2023 (1) TMI 334 - HC - GST

Inter-state transaction or intra-state transaction or not - whether the transaction of supply of manpower by the petitioner to a company in Rajasthan is an inter-state transaction taxable as CGST RGST, or it is an intra-state transaction liable to be taxed as IGST? - HELD THAT - The petitioner admittedly has deposited 18% of IGST and that 35% of the CGST RGST has been recovered by the respondents by attaching the accounts of the petitioner - the issue of inter-state transaction/intra-state transaction is a legal issue, though depending upon the facts of the case and as such, requires deeper consideration. For the reasons that validity of certain provisions is also under challenge, we consider it appropriate to entertain the writ petition and call upon the State of Rajasthan and the Union of India to submit their response to the writ petition within a period of one month, so that the matter may be heard finally immediately thereafter. Grant of interim protection - HELD THAT - The petitioner cannot be compelled to pay tax on the services rendered by it twice, therefore, in the interest of justice, it is provided that the petitioner may apply for the refund of the IGST in the prescribed form as per the Act and the Rules within a period of two weeks from today and in the event such application is moved and is found to be in order, the respondents shall get it processed within a period of two months from the receipt of the said application, as has been provided under the Rules, and the petitioner is directed to deposit the balance 65% of CGST RGST within a period of three months from today. List this petition for admission/final disposal after six weeks.

Summary

Issues:
1. Determination of whether the transaction of supplying manpower by the petitioner to a company in Rajasthan constitutes an inter-state or intra-state transaction for tax purposes.
2. Challenge to the assessment order passed by the Assessing Authority and the Appellate Authority.
3. Constitutional challenge to the validity of Section 19(1) of the IGST Act, Section 77(1) of the CGST Act/RGST Act, and Rule 89(1A) of the CGST Rules.

Analysis:
The petitioner, a private limited company supplying manpower services, treated its supply of manpower to a company in Rajasthan as an inter-state service and deposited IGST. However, the Assessing Authority considered it an intra-state transaction, leading to a demand for CGST+RGST, interest, and penalty. The petitioner challenged this assessment order and the subsequent order by the Appellate Authority through a writ petition, also contesting the constitutionality of certain GST provisions.

The petitioner argued that the supply of manpower was inter-state as it was provided from a location outside Rajasthan to a place within the state. On the contrary, the Advocate General contended that the services were intra-state, citing definitions of "location of the supplier of the services" and "place of business" under the Act. The petitioner's registration in Rajasthan was highlighted as evidence of intra-state services.

The central issue revolved around determining the nature of the transaction, whether inter-state or intra-state, for tax liability. The court acknowledged the legal complexity of the issue, requiring a thorough examination. Given the challenge to the validity of specific provisions and the need for a deeper analysis, the court decided to entertain the writ petition and requested responses from the State of Rajasthan and the Union of India within a month for further proceedings.

Regarding interim relief, the court directed the petitioner to apply for an IGST refund within two weeks and deposit the remaining CGST+RGST balance within three months if the refund application was in order. The court provided relief to prevent double taxation, allowing the release of the petitioner's accounts once the IGST refund application was submitted. The petition was scheduled for admission or final disposal after six weeks, ensuring a comprehensive review of the issues involved.