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TMI Blog2024 (8) TMI 943X X X X Extracts X X X X X X X X Extracts X X X X ..... entity of Maldives. In absence thereof, it is difficult to give seal of approval to the finding that the works contract services were rendered at Maldives by independent/separate legal entity. For these cumulative reasons, it is constrained to hold that the petitioner and respondent No.2 had fixed establishments at Addu city, Maldives and the petitioner was re-registered at Addu which is evident from the re-registration certificate. Scope of Judicial Review - HELD THAT:- The parties have rightly placed reliance on the judgment of Supreme Court in the case of APPROPRIATE AUTHORITY AND ANOTHER VERSUS SMT. SUDHA PATIL AND ANOTHER [ 1998 (11) TMI 124 - SUPREME COURT] . As per the said judgment, the interference can be made if (i) High Courts come to the conclusion that in arriving at the conclusion, the authority has failed to consider some relevant material (ii) has considered some extraneous irrelevant materials, (iii) findings are based on no evidence and (iv) the finding is such that no reasonable man can come to such a conclusion on the basis of which the finding has been arrived. Location of recipient of services and Location of supplier of services - HELD THAT:- Admittedly the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase:- 2. The Government of India (GoI) entered into Memorandum of Understanding (MoU) with Government of Maldives for constructing a Police Academy funded by the GoI. In turn, the GoI appointed respondent No.2 i.e., National Buildings Construction Corporation Ltd., (NBCCL) to execute the construction of Police Academy by itself or through a contractor. NBCCL awarded contract to the petitioner. 3. In order to complete the work at Republic of Maldives (Maldives), the NBCCL set up an office and in turn the petitioner also set up their office at Addu city, Maldives. The Authorized Dealer Bank {Oriental Bank of Commerce (OBC)}, which is acting on behalf of Reserve Bank of India approved the establishment of branch office of petitioner in Maldives. 4. The stand of the petitioner is that it exported various goods to its Maldives office. The turnover of such goods was declared under the GST as 'zero rate supplies'. The petitioner treated the consideration received towards 'works contract service of construction' which was completely executed in the territory of Maldives through their Maldives establishment as outside the scope of GST laws of India. Respondent No.2 did not pay GST on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.0 provides that reimbursement can be to NBCCL or its designated contractor/sub-contractor or supplier. The NBCCL opened its office at Addu city, Maldives, as is evident from the document dated 16.12.2020 (Annexure-3) filed with the counter of respondent No.2. Another contract filed with the rejoinder is referred to show that it is entered into between NBCCL and the petitioner and clause 18.2 of this contract makes it clear that taxes, duties and levies shall be reimbursed by NBCCL to the contractor/petitioner. 8. Learned counsel for the petitioner submits that the construction of ISLES was completed and the same was inaugurated in the presence of high dignitaries of India and Maldives. Photographs of the event are placed on record with the counter of respondent No.2. It is submitted that when contract was entered into between GoI and Government of Maldives and work started, service tax regime was holding the field. The GST law came into force with effect from 01.07.2017. 9. In furtherance of the petitioner's letters dated 04.07.2017 and 22.08.2017, NBCCL wrote a letter dated 13.04.2018 to the petitioner which was filed with the counter of respondent No.3. Learned counsel for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to a 'works contract service' provided by the petitioner through his 'fixed establishment' at Addu city, Maldives. The 'location' of the petitioner/supplier for present purpose must be the location of 'fixed establishment' at Addu city and not at the registered office at Hyderabad (Telangana). 13. The alternative submission of learned counsel for the petitioner is that even assuming that the petitioner is covered under the GST law of India and he is required to pay tax based on it, in view of terms of contracts dated 11.03.2015 and another filed with the rejoinder, the tax amount is required to be reimbursed by the GoI to NBCCL and in turn by NBCCL to the petitioner. Thus, it is an arrangement because of which money will go from one pocket to another pocket of the Government. The petitioner cannot be made to suffer and pay the tax under the GST law of India for the activity carried out in the Maldives. 14. It is further submitted that the petitioner has already paid taxes under the GST law of Maldives. The object behind bringing GST and IGST Acts is to levy tax for the activity which takes place within the territory of India and not outside the territory of India. Lastly, on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ika Contractors (I) Limited, Hyderabad, India. 17. Section 2 (50) of the CGST Act, which is pari materia to Section 2 (7) of the IGST Act, is referred to highlight the definition of 'fixed establishment'. The definition of 'person' mentioned in Section 2 (84) of the CGST Act is also referred to contend that the definition of 'person' and definition of 'company' and 'foreign company' under Section 2 of the Companies Act, 2013 shows that a 'company' is company incorporated in India and foreign company is company incorporated outside India are separated persons under provisions of the CGST Act and hence, both are separate 'persons' and separate legal entities. Hence, registered place of business of the petitioner in Maldives cannot be considered as 'fixed establishment' of M/s. Sri Avantika Contractors (I) Limited. 18. Furthermore, Sri Dominic Feranandes, learned Senior Standing counsel for CBIC, submits that no doubt the work performed by the petitioner at Maldives is based on 'works contract' as per Section 2 (119) of the CGST Act and relates to contract of services, yet 'works contract' is essentially a contract. The contract was between the petitioner and respondent No.2. The co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he manner suggested by the petitioner and respondent No.2. Otherwise, the proviso will be otiose. The location of the recipient must be treated to be at New Delhi and cannot be at Addu city of Maldives. It is faintly argued that the petitioner has only challenged the OIA/appellate order and not assailed the order dated 05.08.2021 (Annexure P-18) in specific passed by the Advance Ruling Authority. Contention of respondent No.2:- 23. Sri S.Dwarakanath, learned Senior Counsel appearing for respondent No.2, at the outset, fairly submits that respondent No.2 is sailing with the petitioner in all respects, except on the aspect of reimbursement of tax to the petitioner by respondent No.2. The learned Senior Counsel urged that the impugned advance ruling (Annexure P-18) is cryptic in nature and does not deal with certain statutory provisions of the GST/IGST Act. For example, the impact of both the 'Explanations' appended to Section 8 of the IGST Act has escaped notice of the said authority. The appellate authority confirming the advance ruling, although referred about certain statutory provisions, did not deal with it in correct perspective. The impugned orders will make the petitioner a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... medy for petitioner is under the civil law. To this extent, respondent No.2 opposed the petition. Rejoinder Submissions : 27. In rejoinder submissions, the learned counsel for the petitioner submits that the document dated 16.12.2020 (Annexure P-3) filed with counter of respondent No.2 shows that between February, 2020 to November, 2020, 436 persons worked with respondent No.2 at Addu city of Maldives. Thus, this is also a relevant factor for determining whether there exists a 'fixed establishment' in Maldives. 28. Apart from this, to counter the argument of the Revenue relating to filing of 'zero rated returns', it is urged that this is not the reason for passing the impugned order by Advance Ruling Authority and Appellate Authority. Reliance is placed on Constitution Bench judgment of Supreme Court in the case of Mohinder Singh Gill v. The Chief Election Commissioner 1978 (1) SCC 405, to canvas that validity of order of statutory authority is to be judged on the basis of grounds mentioned therein and same cannot be supplemented by filing counter affidavit in the Court. 29. By placing reliance on another judgment of Supreme Court in the case of Jayaswal Neco Ltd. v. Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company has already set up site office/liaison office at Sri Avantika Contractors (I) Limited, Reef View, Feydhoo, Hirudhu Maa Magu, S.Hithadhoo, Addu City, Republic of Maldives. Clause 1.1 of the agreement dated 08.07.2016 entered between respondent No.2 and the petitioner reads as under: "1.1 SCOPE OF WORK: NBCC has awarded the contract to M/s Shri Avantika Contractors (1) Limited for the setting up of the Institute for security and Law Enforcement Studies (ISLES) at ADDU city in Maldives on the terms and conditions contained in its letter of Award No.NBCC/GM (CPG)/2016/817 dated: 04.06.2016 and the documents referred to therein. The award has taken effect from 04.06.2016 i.e. the date of issue of aforesaid letter of intent. The terms and expressions used in this agreement shall have the same meanings as are assigned to them in the "Contract Documents" referred to in the succeeding Article." 34. Similarly, Clause 2.5, 6 (e) and 8.0 of the agreement entered into between MEA and NBCCL are worth mentioning, which read as under: "2.5: The Executing Agency shall invite tenders, on behalf of the Employer, for awarding the different work packages of the Project. For this, it shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be made in Indian Rupees. These are the only events which have taken place within the territory of India. The other things i.e., 're-registration' of the petitioner at Maldives, establishment of site office/establishment by the petitioner and respondent No.2 at Addu city of Maldives and the construction of ISLES pursuant to works contract services had taken place within the territory of Maldives. In this backdrop, the interesting conundrum is whether the Advance Ruling Authority and Appellate Authority were justified in giving a ruling against the petitioner. 39. As noticed above, the parties are at loggerheads on the question whether the establishment/site office maintained by the petitioner and respondent No.2 fall within the ambit of Section 2 (7) 'fixed establishment' of the IGST Act. The parties have also taken diametrically opposite stands on the question relating to 'location of recipient of services' and 'location of supplies or services'. 40. These aspects deserve serious consideration. However, before dealing with the statutory provisions, we deem it proper to briefly state reasons assigned by learned Appellate Authority in OIA dated 16.07.2022 (Annexure P-1) for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner and respondent No.2. In this backdrop, the question is whether such establishments of the petitioner and respondent No.2 can be treated to be 'fixed establishment' under Section 2 (7) of the IGST Act. The said provision reads as under: "2(7) "fixed establishment" means a place (other than the registered place of business) which is characterized by a sufficient degree of permanence and suitable structure in terms of human and technical resources to supply services or to receive and use services for its own needs." (Emphasis Supplied) 42. A bare perusal of this provision makes it clear that the necessary ingredients to bring the 'establishment' within the definition of 'fixed establishment' are existence of (i) establishment with sufficient degree of permanence, (ii) suitable structure in terms of human and technical resources to receive or supply services and (iii) such establishments must be a place other than their registered place of business. In our considered opinion, the expression 'registered place' means registration under Indian laws. The registration under Maldivian law is not covered under Section 2 (7). The necessary ingredients to treat the establishment of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supplied) 46. A careful reading of Section 94 (a) aforesaid leaves no room for any doubt that an existing company registered outside Maldives needs to get itself 're-registered' before commencing any business in Maldives. The aforesaid Certificate of Re-registration was obtained by the petitioner as per the requirement of Section 94 (a). It is clear like noon day that same company registered outside Maldives (in India) got re-registered. Thus, it is difficult to hold that merely because petitioner got Certificate of Re-registration under the Maldivian law, the Maldivian entity became a separate legal entity or person. 47. We say so for yet another reason. If this finding given in OIA is accepted that the petitioner and re-registered Maldivian entity are two separate legal entities, it will be difficult to understand under which authority/contract the said independent legal entity of Maldives was permitted to execute the work. Admittedly, no contract is entered into between respondent Nos.1 and 2 with the re-registered entity of Maldives. In absence thereof, it is difficult to give seal of approval to the finding that the 'works contract services' were rendered at Maldives by in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held as under: Para No.12 Para No.21 The discussion from where the "Individual" goods and services involved in the works contract are supplied from, is immaterial in determining the Supplier or the Location of the Supplier. The service (works contract service) has to be looked in a holistic manner and the promise to deliver has been made by M/s Avantika Contractors (1) Limited, who will be held responsible in the event of any non-performance of the agreement. The discussion from where the "individual" goods and services involved in the works contract are received is immaterial in determining the Location of the Recipient, instead, the place where the total service (works contract service), of agreeing to perform has been received will be the location of recipient of service. (Emphasis Supplied) 52. In para Nos.14 of same order, it is mentioned that since supply, the agreement to perform is being made from the place of business for which registration has been obtained i.e., Hyderabad, location of 'supplier of service' will be Hyderabad. Same parameter is applied for recipient in para 22. Para No.14 Para No.22 In this case, the supply, the agreement to perform is being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registration of recipient under the Indian law was separately made for respondent No.2 at Maldives. Thus, it is crystal clear that it was received at 'fixed establishment' i.e., a place other than the place of business for which registration was obtained i.e., New Delhi. Section 2(15) defines 'location of the supplier of services'. The relevant portion reads as under: "2(15) "location of the supplier of services" means:- (a) where a supply is made from a place of business for which the registration has been obtained, the location of such place of business; (b) where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment." (Emphasis Supplied) 55. A comparative reading of definitions of 'location of recipient of services' and 'location of supplier of services' shows that only difference between two provisions is relating to 'receiving' and making the 'supply'. Otherwise, provisions are identically worded. For the simple reason mentioned in preceding para interpreting Section 2(14) of the IGST Act, we hold that the location of the supplier is covered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue purport and intendment of the enactment, and (e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same. 58. While prescribing about 'Intra-State Supply', the statute (Explanation 1) takes care of a situation where a person has an 'establishment' in India and any other 'establishment' outside India. Explanation 2 further provides that if the person carrying on a business has a branch or agency or representational office in any other territory, it shall be treated as an establishment in that territory. This provision has totally escaped notice of learned Advance Ruling Authority and Appellate Authority. 59. A combined reading of Explanations 1 and 2 shows that if the petitioner had any 'establishment' in Maldives, it must be treated to be his 'establishment' in that territory and such establishment shall be treated as 'establishment' of distinct person. Once such 'fixed establishment' is treated to be as establishment of distinct person and treated as his 'representational office' in other territory, it will be clear that the 'work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... … shall be the location at which the immovable property or boat or vessel, as the case may be, is located or intended to be located; PROVIDED that if the location of the immovable property or boat or vessel is located or intended to be located outside India, the place of supply shall be the location of the recipient. (Emphasis Supplied) 63. The heading of Section 12 of the IGST Act suggests that the provision was introduced in order to determine the place of supply of services where the location of supplier and recipient is within the territory of India. Except proviso to sub-section (3) of Section 12, the entire Section 12 deals with the aspect of determination of place of supply of services where location of both i.e., recipient and supplier is within India. The proviso to Section 12(3) was interpreted by learned Appellate Authority in the line of his finding that Avantika Contractors (I) Limited, Maldives, cannot be treated as 'fixed establishment'. The re-registered body of the petitioner at Maldives is a different legal entity than the petitioner and Sections 2(14)(a) and (15) (a) will be applicable for deciding the 'location of supplier and recipient'. 64. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The first and second purpose mentioned above squarely covers proviso to Section 12(3) of the IGST Act. It is qualifying/excepting a situation from Section 12 of the IGST Act which necessarily deals with a situation which happens within India. Similarly, it changes the concept of intendment in cases where location of immovable property is outside India. Thus, we are of the opinion that even as per the aforesaid proviso, the location of recipient will be in Maldives. The proviso was inserted with above mentioned purpose and its literal interpretation does not make it redundant or otiose. 68. In the peculiar factual backdrop of this case, admittedly the location of immovable property i.e., ISLES is located in Maldives/outside India. Hence, the place of supply shall determine the 'location of recipient'. As analysed above, the place of supply of services is at Addu, Maldives. The 'location of recipient' is already interpreted by us by holding that as per Section 2(14)(b), it will be the 'fixed establishment' of respondent No.2 which will be the location of recipient. Thus, even as per the aforesaid proviso to Section 12(3), we are unable to give our stamp of approval to the OIA passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ively. Hence, we are constrained to hold that the learned Appellate Authority has taken a view which no reasonable man well-versed with the subject can take upon reading the relevant provisions of the Acts. 71. So far as the argument relating to filing of 'zero rated return' is concerned, suffice it to say that argument must fail for twin reasons: (i) the OIA in question is not based on this reason. As per Constitution Bench judgment of the Supreme Court in Mohinder Singh Gill (supra), the validity of an order of statutory authority is to be examined on the basis of reasons mentioned therein and it cannot be supplemented by filing counter in the Court. (ii) Filing of an incorrect return will not operate as 'estoppel' in view of the judgment of the Supreme Court in Jayaswal Neco Ltd. (supra). 72. Another argument faintly advanced by the learned Senior Standing counsel for CBIC was that the singular challenge in this petition is to the OIA dated 16.07.2022 and original order of advance ruling dated 05.08.2021 is not called in question. We do not find any force in this contention. The order of advance ruling stood merged in the OIA in view of 'doctrine of merger'. Thus, if order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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