2024 (10) TMI 442 - HC - GST

Refund of unutilized Input Tax Credit - remittance being received in a different branch's bank account - Treatment of Establishments as Distinct Persons under CGST Act - HELD THAT - It transpires that while originally the writ petitioner, while applying for registration for its Delhi BO had not provided any details of a bank account at Bangalore, at the time of the first core field amendment and review exercise and the filing submitted on 29 December 2020, bank account details including in respect of the one maintained at the Standard Chartered Bank Limited at Bangalore were also uploaded and mapped along with the original registration. It becomes relevant to note that the remittances from VGSL were credited to this account. While it is true that the aforesaid mapping of the Bangalore bank account has occurred after the remittances were received, they are clearly in validation of the fact that services had been exported by the Delhi BO and which has now clearly disclosed an additional bank account maintained at Bangalore. That these remittances are connected with the services rendered by the Delhi BO to VGSL was neither questioned nor doubted by the respondents. The objection as taken thus clearly appears to be overly technical and unsustainable. The argument based on sub-sections (4) and (5) is equally misconceived. One must bear in mind that the CGST Act is principally concerned with the levy of a tax on intra-State supply of goods and thus presupposes the possibility of an entity having more than one establishment or a place of business in different States of the Union. It is this basic objective of the enactment that informs subsections (4) and (5) of Section 25 and the Legislature thus, out of abundant caution, having overridden the otherwise jurisprudential precept of branch offices not being separate and distinct juridical entities. The impugned Order-in-Appeal dated 07 June 2022 which had upheld the Order-in-Original dated 29 June 2021 is quashed - petition allowed.

Summary

Issues Involved:

1. Denial of refund of unutilized Input Tax Credit (ITC) due to remittance being received in a different branch's bank account.
2. Interpretation of "export of services" under the Integrated Goods and Services Tax Act, 2017 (IGST Act).
3. Treatment of establishments as distinct persons under the Central Goods and Services Tax Act, 2017 (CGST Act).

Issue-wise Detailed Analysis:

1. Denial of Refund of Unutilized ITC:

The petitioner sought a refund of unutilized Input Tax Credit amounting to INR 47,33,053/-, which was denied by the respondents based on the Order-in-Original dated 29 June 2021, and upheld by the Order-in-Appeal dated 07 June 2022. The core issue was the remittance for services provided by the Delhi Branch Office (BO) being credited to the bank account of the Bangalore office. The respondents argued that the refund claim was unsustainable as the payment was not received by the supplier, as defined under the IGST Act. However, the court found this objection to be overly technical and unsustainable, as the services were undisputedly exported by the Delhi BO, and the remittance was connected to those services.

2. Interpretation of "Export of Services" under IGST Act:

The respondents relied on Section 2(6) of the IGST Act, which defines "export of services" and emphasizes that payment for such service must be received by the supplier in convertible foreign exchange. The court observed that this provision does not mandate the receipt of payment in a specific bank account. The court highlighted that the location of the supplier of services is determined by Section 2(15) of the IGST Act, which identifies the place of business from which the supply is made as the supplier's location. Thus, the Delhi BO was correctly identified as the supplier, irrespective of the bank account location.

3. Treatment of Establishments as Distinct Persons under CGST Act:

The respondents argued that under Section 25 of the CGST Act, establishments in different states are treated as distinct persons, thus justifying the denial of the refund. The court examined sub-sections (4) and (5) of Section 25, which treat establishments in different states as distinct persons for registration purposes. However, the court clarified that this provision is primarily for the tax levy on intra-state supplies and does not alter the supplier's location for export services. The court emphasized that the registered place of business that effected the supply remains the supplier, reinforcing the insignificance of the bank account's location.

Conclusion:

The court found the objections raised by the respondents to be overly technical and unsustainable. It held that the remittance being received in a different branch's bank account does not alter the supplier's location as per the statutory definitions. Consequently, the court quashed the impugned orders and allowed the writ petition, directing the respondents to process the refund claim with due expedition.