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2024 (5) TMI 313 - HC - GSTRejection of refund claim - Export of services - Export of software development services - petitioner submitted that the first respondent has wrongly affirmed the order of the second respondent by confusing the status of the subsidiary as a distinct person in accordance with explanation 1 in Section 8 of IGST Act 2017 - HELD THAT - The impugned order passed by the first respondent fairly concludes that the petitioner has satisfied the requirements of Section 2(6)(i) to (iv) of IGST Act 2017. Admittedly the petitioner and its subsidiary are two distinct entities and therefore it cannot be said that the petitioner has not satisfied the requirements of Section 2(6)(v) of IGST Act 2017. The doctrine of the authority for advance Ruling IN RE SEGOMA IMAGING TECHNOLOGIES INDIA PRIVATE LIMITED 2018 (12) TMI 650 - AUTHORITY FOR ADVANCE RULING MAHARASHTRA cannot be applied to the facts of this case - It cannot be said that the petitioner and its subsidiary are not merely establishment of a distinct person in accordance with the explanation I in Section 8 of the IGST Act 2017. The second respondent is directed to process the re-fund claim of the petitioner together with interest payable in accordance with the provisions of the Act as expeditiously as possible preferably within a period of 12 weeks from the date of receipt of a copy of this order. The writ petition is allowed.
Issues involved:
The judgment involves the interpretation of Section 2(6) of the IGST Act, 2017 regarding the conditions for considering a service as export, the rejection of a refund claim under Section 54/55 of the CGST Act, 2017, and the applicability of Circular No.161/17/2021-GST dated 20.09.2021 in determining the relationship between entities for export of services. Interpretation of Section 2(6) of the IGST Act, 2017: The impugned order highlighted the conditions under Section 2(6) of the IGST Act, emphasizing that for a service to constitute export, all conditions must be met. The key condition discussed was that "the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8." The judgment referred to a similar case decided by the Hon'ble Authority of Advance Ruling under GST, Maharashtra, emphasizing the significance of the relationship between the supplier and recipient of services. The court held that the appellant's services to its foreign subsidiary could not be considered export of services as they failed to satisfy clause (v) of Section 2(5) of the IGST Act, 2017, resulting in the rejection of the refund claim. Rejection of Refund Claim under CGST Act, 2017: The petitioner had filed a refund claim under Section 54/55 of the CGST Act, 2017 for the service tax liability discharged while exporting services to its subsidiary in Australia. However, the refund claim was rejected by the second respondent, and this rejection was upheld by the first respondent in the impugned order. The petitioner contended that the subsidiary should not be considered a distinct person as per Explanation 1 in Section 8 of the IGST Act, 2017. The petitioner argued that the circular issued by the Central Board of Indirect Taxes and Customs clarified the relationship between entities in cases of export of services involving subsidiaries of foreign companies incorporated in India, supporting the petitioner's claim for a refund. Applicability of Circular No.161/17/2021-GST: The judgment discussed Circular No.161/17/2021-GST dated 20.09.2021 issued by the Central Board of Indirect Taxes and Customs, which clarified that entities incorporated in India and foreign companies are separate legal entities under the CGST Act. The circular provided guidance on the supply of services by subsidiaries of foreign companies incorporated in India to establishments outside India, stating that such supplies would qualify as export of services. The petitioner relied on this circular and a judgment of the Delhi High Court to support their claim for the refund. The court found that the circular's interpretation was correct and directed the second respondent to process the refund claim with interest, in line with the provisions of the Act.
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