitutionally valid and operative for all purposes. 69. Pursuant to this Petition under Article 226 of the Constitution of India, Petitioner seeks to declare section 13(8)(b) and section 8(2) of the IGST Act as ultra vires Articles 14, 19(1)(g), 245, 246, 246A, 269A, 286 of the Constitution of India and also ultra vires the provisions of the IGST Act and section 9 of the Central Goods and Services Tax Act, 2017 ("CGST Act") and Maharashtra Goods and Services Tax Act, 2017 ("MGST Act"). 70. Although, the facts in the matter as well as the ple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin one Union Territory. Section 13 of the IGST Act deals with a situation where location of the supplier or the location of the recipient is outside India. Sub-Section (2) provides that the place of supply of services shall be the location of the recipient of services. Sub-Sections 3 to 13 provide exceptions. As per Sub-Section 8, the place of supply shall be the location of the supplier of services and which includes the intermediary services in Clause (b), which are the services rendered by Petitioner. 75. Further, it is submitted that by way of deeming fiction under Section 13(8)(b) of the IGST Act, where the location of the recipient of service is outside India, the place of supply is treated as the location of the supplier of services which is in India, thereby bringing into the tax net export of services. Reference has also been made to Section 8(2) of the IGST Act, 2017, which provides that in case of services where the location of the supplier and the place of supply of services are in the same State or same Union Territory, it would be treated as an intrastate supply. With reference to these provisions, it is submitted that the export of service by Petitioner as an inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Articles 14, 19 (1) (g), 245, 246A, 269A and 286 of the Constitution of India as well as the IGST Act and section 9 of the CGST and MGST Act. 79. Before commencing the examination of the aforesaid challenge, it would be helpful to set out the principles of judicial review. 80. Whether a law or a provision is unconstitutional or not, has to be decided by the Court on the touch-stone of the Constitution. It is also settled law that Courts should proceed to construe a statute with a view to uphold its constitutionality. ITC Ltd. v. Agricultural Produce Market Committee (2002) 9 SCC 232, Asst. Director of Inspection Investigation v. A.B. Shanthi (2002) 6 SCC 259, Shri Krishna Gyanoday Sugar Ltd. v. State of Bihar, (2003) 4 SCC 378 and Welfare Association A.R.P. Maharashtra v. Ranjit P. Gohil (2003) 9 SCC 358, State of A.P. v. K. Purushottam Reddy and Others, (2003) 9 SCC 564 (SC). 81. In the case of State of Madhya Pradesh v/s. Rakesh Kohli & Another (2012) 6 SCC 312 the Supreme Court had set out the following principles to be considered while examining the validity of statutes on taxability. In paragraph 32, the Supreme Court stated thus:- "32:- While dealing with constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law of the land and must prevail over the ordinary statute in case of conflict, on the other hand the Court must not seek an unnecessary confrontation with the legislature, particularly since the legislature consists of representatives democratically elected by the people. The Court must always remember that invalidating a statute is a grave step, and must therefore be taken in very rare and exceptional circumstances. 33. We have observed above that while the Court has power to declare a statute to be unconstitutional, it should exercise great judicial restraint in this connection. This requires clarification, since, sometimes Courts are perplexed as to whether they should declare a statute to be constitutional or unconstitutional. 34. The solution to this problem was provided in the classic essay of Prof James Bradley Thayer, Professor of Law of Harvard University entitled 'The Origin and Scope of the American Doctrine of Constitutional Law' which was published in the Harvard Law Review in 1893. In this article, Professor Thayer wrote that judicial review is strictly judicial and thus quite different from the policymaking functions of the executive and legislative bran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but only when that is the only possible view not open to rational question. In other words, the Court can declare a statute to be unconstitutional only when there can be no manner of doubt that it is flagrantly unconstitutional, and there is no way of avoiding such decision. The philosophy behind this view is that there is broad separation of powers under the Constitution, and the three organs of the State - the legislature, the executive and the judiciary, must respect each other and must not ordinarily encroach into each other's domain. Also the judiciary must realize that the legislature is a democratically elected body which expresses the will of the people, and in a democracy this will is not to be lightly frustrated or obstructed. 36. Apart from the above, Thayer also warned that exercise of the power of judicial review "is always attended with a serious evil", namely, that of depriving people of "the political experience and the moral education and stimulus that comes from fighting the question out in the ordinary way, and correcting their own errors" and with the tendency "to dwarf the political capacity of the people and to deaden its sense of moral responsibility". ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vents the experiment being tried". The Court certainly has the power to decide about the constitutional validity of a statute. However, as observed by Justice Frankfurter in West Virginia V. Barnette 319 U.S. 624 (1943), since this power prevents the full play of the democratic process it is vital that it should be exercised with rigorous self restraint. ........................................................................................................ ........................................................................................................ 46. In our opinion adjudication must be done within the system of historically validated restraints and conscious minimization of the judges personal preferences. The Court must not invalidate a statute lightly, for, as observed above, invalidation of a statute made by the legislature elected by the people is a grave step. As observed by this Court in State of Bihar V. Kameshwar Singh AIR 1952, SC 252 (274); "The legislature is the best judge of what is good for the community, by whose suffrage it comes into existence". In our opinion, the Court should, therefore, ordinarily defer to the wisdom of the legislat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence, but also out of the basic scheme of the Constitution wherein the power to legislate is the exclusive domain of the Legislature/ Parliament. This power is clothed with power to decide when to legislate, what to legislate and how much to legislate. Thus, to decide the timing, content and extent of legislation is a function primarily entrusted to the legislature and, in exercise of judicial review, the Court starts with a basic presumption in favor of the proper exercise of such power. There has to be a delicate balance of powers or rather separation of powers to be preserved under the Constitution. 85. In paragraph 30 of the decision of Exide Industries (supra) the Supreme Court, while observing that the time tested principle of checks and balances does not empower the Court to question the motives or wisdom of the legislature, except in circumstances when the same is demonstrated from enacted law, quoted the following passage from United States v/s. Butler et al (297 US (1936)) in support as under:- "The power of courts to declare a statute unconstitutional is subject to two guiding principles of decision which ought never to be absent from judicial consciousness. One is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Malaysia introduced GST in 2015 but was dismantled in 2018. 86.2. Historically, Indian experience with GST like tax began in late 1970s. The first proposal being the Indirect Taxation Enquiry Committee Report of 1978 by L.K. Jha. The Jha Committee suggested introduction of manufacturing VAT as MANVAT. This could not be implemented due to inter linkage issues. Then came the Long Term Fiscal Policy (LTFP) report in 1985 that suggested MODVAT. Thereafter there was a Tax Reform Committee Report of 1992 with focus on requirements for opening up the economy which was initiated in 1991 under New Economic Policy (NEP). There was a proposal to tax services also. Services were brought into the indirect tax net by 1994 by imposing service tax on them as the services sector had been expanding rapidly. In 1994 the MODVAT scheme was expanded to include capital goods and to shift to comprehensive VAT. MODVAT was replaced by CENVAT in 2000. Full-fledged CENVAT came into operation in July 2001. MODVAT on goods was also expanded by bringing in more commodities in its purview. Then came the Task Force on Indirect Taxes, which recommended moving towards comprehensive VAT on goods and services. It bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing powers on the Union as well as the States including Union territory with Legislature to make laws for levying goods and services tax on every transaction of supply of goods or services or both. The goods and services tax shall replace a number of indirect taxes being levied by the Union and the State Governments and is intended to remove cascading effect of taxes and provide for a common national market for goods and services. The proposed Central and State goods and services tax will be levied on all transactions involving supply of goods and services, except those which are kept out of the purview of the goods and services tax. 2. The proposed Bill, which seeks further to amend the Constitution, inter alia, provides for- (a) subsuming of various Central indirect taxes and levies such as Central Excise Duty, Additional Excise Duties, Excise Duty levied under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, Service Tax, Additional Customs Duty commonly known as Countervailing Duty, Special Additional Duty of Customs, and Central Surcharges and Cesses so far as they relate to the supply of goods and services; (b) subsuming of State Value Added Tax/Sales Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m paragraph 1.10 of the said report under the head RATIONALE BEHIND MOVING TOWARDS GST as under: "1.10 The introduction of GST would mark a clear departure from the scheme of distribution of fscal powers envisaged in the Constitution. The proposed dual GST envisages taxation of the same taxable event i.e., supply of goods and services, simultaneously by both the Centre and the States." 86.9. The Bill was passed with amendments in the Rajyasabha on August 3, 2016 and in the Loksabha on 8th August 2016 and after ratification by half of the States, the Constitution (One Hundred and First Amendment) Act 2016 ("Constitution (101st) Amendment Act") received the assent of the Hon'ble President of India on 8th September 2016. The said proposed dual GST which envisages taxation of the same taxable events i.e. supply of goods and services, simultaneously and concurrently by both the Centre and the State. This has led inter alia to the introduction of Articles 246A, 269A, 279A, 366(12A) (defining Goods and Services Tax), 366 (26A) (defining services) and omission of Article 268A, Entry 92, Entry 92-C in the Union List to Schedule VII of the Constitution of India to make way for IGST, CGST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 268A was omitted. Amendments were also made in Seventh Schedule to the Constitution in List I and List II...." 86.13. Thereafter, the Supreme Court went on to quote Article 246A, Article 269A and other Articles and sections of the Constitution (101st) Amendment Act which were relevant in respect of deciding the challenge relating to the Compensation to States for loss of revenue on account of introduction of Goods and Services Tax to finally hold that that the Compensation Act as well as the Rules were not unconstitutional or ultra vires the Constitution of India. 86.14. Pursuant to the above referred amendments to the Constitution of India, including Articles 246A, 269A, 366(12A), 366(26A), the Parliament has enacted the Central Goods and Services Tax Act, 2017 ("CGST Act") as well as the Integrated Goods and Services Tax Act, 2017 and the State Legislature has enacted the Maharashtra Goods and Services Tax Act, 2017 ("MGST Act"). The CGST Act and the MGST Act have been enacted to make a provision for levy and collection of tax on intra-State supply of goods or services or both respectively by the Central Government and the State Government. The IGST Act has been enacted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the following, namely- (a) to levy tax on all inter-State supplies of goods or services or both except supply of alcoholic liquor for human consumption at a rate to be notifed, not exceeding forty percent as recommended by the Goods and Services Tax Council (the Council); (b) to provide for levy of tax on goods imported into India in accordance with the provisions of the Customs Tariff Act, 1975 read with the provisions contained in the Customs Act, 1962; (c) to provide for levy of taxes on import of services on reverse charge basis under the proposed Legislation; (d) to empower the Central Government to grant exemptions by notification or by special order, on the recommendation of the Council; (e) to provide for determination of the nature of supply as to whether it is an inter-State or intra-State supply; (f) to provide elaborate provisions for determining the place of supply in relation to goods or services or both; (g) to provide for payment of tax of a supplier of online information and database access or retrieval services; (h) to provide for refund of tax paid on supply of goods to tourists leaving India; (i) to provide for apportionment of tax and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the "State List"). (4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included (in a State) notwithstanding that such matter is a matter enumerated in the State List". 89.2 Article 246A is quoted as under: "Art. 246A:- (1) Notwithstanding anything contained in articles 246 and 254, Parliament, and , subject to clause (2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State. (2) Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce. Explanation - The provisions of this article, shall, in respect of goods and services tax referred to in clause (5) of article 279A, take effect from the date recommended by the Goods and Services Tax Council." 89.3 Article 269A of the Constitution of India is quoted as under: "Art. 269A :- (1) Goods and services tax on supplies in the course of inter-State trade or commerce shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o mean any tax on supply of goods or services or both except taxes on the supply of the alcoholic liquor for human consumption. 89.7 Article 366 (26A) defines "services" to mean anything other than goods. 90. It is well known that taxation is recognized as an instrument of raising revenue. Under Article 336 (28), of the Constitution of India taxation is defined to include imposition of any tax, whether general or local or special. Article 265 says that no tax shall be levied or collected except by authority of law. The Constitution of India is quasi federal in nature with clear precise demarcation of legislative powers between the Center and the States. 91. As can be seen, Article 246 of the Constitution of India deals with the distribution of legislative powers as between Union and the State legislatures as contained in the VIIth Schedule of Constitution. The VIIth Schedule to the Constitution of India gives three lists. List - I is known as the Union list, list -II is the State list and list - III is the concurrent list. If an item is listed in list- I then the Union or the Parliament would have competence to legislate on such item. If the item is in list-II, then the State wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make laws (i) with respect to goods and services tax where the supply of goods or services or both takes place in the course of inter-State trade or commerce (Article 269A(1)) or (ii) on the principles determining place of supply, and when a supply of goods or services takes place in the course of inter-state trade or commerce (Article 269A(5)). 92.2. Under Article 269A of the Constitution, any law pertaining to supply of goods or services in the course of inter-State trade or commerce is to be enacted by the Parliament. Under Article 269A(5) the rules or principles for place of supply are also to be formulated by the Parliament. 92.3. The GST on supplies in the course of inter-State trade or commerce is levied and collected by the Government of India and such tax is apportioned between the Union and the State. The manner of apportionment may be provided by the Parliament by law on the recommendations of the GST Council. 93. Pursuant to the aforesaid powers under Article 246A and Article 269A, the IGST Act has been enacted. 94. Before moving further, it would be apposite to refer to the following provisions of the IGST Act which are relevant for our discussion. 94.1. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be notified by the Government on the recommendations of the Council. 3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. 4) The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to such supply of goods or services or both. 5) The Government may, on the recommendations of the Council, by notification, specify categories of services, the tax on inter-State supplies of which shall be paid by the electronic commerce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate supply as under: Intra-State supply 1) Subject to the provisions of section 10, supply of goods where the location of the supplier and the place of supply of goods are in the same State or same Union territory shall be treated as intra-State supply: Provided that the following supply of goods shall not be treated as intra-State supply, namely:-- (i) supply of goods to or by a Special Economic Zone developer or a Special Economic Zone unit; (ii) goods imported into the territory of India till they cross the customs frontiers of India; or (iii) supplies made to a tourist referred to in section 15. 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 same Union territory shall be treated as intra-State supply: Provided that the 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.--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 territo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the location of the importer; (b) exported from India shall be the location outside India." 94.9. Section 12 deals with place of supply of services where location of supplier and recipient is in India.-- 1) The provisions of this section shall apply to determine the place of supply of services where the location of supplier of services and the location of the recipient of services is in India. 2) The place of supply of services, except the services specified in sub-sections (3) to (14),-- (a) made to a registered person shall be the location of such person; (b) made to any person other than a registered person shall be,- (i) the location of the recipient where the address on record exists; and (ii) the location of the supplier of services in other cases. 3) The place of supply of services,-- (a) directly in relation to an immovable property, including services provided by architects, interior decorators, surveyors, engineers and other related experts or estate agents, any service provided by way of grant of rights to use immovable property or for carrying out or coordination of construction work; or (b) by way of lodging accommodation by a hotel, inn, guesthou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to in clause (a), or assigning of sponsorship to such events,-- (i) to a registered person, shall be the location of such person; (ii) to a person other than a registered person, shall be the place where the event is actually held and if the event is held outside India, the place of supply shall be the location of the recipient. Explanation.--Where the event is held in more than one State or Union territory and a consolidated amount is charged for supply of services relating to such event, the place of supply of such services shall be taken as being in each of the respective States or Union territories in proportion to the value for services separately collected or determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed. (8) The place of supply of services by way of transportation of goods, including by mail or courier to, -- (a) a registered person, shall be the location of such person; (b) a person other than a registered person, shall be the location at which such goods are handed over for their transportation: [Provided that where the transportation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not available, the place of supply shall be location of the supplier of services: Provided that where the address of the recipient as per the records of the supplier of services is not available, the place of supply shall be location of the supplier of services: Provided further that if such pre-paid service is availed or the recharge is made through internet banking or other electronic mode of payment, the location of the recipient of services on the record of the supplier of services shall be the place of supply of such services. Explanation.--Where the leased circuit is installed in more than one State or Union territory and a consolidated amount is charged for supply of services relating to such circuit, the place of supply of such services shall be taken as being in each of the respective States or Union territories in proportion to the value for services separately collected or determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed. (12) The place of supply of banking and other financial services, including stock broking services to any person shall be the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 or for any other treatment or process and are exported after such repairs or treatment or process without being put to any use in India, other than that which is required for such repairs or treatment or process; (b) services supplied to an individual, represented either as the recipient of services or a person acting on behalf of the recipient, which require the physical presence of the recipient or the person acting on his behalf, with the supplier for the supply of services. (4) The place of supply of services supplied directly in relation to an immovable property, including services supplied in this regard by experts and estate agents, supply of accommodation by a hotel, inn, guest house, club or campsite, by whatever name called, grant of rights to use immovable property, services for carrying out or coordination of construction work, including that of architects or interior decorators, shall be the place where the immovable property is located or intended to be locat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or lending in any manner; or (iii) such other non-banking institution or class of such institutions, as the Reserve Bank of India may, with the previous approval of the Central Government and by notification in the Official Gazette, specify. (9) The place of supply of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of such goods. (10) The place of supply in respect of passenger transportation services shall be the place where the passenger embarks on the conveyance for a continuous journey. (11) The place of supply of services provided on board a conveyance during the course of a passenger transport operation, including services intended to be wholly or substantially consumed while on board, shall be the first scheduled point of departure of that conveyance for the journey. (12) The place of supply of online information and database access or retrieval services shall be the location of the recipient of services. Explanation.--For the purposes of this sub-section, person receiving such services shall be deemed to be located in the taxable territory, if any two of the following noncontradictory conditions are s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54 of the Central Goods and Services Tax Act or the rules made thereunder. 95. Petitioner's case is that his supply is export of services as defined in section 2(6) of the IGST Act. But because of (i) Section 13(8)(b) of the IGST Act which in the case of Intermediary services (as well as two other services), provides the place of supply to be the location of supplier (and not the location of the recipient and which according to him should have been the case) as the service recipient is outside India read with (ii) section 8(2) which provides that where the location of the supplier and the place of supply of services are in the same State, the supply is being treated as intra State supply, Petitioner's export is being deemed as intra -state supply making him liable to CGST and MGST. Petitioner has therefore questioned the vires of these two provisions or the competence of the Parliament to enact these provisions with reference to Articles 246A, 269A, 286 and 245 of the Constitution of India. According to Petitioner, Parliament cannot legislate to deem an export of services to be an intra -state Supply as is purportedly being done by virtue of section 13(8)(b) read with section 8(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is apt here, Specialia derogant generaliabus, which means special provisions are never limited or explained by the general, i.e., special provisions derogate from general, but generalia specibus non derogant which means general provisions do not derogate from special provisions. 100. There would therefore be no question of deeming Petitioner's supply of intermediary services to be intra-State supply. 101. It is pursuant to the powers invested by the Constitution, that the Parliament, in Sections 7 and 8 of IGST Act has provided for determination of the nature of supply, whether inter-state or intra-State; Section 7 provides for what supply is inter-State and Section 8 provides for what is treated as intra-State. 102. It is pursuant to the power in Article 269A(5) that Chapter V of the IGST Act entitled "Place of Supply of Goods or Services or Both" containing Sections 10 to 14 has been enacted by the Parliament. 103. It is observed that the Explanation to Article 269A(1) deems supply of goods or services in the course of import into India to be supply in the course of inter-State trade or commerce. A plain reading indicates that the said Explanation clearly limits itself to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 21 of the GST flyer of CBIC (www.cbic.gov.in) where in paragraph 10.1 it has been stated that considering the intangible nature of supply of services, in respect of certain categories of services, the place of supply is determined with reference to a proxy. The said paragraph is quoted as under: "10. Place of supply 10.1 Place of supply provisions have been framed for goods & services keeping in mind the destination/consumption principle. In other words, place of supply is based on the place of consumption of goods or services. As goods are tangible, the determination of their place of supply based on the consumption principle is not difficult. Generally the place of delivery of goods becomes the place of supply. However, the services being intangible in nature, it is not easy to determine the exact place where services are acquired, enjoyed and consumed. In respect of certain categories of services, the place of supply is determined with reference to a proxy..... 105. Coming to Petitioner's case of Section 13(8)(b) invoking Section 8(2) to deem inter-state supply as intra-state supply, it is observed that Section 8 deals with nature of supply and Section 13 deals with plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly when the constitutionality of both the above provisions has been upheld. 105.3. Therefore, there would be no question of Section 13(8) (b) or Section 8(2) being unconstitutional. Rather these provisions are clearly intra vires Articles 246, 246A and 269A of the Constitution. 106.1. With respect to Article 286, Petitioner submits that no State has the authority to levy local tax on export of services as that would be in violation of Article 286 (1), which states that no law of the State shall impose or authorise the imposition of tax on the supply of goods or services or both where such supply takes place outside the State. It has also been submitted that Section 13 (8) (b) read with Section 7(5) has deemed an export of service to be a local supply which is in violation of Article 286 (1) and that a central legislation cannot authorise the State to collect tax which has been prohibited by the Constitution. 106.2. Article 286 of the Constitution of India is reproduced as under: "Article 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 of services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocal apply whereas Section 13 pertains to place of supply and Section 7 pertains to the nature of inter-state supply as enacted by the Parliament pursuant to Article 246A read with Article 269A of the Constitution. Both the Sections as discussed have different purposes. 106.9. The submission by Petitioner that in terms of Section 13(2), Petitioner's service is an export of service appears to be misplaced as Section 13(2) clearly stipulates that except for the services specified in sub-sections (3) to (13), the place of supply to be the location of the recipient of services. And one of such exception in Section 13(8)(b) clearly stipulates that the place of supply for "intermediary services" shall be the location of the supplier of services. Therefore this submission appears to be misplaced. 106.10. The argument that a central legislation cannot authorize the State to collect tax which is prohibited by the Constitution or that the provisions are a colorable legislation is without any legs to stand in view of provisions under Articles 245, 246A, 269A of the Constitution of India. 106.11. Therefore, the argument of Petitioner that the impugned provisions are violative of Article 286 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 13 (8) (b) of the IGST Act are ultra vires Article 245 of the Constitution of India. According to him by stipulating place of supply in the case of intermediary services to be the location of the supplier of services is to levy tax on the overseas recipient thereby attracting the provisions of Article 245. In the written submissions a question is raised whether the Parliament is empowered to enact laws in respect of extra-territorial aspects or causes that have no nexus with India. Counsel has also alluded to a hypothetical situation where the supplier of goods is in Germany and the buyer of goods is in Singapore to question whether such a transaction would be subject to GST at the hands of petitioner by virtue of the impugned section even though payment of GST in respect of such transactions is exempted under the IGST law. He has sought to rely upon paragraph 76 of the decision in the case of GVK Industries Ltd Vs. ITO 2011 332 ITR 130 (SC). 107.2. At the outset we observe that this challenge by way of written submissions on behalf of petitioner has been taken up for the first time during the course of arguments and does not find place in the petition, either in the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rliament may make laws for the whole or any part of the territory of India, and the Legislature of a State may make laws for the whole or any part of the State. (2) No law made by Parliament shall be deemed to be invalid on the ground that it would have extra-territorial operation." 107.4. A plain reading of Article 245, makes it clear that the impugned section in no way violates this provision as from the plain language of the said section it is clear that the same do not seek extra territorial operation nor seek to levy tax on service recipient outside India. All that Section 13(8)(b) does is to provide for place of supply in respect of intermediary services where the service recipient is outside India (as in the case of the Petitioner), to be the location of the supplier of services. Therefore, there is no question of extra territorial legislation here. In the facts of the present case, the recipient is located outside India and the intermediary services supplier is located in India and therefore section 13 (8)(b) would become applicable in that the place of supply would be the location of the supplier of services viz. in the taxable territory in India. Even if the supplier of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09. Having held that the IGST law is constitutional, and the provisions pertaining to the place of supply contained in section 13(8)(b) of the IGST Act in respect of intermediary services would not be violative of Articles 246A, 269A, 286, 245 of the Constitution of India, we now move on to consider Petitioner's challenge under Articles 14 and 19(1)(g) of the Constitution of India. 110.1. Petitioner's grievance of violation of Article 14 of the Constitution of India is on two counts: (1) One is despite having purportedly satisfied the definition of export of services as defined in Section 2(6) of the IGST Act, by virtue of Section 13(8)(b), the intermediary services provided by the Petitioner to its overseas customer are not being treated as export of service thereby discriminating against Petitioner and other exporters of service; (2) secondly the intermediary services provided by Petitioner in India are subject to GST, whereas that is not the case with other service providers like marketing agents, management consultants, market research agents, professional advisers as such services are not subject to GST pursuant to Section 13(2) of the IGST Act. 110.2. Before we discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra), the Supreme Court has once again laid down that in order to pass the test of reasonable classification, the classification must fulfill two conditions, namely, (l) that the classification must be founded on an intelligible differentia which distinguishes those that are grouped together from others and (2) that differentia must have a rational relation to the object sought to be achieved by the Act. The differentia which is a basis of the classification and the object of the Act are distinct things and what is necessary is that there must be a nexus between them. This means that Article 14 forbids class discrimination by conferring privileges or imposing liabilities upon persons arbitrarily selected out of a large number of other persons similarly situated in relation to the privileges sought to be conferred or the liabilities proposed to be imposed, it however does not forbid classification provided such classification is not arbitrary. In other words, what is necessary in order to pass the test of permissible classification under Article 14 is that the classification must not be arbitrary, artificial or evasive, but must be based on some real and substantial distinction be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the need is deemed to be the clearest; (v) that in order to sustain the presumption of constitutionality the Court may take into consideration matters of common knowledge, matters of common report, the history of the times and may assume every state of facts which can be conceived existing at the time of legislation; and (vi) that while good faith and knowledge of the existing conditions on the part of a Legislature are to be presumed,, if there is nothing on the face of the law of the surrounding circumstances brought to the notice of the Court on which the classification may reasonably be regarded as based, the presumption of constitutionality cannot be carried to the extent of always holding that there must be some undisclosed and unknown reasons for subjecting certain individuals or corporations to hostile or discriminating legislation. The above principles will have to be constantly borne in mind by the Court when it is called upon, to adjudge the constitutionality of any particular law attacked as discriminatory and violative of the equal protection of the laws." 110.6. The Supreme Court, in the case of V.S. Rice and Oil Mills and Others Vs. State of Andhra Pradesh etc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned and which as discussed earlier does not include a person who renders the services for himself. Here, because of the intermediary, the export of goods is taking place from the overseas customer to the Indian importer, which is the transaction of import of goods for which the intermediary services have been provided by Petitioner. Therefore, between Petitioner and others there is no discrimination. Section 13(8)(b) would not be hit by Article 14 on this ground. For the same reason the second ground of discrimination, is also not tenable in as much as the Act has specifically provided for such intermediaries. Petitioner who is providing Intermediary Service to recipient outside India is on a different footing, the objective in my view would be to prevent revenue from escaping. 110.10. In my view, therefore there is a reasonable classification founded on intelligible differntia which has a rational relation/nexus to the object sought to be achieved. The objectives could be, as stated in the Respondent's reply, to encourage the Make in India program and create the level playing field. It is however clarified that no view is being expressed with respect to the claims or counter-clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person like Petitioner. It is a legitimate power of the parliament, as discussed earlier, to enact IGST Act including Section 13 (8)(b). If the submission of Petitioner was to be considered, then any tax levied by the Central or State Government would be a restriction to carry on trade under Article 19(1)(g) of the Constitution of India. 111.4. Further, whether a foreign exporter would set up a liaison office in India is a matter which is in the individual freedom of such an exporter subject of course to the other applicable laws. As to what Section 13(8)(b) of the IGST Act has to do with it or as to how that would infringe on Petitioner's right is not understood. Even otherwise, as on date there is no grievance of Petitioner that his overseas customer has set up liaison office in India. 111.5. On behalf of Petitioner, Paragraph 6 of the decision of the Supreme Court in the case of Bengal Immunity Company Vs. State of Bihar 1955 (2 )SCR 603 has been cited in support of his contentions. 111.6. A plain reading of Paragraph 6 suggests that no such restriction as set out in the said paragraph has been imposed by virtue of Section 13(8)(b) of the IGST Act. It appears that Petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cle 366 (12A) defines Goods and Services Tax to any tax on supply of Goods and Services or both, therefore the charging sections in GST laws, CGST as well as IGST is to levy GST on supply. 112.4. Even Section 2 (21) of IGST Act defines "supply" as under:- "(21) "supply" shall have the same meaning as assigned to it in section 7 of the Central Goods and Services Tax Act; and (ii) Section 7 of the CGST Act, 2017 refers to scope of supply and reads as under: "7. (1) For the purposes of this Act, the expression "supply" includes-- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedule I, made or agreed to be made without a consideration; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II...." 112.5. Therefore, the scheme of the GST law in India is taxation on supply. Concepts cannot be imposed upon clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... described herein GST is a tax on supply and not on the sale. One of the elements of GST as mentioned is that the calculation of GST is like VAT, which is on the value addition to reduce the cascading effect of the various taxes thereby reducing the effective rate of indirect taxes. This is one of the three methods of calculation of indirect taxes, viz., specific duty, ad valorem tax and value added tax. That was a different context and the constitutional amendments introducing special provisions of Article 246A, Article 269A and Article 279A, have brought in the new GST regime. It is also observed that the Constitutional Amendment bringing an end to the service tax regime has omitted Article 268A and Entry 92C (though the same was not notified). 112.8. As regards the decision in the case of Commissioner of Service Tax v. SGS India Pvt. Ltd. 2016 (34) STR 554 (Bom) Petitioner therein was providing technical inspection and certification agency services and technical testing and analyzing agency service on behalf of its foreign customers who imported goods from India whereas in the case at hand the Petitioner is admittedly an "intermediary" defined in the IGST Act and providing inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the value as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962 (52 of 1962). ...." 113.3. The above Section clearly states that all that on inter-State supplies of goods and services, there shall be levied a tax called the Integrated Goods and Service Tax, which shall be paid by the taxable person. There is no divergence of view that the scheme, scope and object of the IGST Act is a levy on inter-State supplies and the supply in this case is an inter-State supply. But what the argument of Petitioner seems to miss is that the Parliament as discussed earlier, can by law determine the place of supply, which pursuant to Article 269A(5) of the Constitution of India, it has done by enacting Chapter V containing Sections 10 to 14 on place of supply. Section 13(8)(b) as discussed earlier pertains to the case of intermediary services, where the service recipient is outside India and where the place of supply has been provided to be the location of the supplier. When the Constitution has empowered the Parliament to formulate principles determining the place of supply, in my view, Section 13(8)(b) ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. 114.3. Similar is the provision under the MGST Act and is therefore not being reproduced. 114.4. Firstly there is no dispute that the supply under consideration is an inter-State supply of service. Therefore, when the place of supply in the case of intermediary services, such as that rendered by Petitioner and the place of supply of such service is provided to be the location of supplier of services, viz., Petitioner, it could not be said that Section 13(8)(b) of the IGST Act is in breach of Section 9 of the CGST Act/MGST Act as both these provisions operate in different fields. When there is a specific provision dealing with the case of Petitioner viz. Section 13 (8)(b) of the IGST Act, which has been enacted pursuant to the powers under Article 269A (5) of the Constitution of India, then also in my view the challenge appears to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service outside India would be entitled to get deduction of such payment of commission by way of expenses and therefore, it would not be a case of double taxation. Moreover, that would depend on the laws of that country. It is also pertinent to refer to the earlier discussion that Petitioner is providing intermediary services as an intermediary as defined in the IGST Act to the overseas customer and not as an exporter of service. 116.1. It is observed that Petitioner has placed much reliance upon the 139th Department related Parliamentary Standing Committee on Commerce in support of his contentions In support of his contention, Petitioner has extracted paragraphs 15.1 to 15.3 of the recommendations regarding amendment to section 13(8) of the IGST Act to exclude 'intermediary' services and make it subject to the default section 13(2) so that the benefit of export of services would be available." 116.2. Without commenting on the necessity for the Parliament, GST Council/Government to take steps to implement or effectuate the above recommendations, it is pertinent to appreciate that the recommendations, do not have any binding value nor are they enforceable. 116.3. Relianc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutional validity of Section 13(8)(b) read with Section 2(13) of the IGST Act. Though, the challenge before this Court is with respect to some more Articles of the Constitution of India, however I am in respectful agreement with the conclusion of the Gujarat High Court in the said case. True also that the decision in the case of Material Recycling Association of India (supra) cannot be treated as a binding precedent, however I am persuaded to rely on the following paragraphs :- "64. The introduction of Goods and Service Tax in India in the year 2017 is with an object of providing one tax for one nation so as to harmonize the indirect tax structure in the country. For the said purpose, the Constitution is amended by the Constitution (One Hundred First Amendment) Act, 2016 to bring on to introduce Article 246A which provides for special provision with respect to Goods and Service Tax. Article 246A begins with non-obstante clause stipulating that notwithstanding anything contained in Articles 246 and 254, the parliament subject to Clause-2, Legislature of every State, have power to make laws with respect to Goods and Service Tax imposed by the Union or by such State. Clause 2 of Art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es or the location of the recipient of services in outside India. Sub-section 2 of Section 13 stipulates that the place of supply of service except the services described in sub-section 3 to 13 shall be the location of the recipient of the services and if the location of recipient of service is not available in the ordinary course of business, the place of supply shall be location of supplier of service. Thus, sub-section 3 to 13 carves out an exception to the place of supply of services to be the place of recipient of services where the location of supplier or location of recipient is outside India. On perusal of provision of Section 13 of IGST Act, 2017, Sub-Section 3 to 13 thereof provide different eventualities to determine the place of supply of services. Sub-section 3 describes place of supply of services where the services are actually performed, Sub-section 4 refers to place of supply of services supplied directly in relation to an immovable property, Sub-section 5 refers to supply of services supplied by way of admission to, or organization of a cultural artistic etc. and Sub-section 6 provides that when services as provided in sub-sections 3, 4 and 5 are at more than one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contrary a commission paid by the recipient of service outside India would be entitled to get deduction of such payment of commission by way of expenses and therefore, it would not be a case of double taxation. If the services provided by intermediary is not taxed in India, which is a location of supply of service, then, providing such service by the intermediary located in India would be without payment of any tax and such services would not be liable to tax anywhere. In such circumstances, the contentions raised on behalf of the petitioner are not tenable in view of the Notification No.20/2019 issued by the Government of India, Ministry of Finance whereby Entry no.12AA is inserted to provide Nil rate of tax granting exemption from payment of IGST for service provided by an intermediary when location of both supplier and recipient of goods is outside the taxable territory i.e. India. Therefore, the respondents have thought it ft to consider granting exemption to the intermediary services viz. service provider when the movement of goods is outside India. 69. In view of the foregoing reasons, it cannot be said that the provision of Section 13(8)(b) r.w. Section 2(13) of the IGST ..... 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