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TMI Blog2025 (3) TMI 347X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority to legislate and levy a duty on import of service which is clearly not the legislative field or subject of that entry. In fact if Entry 83 were so read, it would impinge upon the power conferred by Articles 246A and 269A itself. A conjoint reading of the Proviso to Section 5 (1) along side Section 3 (7) of the CTA clearly establishes that they are a part of a composite and comprehensive machinery laid in place for collection of a goods and services tax. It merely designates the place and the juncture when the tax liability would be liable to be discharged. The integrated tax which is spoken of in Section 3 (7) can only be recognised as being a reference to the integrated tax leviable under the IGST. We find ourselves unable to countenance a power or authority inhering in the respondents to subject a supply or import of service to a tax under the CTA in the garb of levying an additional duty. The reliance placed on the judgment of the Supreme Court in Hyderabad Industries [1999 (5) TMI 29 - SUPREME COURT] is clearly misplaced since the said decision was primarily concerned with the interplay between BCD and an additional duty of customs under the CTA. While there cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Chaturvedi, Advs., Mr. Niraj Kumar, Sr. CGC for R-2/UOI. Ms. Avshreya Pratap Singh Rudy, SPC with Ms. Usha Jamnal, Ms. Harshita Chaturvedi & Mr. Siddhant Nagar, Advs. JUDGMENT YASHWANT VARMA, J. TABLE OF CONTENTS PRELUDE 3 FACTUAL NARRATIVE 5 CONSTITUTIONAL AMENDMENT: LEGISLATIVE OBJECTIVES 7 CGST, IGST, CUSTOMS ACT, AND CTA: AN OVERVIEW 27 SCHEME OF THE IMPUGNED NOTIFICATIONS 58 RIVAL SUBMISSIONS 68 THE INTERSTATE LEVY ON SUPPLY OF GOODS, SERVICES OR BOTH 108 SECTION 5 AND ITS PROVISO 141 THE ARGUMENT ON ASPECT THEORY 152 DISCERNING THE INTENT OF AN 'EXPLANATION ' 153 ORDERS OF THE COMMISSIONER OF CUSTOMS (APPEALS) 171 SUMMATION 182 DISPOSITION 184 PRELUDE 1. These three writ petitions bid us to traverse the unchartered and untested territory of the interplay between the Customs Act, 1962 [Customs Act], and the Customs Tariff Act, 1975 [CTA] on one side of the scale when pitted against the Central Goods and Services Tax Act, 2017 [CGST Act] and the Integrated Goods and Services Tax Act, 2017 [IGST Act]. They pose two fundamental questions for our consideration: - (A) Whether the duty leviable under Section 3 (7) of the CTA is independent of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standing the levy of a tax under the principal provision of Section 5 (1) of the IGST, the petitioner does not stand absolved of the liabilities created by Section 3 (7) of the CTA. FACTUAL NARRATIVE 6. For the purposes of appreciating the rival contentions which were addressed, we propose to take note of the following principal facts. As we gather from the disclosures made in the writ petitions, the petitioner is principally engaged in the activity of transportation of passengers and goods by air from various places in and outside India. During the course of its business, the petitioner sends the subject goods to Maintenance, Repair and Overhaul Service [MROs"] providers. These MROs' are located outside India and the goods so consigned to them post repair and overhaul are reimported. According to the writ petitioners at the time of physical reimport of the subject goods, while a Basic Customs Duty [BCD] would be attracted, the same is exempt by virtue of Notification No. 50/2017 dated 30 June 2017. 7. The writ petitioners assert that the reimport is liable to be treated as a transaction of supply of service or import of service in terms of Section 5 (1) of the IGST read along w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... introduced by virtue of Notification 36/2021 read along with Section 3 (7) of the CTA. 10. We have had the benefit of hearing elaborate and erudite submissions which were advanced by Mr. Lakshmikumaran, learned counsel who appeared for the writ petitioners and Mr. Ojha, who represented the respondents. However, before we proceed to notice the contentions that were advanced, it would be apposite to take note of the statutory scheme as well as the principal provisions made in the subject notifications which would enable us to appreciate and evaluate the questions which stand posited for our consideration. CONSTITUTIONAL AMENDMENT: LEGISLATIVE OBJECTIVES 11. Our discussion would necessarily have to be prefaced by taking note of the seminal amendments which came to be introduced by the Constitution Amendment Act. The Constitution Amendment Act came to be passed on 08 September 2016. For the purposes of appreciating the broad objectives underlying the various amendments introduced by virtue of that enactment, it would be pertinent to refer to its Statement of Objects and Reasons as well as the salient parts of the Bill as introduced and which are reproduced hereinbelow: - "Constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Legislatures to make laws governing goods and services tax; (g) coverage of all goods and services, except alcoholic liquor for human consumption, for the levy of goods and services tax. In case of petroleum and petroleum products, it has been provided that these goods shall not be subject to the levy of Goods and Services Tax till a date notified on the recommendation of the Goods and Services Tax Council; (h) compensation to the States for loss of revenue arising on account of implementation of the Goods and Services Tax for a period which may extend to five years; (i) creation of Goods and Services Tax Council to examine issues relating to goods and services tax and make recommendations to the Union and the States on parameters like rates, exemption list and threshold limits. The Council shall function under the Chairmanship of the Union Finance Minister and will have the Union Minister of State in charge of Revenue or Finance as member, along with the Minister in-charge of Finance or Taxation or any other Minister nominated by each State Government. It is further provided that every decision of the Council shall be taken by a majority of not less than three-fourths of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 279-A, take effect from the date recommended by the Goods and Services Tax Council.". 3. Amendment of Article 248.- In Article 248 of the Constitution, in clause (1), for the word "Parliament", the words, figures and letter "Subject to Article 246-A, Parliament" shall be substituted. 4. Amendment of Article 249.- In Article 249 of the Constitution, in clause (1), after the words "with respect to", the words, figures and letter "goods and services tax provided under Article 246-A or" shall be inserted. 5. Amendment of Article 250.- In Article 250 of the Constitution, in clause (1), after the words "with respect to", the words, figures and letter "goods and services tax provided under Article 246-A or" shall be inserted. 6. Amendment of Article 268.- In Article 268 of the Constitution, in cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 246-A shall also be distributed between the Union and the States in the manner provided in clause (2). (1-B) The tax levied and collected by the Union under clause (2) of Article 246-A and Article 269-A, which has been used for payment of the tax levied by the Union under clause (1) of Article 246-A, and the amount apportioned to the Union under clause (1) of Article 269-A, shall also be distributed between the Union and the States in the manner provided in clause (2).". 11. Amendment of Article 271.- In Article 271 of the Constitution, after the words "in those articles", the words, figures and letter "except the goods and services tax under Article 246-A," shall be inserted. 12. Insertion of new Article 279-A.- After Article 279 of the Constitution, the following article shall be inserted, namely:- "279-A. Goods and Services Tax Council.- (1) The President shall, within sixty days from the date of commencement of the Constitution (One Hundred and First Amendment) Act, 2016, by order, constitute a Council to be called the Goods and Services Tax Council. (2) The Goods and Services Tax Council shall consist of the following members, namely:- (a) the Union Finance Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Goods and Services Tax Council shall be taken at a meeting, by a majority of not less than three-fourths of the weighted votes of the members present and voting, in accordance with the following principles, namely:- (a) the vote of the Central Government shall have a weightage of one-third of the total votes cast, and (b) the votes of all the State Governments taken together shall have a weightage of two-thirds of the total votes cast, in that meeting. (10) No act or proceedings of the Goods and Services Tax Council shall be invalid merely by reason of- (a) any vacancy in, or any defect in, the constitution of the Council; or (b) any defect in the appointment of a person as a Member of the Council; or (c) any procedural irregularity of the Council not affecting the merits of the case. (11) The Goods and Services Tax Council shall establish a mechanism to adjudicate any dispute - (a) between the Government of India and one or more States; or (b) between the Government of India and any State or States on one side and one or more other States on the other side; or (c) between two or more States, arising out of the recommendations of the Council or impl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,- (i) Entry 52 shall be omitted; (ii) for Entry 54, the following entry shall be substituted, namely:- "54. Taxes on the sale of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption, but not including sale in the course of inter-State trade or commerce or sale in the course of international trade or commerce of such goods."; (iii) Entry 55 shall be omitted; (iv) for Entry 62, the following entry shall be substituted, namely:- "62. Taxes on entertainments and amusements to the extent levied and collected by a Panchayat or a Municipality or a Regional Council or a District Council.". 18. Compensation to States for loss of revenue on account of introduction of goods and services tax.- Parliament shall, by law, on the recommendation of the Goods and Services Tax Council, provide for compensation to the States for loss of revenue arising on account of implementation of the goods and services tax for a period of five years. 19. Transitional provisions.- Notwithstanding anything in this Act, any provision of any law relating to tax on goods or services or on both in force ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merable indirect taxes which were at that time being levied by the Union and State Governments and thus the imperative to overcome the "cascading effect of taxes" and the creation of a common "national market" for goods and services. It was with the aforesaid objective that the Constitution Amending Act sought to introduce amendments in the Constitution which were intended to ultimately lead to the levy of an integrated goods and services tax on all inter-state transactions and such a tax subsuming various Union taxes and levies as well as those being imposed by individual States. 14. It was with that avowed objective that Article 246A came to be introduced in the Constitution. That Article reads as follows: - "[246-A. Special provision with respect to goods and services tax.-(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 int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion, a goods and services tax on supplies in the course of inter-state trade or commerce would be levied and collected by the Union Government and such tax thereafter to be apportioned between the Union and the States in accordance with a legislation to be framed and on the recommendation of the Goods and Services Tax Council. Of significance is the Explanation occurring at the end of Article 269A(1) and which declares that the supply of goods or services or both in the course of import into the territory of India shall be deemed to be a supply in the course of inter-state trade or commerce. Article 269 A thus left it to Parliament to formulate principles not only for the determination of the place of supply but also to prescribe instances which would be deemed to be a supply in the course of inter-state trade or commerce. 18. The GST Council, which was spoken of in Article 269A, was given shape by Article 279A. The said Article reads as follows: - "[279-A. Goods and Services Tax Council.-(1) The President shall, within sixty days from the date of commencement of the Constitution (One Hundred and First Amendment) Act, 2016, by order, constitute a Council to be called the Goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um at its meetings. (8) The Goods and Services Tax Council shall determine the procedure in the performance of its functions. (9) Every decision of the Goods and Services Tax Council shall be taken at a meeting, by a majority of not less than three-fourths of the weighted votes of the members present and voting, in accordance with the following principles, namely:- (a) the vote of the Central Government shall have a weightage of one-third of the total votes cast, and (b) the votes of all the State Governments taken together shall have a weightage of two-thirds of the total votes cast, in that meeting. (10) No act or proceedings of the Goods and Services Tax Council shall be invalid merely by reason of- (a) any vacancy in, or any defect in, the constitution of the Council; or (b) any defect in the appointment of a person as a Member of the Council; or (c) any procedural irregularity of the Council not affecting the merits of the case. (11) The Goods and Services Tax Council shall establish a mechanism to adjudicate any dispute - (a) between the Government of India and one or more States; or (b) between the Government of India and any State or States on one side ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne fuel; and (f) tobacco and tobacco products." Entry 92 Taxes on sale or purchase of newspaper and advertisements published therein Omitted Entry 92C Taxes on services Omitted Entry 92A Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce. No Change Entry 92B Taxes on the consignments of goods (whether the consignment is to the person making it or to any other person), where such consignment takes place in the course of inter-State trade or commerce. No Change Entry 52 Taxes on the entry of goods into a local area for consumption, use or sale therein. (Octroi / Entry Tax) Omitted Entry 55 Taxes on advertisements other than advertisements published in the newspapers [and advertisements broadcast by radio or television]. Omitted Entry 54 Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I. Taxes on the sale of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption, but not including sale in the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be levied and collected by the Union and thereafter assigned to States, the same came to be amended to specifically exclude taxes as provided in Article 269A and thus removed the levy of a goods and services tax in the course of inter-state trade or commerce from its sweep. Similar amendments came to be introduced in Article 270 so as to ensure that its provisions coalesced with the new regime of distribution of taxes collected under Article 246A amongst the Union and the States. We deem it apposite to reproduce some of the Article noticed above hereinbelow: SlNo. Article Provision it stood prior to 101st Constitutional Amendment Amendment 1. 248 Parliament has exclusive power to make any law with respect to any matter not enumerated in the Concurrent List or State List. The Power of the Parliament has been made subject to Article 246A. In other words, residuary power of the Parliament will not affect the State's power to levy Goods and Service Tax under Article 246A. 2. 249 If Rajya Sabha has declared by resolution in national interest that Parliament should make laws with respect to any matter enumerated in the State List, Parliament can make laws for the whole o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... require ratification of state assemblies of not less that 50% of the states. Article 279-A has been inserted in the proviso. Thus, any change that is sought to be made in relation to GST Council will require the ratification of not less than 50% of the states. CGST, IGST, CUSTOMS ACT, AND CTA: AN OVERVIEW 26. We then proceed to examine and take note of the following salient provisions comprised in the CGST and the IGST statutes. The CGST, as its Preamble proclaims, is an enactment promulgated to make appropriate provisions for the levy and collection of taxes on intrastate supply of goods, services or both and for matters connected therewith or incidental thereto. Section 2, which constitutes the definition clause, incorporates the following significant provisions: - "2. Definitions.-In this Act, unless the context otherwise requires,- (17) "business" includes- (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices Tax Act, and includes non-taxable supply; xxx xxx xxx (52) "goods" means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply; xxx xxx xxx (57) "Integrated Goods and Services Tax Act" means the Integrated Goods and Services Tax Act, 2017; (58) "integrated tax" means the integrated goods and services tax levied under the Integrated Goods and Services Tax Act; xxx xxx xxx (64) "intra-State supply of goods" shall have the same meaning as assigned to it in Section 8 of the Integrated Goods and Services Tax Act; (65) "intra-State supply of services" shall have the same meaning as assigned to it in Section 8 of the Integrated Goods and Services Tax Act; xxx xxx xxx (70) "location of the recipient of services" means,- (a) where a supply is received at a place of business for which the registration has been obtained, the location of such place of business; (b) where a supply is received at a place other than the place of business for which registration has been obtained (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny State Goods and Services Tax Act; xxx xxx xxx (111) "the State Goods and Services Tax Act" means the respective State Goods and Services Tax Act, 2017;" 27. Chapter III of the CGST deals with the levy and collection of taxes and incorporates the following provisions:- "Chapter III LEVY AND COLLECTION OF TAX 7. Scope of Supply.-(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; [(aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration. Explanation.-For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply of goods or supply of services 1. Transfer (a) any transfer of the title in goods is a supply of goods; (b) any transfer of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of services; (c) any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods. 2. Land and Building (a) any lease, tenancy, easement, licence to occupy land is a supply of services; (b) any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services. 3. Treatment or process Any treatment or process which is applied to another person's goods is a supply of services. 4. Transfer of business assets (a) where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, [* * *] such transfer or disposal is a supply of goods by the person; (b) where, by or under the direction of a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. 6. Composite supply The following composite supplies shall be treated as a supply of services, namely:- (a) works contract as defined in clause (119) of Section 2; and (b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration. 7. [* * *] SCHEDULE III [See Section 7] Activities or transactions which shall be treated neither as a supply of goods nor a supply of services 1. Services by an employee to the employer in the course of or in relation to his employment. 2. Services by any court or Tribunal established under any law for the time being in force. 3. (a) the functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities; (b) the duties performed by any person who holds any post in pursuance of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earing in different parts of that statute in the following manner: - "2. Definitions.-In this Act, unless the context otherwise requires,- (1) "Central Goods and Services Tax Act" means the Central Goods and Services Tax Act, 2017; (2) "central tax" means the tax levied and collected under the Central Goods and Services Tax Act;" xxx xxx xxx (4) "customs frontiers of India" means the limits of a customs area as defined in Section 2 of the Customs Act, 1962 (52 of 1962); (5) "export of goods" with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India; (6) "export of services" means the supply of any service when,- (i) the supplier of service is located in India; (ii) the recipient of service is located outside India; (iii) the place of supply of service is outside India; (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange 3[or in Indian rupees wherever permitted by the Reserve Bank of India]; and (v) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all inter-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption [and undenatured extra neutral alcohol or rectified spirit used for manufacture of alcoholic liquor, for human consumption], on the value determined under Section 15 of the Central Goods and Services Tax Act and at such rates, not exceeding forty 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: Provided that the integrated tax on goods 8[other than the goods as may be notified by the Government on the recommendations of the Council] imported into India shall be levied and collected in accordance with the provisions of Section 3 of the CTA, 1975 (51 of 1975) 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). (2) The integrated tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a Union territory, shall be treated as a supply of goods in the course of inter-State trade or commerce. (2) Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-State trade or commerce. (3) Subject to the provisions of Section 12, supply of services, where the location of the supplier and the place of supply are in- (a) two different States; (b) two different Union territories; or (c) a State and a Union territory, shall be treated as a supply of services in the course of inter-State trade or commerce. (4) Supply of services imported into the territory of India shall be treated to be a supply of services in the course of inter-State trade or commerce. (5) Supply of goods or services or both,- (a) when the supplier is located in India and the place of supply is outside India; (b) to or by a Special Economic Zone developer or a Special Economic Zone unit; or (c) in the taxable territory, not being an intra-State supply and not covered elsewhere in this section, shall be treated to be a supply of goods or services or both in the course of inter-State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient; (b) where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person; (c) where the supply does not involve movement of goods, whether by the supplier or the recipient, the place of supply shall be the location of such goods at the time of the delivery to the recipient; [(ca) where the supply of goods is made to a person other than a registered person, the place of supply shall, notwithstanding anything contrary contained in clause (a) or clause (c), be the location as per the address of the said person recorded in the invoice issued in respect of the said supply and the location of the supplier where the address of the said person is not recorded in the invoice. Explanation.-For the purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or business function including services provided in relation to such function at such property; or (d) any services ancillary to the services referred to in clauses (a), (b) and (c), 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. Explanation.-Where the immovable property or boat or vessel is located in more than one State or Union territory, the supply of services shall be treated as made 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. (4) The place of supply of restaurant and catering services, personal grooming, fitness, beauty treatment, health service including cosmetic and plastic surgery shall be the location where the services are actually performed. (5) The place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s given for future use and the point of embarkation is not known at the time of issue of right to passage, the place of supply of such service shall be determined in accordance with the provisions of sub-section (2). Explanation.-For the purposes of this sub-section, the return journey shall be treated as a separate journey, even if the right to passage for onward and return journey is issued at the same time. (10) The place of supply of services on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, shall be the location of the first scheduled point of departure of that conveyance for the journey. (11) The place of supply of telecommunication services including data transfer, broadcasting, cable and direct to home television services to any person shall,- (a) in case of services by way of fixed telecommunication line, leased circuits, internet leased circuit, cable or dish antenna, be the location where the telecommunication line, leased circuit or cable connection or dish antenna is installed for receipt of services; (b) in case of mobile connection for telecommunication and internet services provided on post-paid basis, be the location of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the recipient of services on the records of the supplier of services. (14) The place of supply of advertisement services to the Central Government, a State Government, a statutory body or a local authority meant for the States or Union territories identified in the contract or agreement shall be taken as being in each of such States or Union territories and the value of such supplies specific to each State or Union territory shall be in proportion to the amount attributable to services provided by way of dissemination in the respective States or Union territories as may be 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." 35. Similar corresponding provisions are made to deal with situations where the supplier of service or recipient thereof is seated outside India. This becomes evident from a reading of Section 13 which is extracted hereinbelow: - "13. Place of supply of services where location of supplier or location of recipient is outside India.-(1) The provisions of this section shall apply to determine the place of supply of services where the loc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similar events, and of services ancillary to such admission or organisation, shall be the place where the event is actually held. (6) Where any services referred to in sub-section (3) or sub-section (4) or sub-section (5) is supplied at more than one location, including a location in the taxable territory, its place of supply shall be the location in the taxable territory. (7) Where the services referred to in sub-section (3) or sub-section (4) or sub-section (5) are supplied in more than one State or Union territory, the place of supply of such services shall be taken as being in each of the respective States or Union territories and the value of such supplies specific to each State or Union territory shall be 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 the following services shall be the location of the supplier of services, namely:- (a) services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecipient of services is in the taxable territory; (d) the internet protocol address of the device used by the recipient of services is in the taxable territory; (e) the bank of the recipient of services in which the account used for payment is maintained is in the taxable territory; (f) the country code of the subscriber identity module card used by the recipient of services is of taxable territory; (g) the location of the fixed land line through which the service is received by the recipient is in the taxable territory. (13) In order to prevent double taxation or non-taxation of the supply of a service, or for the uniform application of rules, the Government shall have the power to notify any description of services or circumstances in which the place of supply shall be the place of effective use and enjoyment of a service." 36. Section 20 reads as follows: - "CHAPTER IX MISCELLANEOUS 20. Application of provisions of Central Goods and Services Tax Act.-Subject to the provisions of this Act and the rules made thereunder, the provisions of Central Goods and Services Tax Act relating to,- (i) scope of supply; (ii) composite supply and mixed supply; (iii) time and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, unless the context otherwise requires,- (11) "customs area" means the area of a customs station [or a warehouse] and includes any area in which imported goods or exported goods are ordinarily kept before clearance by Customs authorities; xxx xxx xxx (14) "dutiable goods" means any goods which are chargeable to duty and on which duty has not been paid; (15) "duty" means a duty of customs leviable under this Act; xxx xxx xxx (18) "export" with its grammatical variations and cognate expressions, means taking out of India to a place outside India; (19) "export goods" means any goods which are to be taken out of India to a place outside India; xxx xxx xxx (23) "import", with its grammatical variations and cognate expressions, means bringing into India from a place outside India; xxx xxx xxx (25) "imported goods" means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption;" 38. Section 12 of the Customs Act constitutes the charging section and reads thus:- "Chapter V LEVY OF, AND EXEMPTION FROM, CUSTOMS DUTIES 12. Dutiable goods. 1) Except as otherwise provided in this Act, or any ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leviable at any percentage of its value, the value of the imported article shall, notwithstanding anything contained in section 14 of the Customs Act, 1962 (52 of 1962), be the aggregate of.- (i) the value of the imported article determined under sub-section (1) of section 14 of the Customs Act, 1962 (52 of 1962) or the tariff value of such article fixed under sub-section (2) of that section, as the case may be; and (ii) any duty of customs chargeable on that article under section 12 of the Customs Act, 1962 (52 of 1962), and any sum chargeable on that article under any law for the time being in force as an addition to, and in the same manner as, a duty of customs, but does not include- [(a) the duty referred to in sub-sections (1), (3), (5), (7) and (9)]; (b) the safeguard duty referred to in sections 8B and 8C; (c) the countervailing duty referred to in section 9; and (d) the anti-dumping duty referred to in section 9A: [Provided that in case of an article imported into India,- (a) in relation to which it is required, under the provisions of the [Legal Metrology Act, 2009 (1 of 2010)] or the rules made thereunder or under any other law for the time being in force, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verage quantum of the excise duty payable on the raw materials, components or ingredients used in the production or manufacture of such like article. (5) If the Central Government is satisfied that it is necessary in the public interest to levy on any imported article [whether on such article duty is leviable under sub-section (1) or, as the case may be, sub-section (3) or not] such additional duty as would counter-balance the sales tax, value added tax, local tax or any other charges for the time being leviable on a like article on its sale, purchase or transportation in India, it may, by notification in the Official Gazette, direct that such imported article shall, in addition, be liable to an additional duty at a rate not exceeding four per cent. of the value of the imported article as specified in that notification. Explanation.-In this sub-section, the expression "sales tax, value added tax, local tax or any other charges for the time being leviable on a like article on its sale, purchase or transportation in India" means the sales tax, value added tax, local tax or other charges for the time being in force, which would be leviable on a like article if sold, purchased or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m chargeable on that article under any law for the time being in force as an addition to, and in the same manner as, a duty of customs, but does not include the tax referred to in sub-section (7) or the cess referred to in sub-section (9). [(8A) Where the goods deposited in a warehouse under the provisions of the Customs Act, 1962 (52 of 1962) are sold to any person before clearance for home consumption or export under the said Act, the value of such goods for the purpose of calculating the integrated tax under sub-section (7) shall be,- (a) where the whole of the goods are sold, the value determined under sub-section (8) or the transaction value of such goods, whichever is higher; or (b) where any part of the goods is sold, the proportionate value of such goods as determined under sub-section (8) or the transaction value of such goods, whichever is higher: Provided that where the whole of the warehoused goods or any part thereof are sold more than once before such clearance for home consumption or export, the transaction value of the last such transaction shall be the transaction value for the purposes of clause (a) or clause (b): Provided further that in respect of ware ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... warehoused goods or any part thereof are sold more than once before such clearance for home consumption or export, the transaction value of the last of such transaction shall be the transaction value for the purposes of clause (a) or clause (b): Provided further that in respect of warehoused goods which remain unsold, the value or the proportionate value, as the case may be, of such goods shall be determined in accordance with the provisions of sub-section (10). Explanation-For the purposes of this sub-section, the expression "transaction value", in relation to warehoused goods, means the amount paid or payable as consideration for the sale of such goods.] (11) The duty or tax or cess, as the case may be, chargeable under this section shall be in addition to any other duty or tax or cess, as the case may be, imposed under this Act or under any other law for the time being in force. [(12) The provisions of the Customs Act, 1962 (52 of 1962) and all rules and regulations made thereunder, including but not limited to those relating to the date for determination of rate of duty, assessment, non-levy, short-levy, refunds, exemptions, interest, recovery, appeals, offences and pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Integrated Goods and Services Tax Act, 2017 (13 of 2017) as is in excess of the amount calculated at the rate specified in the corresponding entry in column (5) of the said Table, subject to any of the conditions, specified in the Annexure to this notification, the condition number of which is mentioned in the corresponding entry in column (6) of the said Table. S.No. Chapter or Heading or sub-heading or tariff item Description of goods Standard rate Integrated Goods and Services Tax Condition No. (1) (2) (3) (4) (5) (6) XXXX 279. 40 New or retreaded Pneumatic tyres of rubber of a kind used in aircrafts of heading 8802 Nil - 26 540. 8802 (except 8802 60 00) All goods Nil - 79 XXXX 543. 8802 (except 8802 60 00) All goods 2.5% - 81 [544-A. Any Chapter Components or parts which are prescribed in any of the following manuals- i. Aircraft Maintenance Manual (AMM); ii. Component Maintenance Manual (CMM); iii. Illustrated Parts Catalogue (IPCL); iv. Structural Repair Manual (SRM); or v. Standard Procedure Manual (SPM) of the OEMs, when imported into India for servicing, repair, maintenance or overhauling, subject to fulfilling resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T which is concerned with a tax on the supply of services. Insofar as the liability flowing under Section 5 (1) of IGST is concerned, according to the writ petitioner, the same is governed by Notification 45/2017. It is here that the respondents had provisioned for a levy of a duty of customs made up of the fair cost of repairs carried out in respect of goods exported for repairs abroad. Serial No. 2 of the General Exemptions which forms part of Notification 45/2017 is reproduced hereinbelow: "MINISTRY OF FINANCE (Department of Revenue) NOTIFICATION Notification No. 45/2017-Customs G.S.R. 780(E).- In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962) the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the goods falling within any Chapter of the First Schedule to the CTA, 1975 (51 of 1975) and specified in column (2) of the Table below when re-imported into India, from so much of the duty of customs leviable thereon which is specified in the said First Schedule, and the [* * *] integrated tax, compensation cess leviable thereon respectively under sub-section (7) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le under the said CTA, besides the customs duty as specified in the said First Schedule, calculated on the value as specified in column (3), and the exemption, under said serial numbers, is only from the amount of said tax, cess and duty over and above the amount so calculated.". [F.No. CBIC-190354/96/2021-TO(TRU-I)-CBEC] (Rajeev Ranjan) Under Secretary to the Government of India Note: The principal notification No. 45/2017-Customs, dated the 30th June, 2017 was published in the Gazette of India, Extraordinary vide number G.S.R. 780(E), dated the 30th June, 2017." 43. As is apparent from a reading of Notification 36/2021, there were two principal amendments which came to be introduced. Firstly, in serial no. 2 of the original Notification 45/2017, the expression "duty of customs" was substituted by the words "said duty, tax or cess". By the very same Notification, an Explanation also came to be inserted which clarified that goods mentioned at serial nos. 2 and 3 of the table would also be exigible to an integrated tax and cess as leviable under the CTA besides BCD to be calculated on the value as specified and thus holding out that the levy would include the amount of tax as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST, etc) at the applicable rates will be payable on such imports, calculated on the value of repairs, insurance and freight, instead of the value of the goods itself. Similar concession existed in pre-GST period too, vide notification No. 94/96-Customs, whereby, the customs duty (BCD, additional duty of customs under section 3 of CTA, 1975, etc.) were payable on the value of repairs instead of the entire value of goods in such imports. 4. GST rate and exemptions are prescribed on the recommendation of the GST Council. The Council, at the time of roll out of GST decided to continue the concession as were available under the said notification No. 94/96-Cus, with only consequential amendment, i.e, replacing additional duties of customs with IGST and Compensation cess, as discussed in the 14th Meeting of the GST Council. Accordingly, under GST, IGST and Compensation cess were made applicable on the value of repairs, insurance and freight on re-import of goods sent abroad for repair. 5. Again, during the 37th GST Council Meeting, while examining the request to make available the credit of ITC paid on aircraft engines and parts exported for repairs and later re-imported, the leviabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is clarified that notification Nos. 45/2017-Customs and 46/2017-Customs, both dated the 30th of June, 2017 were issued to implement the decision of the GST Council taken earlier, that re-import of goods sent abroad for repair attracts IGST on a value equal to the repair value, insurance and freight. Further, in the light of the recommendations of the GST Council in its 43rd Meeting, a clarificatory amendment has been made in the said notifications, vide notification Nos. 36/2021-Customs and 37/2021-Customs, both dated 19th July, 2021, without prejudice to the leviability of IGST, as above, on such imports as it stood before the amendment. 9. The contents of this circular may please be brought to the notice of trade and industry through issue of Trade/ Public notices. The field formations may also be suitably sensitized in this regard. Difficulty, if any, in the implementation of this Circular may be brought to the notice of this office. Yours faithfully, (Gaurav Singh) Deputy Secretary to the Government of India" 45. As was noticed in the preceding parts of this decision, the CBIC had while issuing that Circular explicitly alluded to the judgment of the CESTAT rendered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty of customs. 48. It was then submitted that undisputedly, the export of aircraft engines or parts for repair is liable to be classified as a supply of service since it would necessarily entail those goods being subjected to a treatment or process and those articles concedely being the property of the petitioner. It was thus contended that once the said transaction came to be characterized as a supply of services in terms of Entry 3 of Schedule II of the CGST, it would be wholly impermissible for the respondents to treat the same transaction as a supply of goods. 49. Mr. Lakshmikumaran argued that if the stand as taken by the respondents were to be accepted, it would clearly amount to the imposition of a "double levy", with a tax firstly being imposed on a supply of services and the very same transaction thereafter being taxed as an import of goods. According to learned counsel, if the stand of the respondents were to be countenanced, it would inevitably result in the petitioner firstly paying BCD on the import of goods by virtue of Section 12 of the Customs Act, an integrated tax on import of goods under Section 3 (7) of the CTA and thirdly an integrated tax on the inter-stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he additional duties which are leviable under that statute. 53. According to Mr. Lakshmikumaran, while Section 12 is thus the repository of the power of the respondent to levy a BCD, the CTA is concerned with additional duties which are leviable in accordance with Section 3. However, according to Mr. Lakshmikumaran, once the transaction had been subjected to a levy by treating it to be a supply of services, an additional tax or duty cannot be validly imposed by an exercise of re-characterization or by viewing the very same transaction as amounting to an import of goods. 54. Our attention in this respect was also drawn to the provisions contained in Section 13 of the IGST which reads as follows: "13. Place of supply of services where location of supplier or location of recipient is outside India-(1) The provisions of this section shall apply to determine the place of supply of services where the location of the supplier of services or the location of the recipient of services is outside India. (2) The place of supply of services except the services specified in sub-sections (3) to (13) shall be the location of the recipient of services: Provided that where the location of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the taxable territory, its place of supply shall be the location in the taxable territory. (7) Where the services referred to in sub-section (3) or sub-section (4) or sub-section (5) are supplied in more than one State or Union territory, the place of supply of such services shall be taken as being in each of the respective States or Union territories and the value of such supplies specific to each State or Union territory shall be 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 the following services shall be the location of the supplier of services, namely:- (a) services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders; (b) intermediary services; (c) services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month. Explanation.-For the purposes of this sub-section, the expression,- (a) "account" means an account bearing in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y; (f) the country code of the subscriber identity module card used by the recipient of services is of taxable territory; (g) the location of the fixed land line through which the service is received by the recipient is in the taxable territory. (13) In order to prevent double taxation or non-taxation of the supply of a service, or for the uniform application of rules, the Government shall have the power to notify any description of services or circumstances in which the place of supply shall be the place of effective use and enjoyment of a service." 55. While we had an occasion to notice that provision in the earlier parts of this decision alongside Sections 11 and 12, suffice it to note that the designation of the place of supply of services or goods is undoubtedly a power exclusively conferred upon the Union. It is in the exercise of the aforenoted powers that the Union stands statutorily empowered to notify the description of services and the place of supply of those services. As is manifest from a reading of Section 13(2), the place of supply of services is declared to be the location of the recipient of services, except in respect of those categories which fall within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l carpet area of the residential and commercial apartments in the project) Nil Provided that the promoter shall be liable to pay tax at the applicable rate, on reverse charge basis, on such proportion of value of development rights, or FSI (including additional FSI), or both, as is attributable to the residential apartments, which remain un-booked on the date of issuance of completion certificate, or first occupation of the project, as the case may be, in the following manner - [GST payable on TDR or FSI (including additional FSI) or both for construction of the residential apartments in the project but for the exemption contained herein] x (carpet area of the residential apartments in the project which remain un-booked on the date of issuance of completion certificate or first occupation / Total carpet area of the residential apartments in the project) Provided further that tax payable in terms of the first proviso hereinabove shall not exceed 0.5 per cent. of the value in case of affordable residential apartments and 2.5 per cent. of the value in case of residential apartments other than affordable residential apartments remaining un-booked on the date of issuance of compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and 2.5 per cent. of the value in case of residential apartments other than affordable residential apartments remaining un-booked on the date of issuance of completion certificate or first occupation. The liability to pay central tax on the said proportion of upfront amount (called as premium, salami, cost, price, development charges or by any other name) paid for long term lease of land, calculated as above, shall arise on the date of issue of completion certificate or first occupation of the project, as the case may be. (iii) after paragraph 1, the following paragraphs shall be inserted, namely, - "1A. Value of supply of service by way of transfer of development rights or FSI by a person to the promoter against consideration in the form of residential or commercial apartments shall be deemed to be equal to the value of similar apartments charged by the promoter from the independent buyers nearest to the date on which such development rights or FSI is transferred to the promoter. 1B. Value of portion of residential or commercial apartments remaining un-booked on the date of issuance of completion certificate or first occupation, as the case may be, shall be deemed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich it is built.". 2. This notification shall come into force with effect from the 1st day of April, 2019. [F. No.354/32/2019 -TRU] (Pramod Kumar) Deputy Secretary to the Government of India" "[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)] Government of India Ministry of Finance (Department of Revenue) Notification No. 02/2020-Integrated Tax (Rate) New Delhi, the 26th March, 2020 G.S.R (E).- In exercise of the powers conferred by sub-section (1) , (3) and sub-section (4) of section 5, sub-section (1) of section 6 and clauses (iii) and (xxv) of section 20 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), read with sub-section (5) of section 15 and section 148 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, and on being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India, in the Ministry of Finance (Department of Revenue) No. 8/2017-Integrated Tax (Rate), dated the 28th June, 2017, published in the Gazette of India, Extraordinary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces was concerned, Mr. Lakshmikumaran submitted that the same would be governed exclusively by the principal part of Section 5 (1) and to which the Proviso would clearly have no application. 59. It was then submitted that from the plain language in which the Proviso stands constructed, it is apparent that the integrated tax becomes leviable on goods imported into India. According to learned counsel, the only correlation between the Proviso to Section 5 (1) and the CTA is the point at which the integrated tax may be levied and collected. This, according to Mr. Lakshmikumaran, becomes evident in light of the Proviso using the phrase "shall be levied and collected in accordance with the provisions of" Section 3 of the CTA. It was in view of the above that Mr. Lakshmikumaran had submitted that Section 3 (7) of the CTA is merely intended to designate a collection point of the integrated tax as opposed to a provision contemplating an independent levy of IGST. It was thus submitted that it would be wholly incorrect for Section 3 (7) of the CTA being viewed or countenanced as constituting an independent charging provision. 60. According to Mr. Lakshmikumaran, the acceptance of the positi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , including the import of services for consideration as well as activities specified in Schedule 1. 64. This, according to Mr. Lakshmikumaran, is the activity that becomes the subject matter of a tax under Section 5 (1) of the IGST. It was in the aforesaid light that Mr. Lakshmikumaran also questioned the correctness of the stand of the respondents who had sought to invoke the Proviso to Section 5 (1) of the IGST as also being applicable to a supply of services. It was submitted that the contention addressed at the behest of the respondents in this respect fails to bear in mind the well-settled principle of the Proviso to a section merely carving out an exception to the general rule or extracting a subject which may have otherwise fallen within the province of the former. However, learned counsel submitted that the operation of a proviso cannot be countenanced as travelling beyond the main section itself. It was thus submitted that it would be wholly incorrect to view the Proviso to Section 5 (1) as authorizing the levy of a tax on an import of goods even where no supply thereof may have occurred. In any case, according to learned counsel, an integrated tax is solely concerned wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e text of Section 8 of the CGST Act and treat the two transactions as standalone agreements. In a CIF contract, the supply of goods is accompanied by the supply of services of transportation and insurance, the responsibility for which lies on the seller (the foreign exporter in this case). The supply of service of transportation by the foreign shipper forms a part of the bundle of supplies between the foreign exporter and the Indian importer, on which the IGST is payable under Section 5 (1) of the IGST Act read with Section 20 of the IGST Act, Section 8 and Section 2 (30) of the CGST Act. To levy the IGST on the supply of the service component of the transaction would contradict the principle enshrined in Section 8 and be in violation of the scheme of the GST legislation. Based on this reason, we are of the opinion that while the impugned notifications are validly issued under Sections 5 (3) and 5 (4) of the IGST Act, it would be in violation of Section 8 of the CGST Act and the overall scheme of the GST legislation. As noted earlier, under Section 7 (3) of the CGST Act, the Central Government has the power to notify an import of goods as an import of services and vice versa: "7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t if such an erroneous impression is not corrected and if such a trend continues, then in future even the other components of supply of goods, such as, insurance, packaging, loading/unloading, labour, etc. may also be artificially vivisected by the delegated legislation to once again levy the GST on the supply on which the tax is already collected. *** 216. Thus, having paid the IGST on the amount of freight which is included in the value of the imported goods, the impugned notifications levying tax again as a supply of service, without any express sanction by the statute, are illegal and liable to be struck down." (emphasis supplied)" 170. We are in agreement with the High Court to the extent that a tax on the supply of a service, which has already been included by the legislation as a tax on the composite supply of goods, cannot be allowed. E. Conclusion 171. Based on the above discussion, we have reached the following conclusion: 171.1. The recommendations of the GST Council are not binding on the Union and States for the following reasons: 171.1.1. The deletion of Article 279-B and the inclusion of Article 279(1) by the Constitution Amendment Act, 2016 indicates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Government to specify a class of registered persons as the recipients, thereby conferring the power of creating a deeming fiction on the delegated legislation. 171.5. The impugned levy imposed on the "service" aspect of the transaction is in violation of the principle of "composite supply" enshrined under Section 2(30) read with Section 8 of the CGST Act. Since the Indian importer is liable to pay IGST on the "composite supply", comprising of supply of goods and supply of services of transportation, insurance, etc. in a CIF contract, a separate levy on the Indian importer for the "supply of services" by the shipping line would be in violation of Section 8 of the CGST Act. 172. For the reasons stated above, the appeals are accordingly dismissed. Pending application(s) if any, stand disposed of." 67. Questioning the correctness of the view canvassed for our consideration by Mr. Lakshmikumaran, Mr. Ojha, learned counsel representing the respondents submitted that the stand taken by the writ petitioners is fundamentally flawed since it seeks to confuse the distinction which must be borne in mind between a supply of service and the import of repaired parts. Mr. Ojha contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act or under any other law for the time being in force. 16. There are different types of customs duty levied under different Acts or Rules. Some of them are; (a) a duty of customs chargeable under Section 12 of the Customs Act, 1962; (b) the duty in question, namely, under Section 3 (1) of the CTA; (c) additional duty levied on raw-materials, components and ingredients under Section 3(3) of the CTA; and (d) duty chargeable under Section 9A of the CTA, 1975. Customs Act 1962 and the CTA, 1975 are two separate independent statutes. Merely because the incidence of tax under Section 3 of the CTA, 1975 arises on the import of the articles into India it does not necessarily mean that the CTA cannot provide for the charging of a duty which is independent of the customs duty leviable under the Customs Act. 17. The CTA, 1975 was preceded by the Indian Tariff Act, 1934. Section 2A of the Tariff Act, 1934 provided for levy of countervailing duty. This section stipulated that any article which was imported into India shall be liable to customs duty equal to the excise duty for the time being leviable on a like article if produced or manufactured in India. In the notes to clauses to the Cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pear to be correct inasmuch as the measure for levy of additional duty is the quantum of excise duty leviable on a similar article under the Excise Act. Duty under the Excise Act can be levied, as has been held earlier, if the article has come into existence as a result of production or manufacture. In other words when articles which are not produced or manufactured cannot be subjected to levy of excise duty then on the import of like articles no additional duty can be levied under the CTA. The levy of additional duty being with a view to provide for counter balancing the excise duty leviable, we are clearly of the opinion that additional duty can be levied only if on a like article excise duty could be levied. The decision in Khandelwal Engineering Works case to the extent it takes a contrary view, does not appear to lay down the correct law. Sh. Vaidyanathan contended that this Court should be reluctant to reconsider a judgment which has held the field for a long time, but in our opinion public interest requires that law be correctly interpreted more so in a taxing statute where the ultimate burden may fall on the common man. We hasten to add that we are not over-ruling the Khand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is done on the basis of the procedures laid down by the competent legislature. In situations where the legislature selects one method out of the many available for assessing tax, the courts should not strike down the levy on the ground that the legislature should have adopted another method unless the method is capricious, fanciful, arbitrary or clearly unjust. Although the liability may be quantified or measured in many ways, there is a clear distinction between the subject matter of a tax and the standard by which the amount of tax is measured. 285. The pith and substance or true nature and character of the legislation must be determined with reference to the legislative subject matter and the charging section. The charging section levying a tax and defining the persons who are liable to pay the tax constitute the core of a taxing statute. The distinction between the nature of tax and measure of tax can be gathered from the decision of this Court in Sainik Motors, Jodhpur v. State of Rajasthan. In that case, the petitioners challenged the levy of taxes on passengers and goods by the State legislature. The charging section provided that the tax was "in respect of all passenger ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty and to make some kind of annual value the basis of the tax without intending to tax income. The levy was held to be in pith and substance a tax on land and buildings even though the basis of the tax was similar to the one adopted to measure income. 288. From the above discussion, we can derive the following principles: (i) the incidence of a tax on lands and buildings will likely be on the owner or occupier, as the case may be; (ii) the legislature may adopt a suitable measure for levying the tax on lands and buildings under Entry 49 of List II; and (iii) the measure adopted by legislature does not determine the nature of the tax. 289. In recent decades, this Court has held that there ought to be a "nexus" between the nature of tax and the measure of tax. In Union of India v. Bombay Tyre International Ltd., the issue before a three-Judge Bench of this Court was whether the value of an article for the purposes of excise duty must be determined exclusively with reference to the manufacturing cost and manufacturing profit of the manufacturer or the entire wholesale price charged by the manufacturer. The assesses contended that only the measure of manufacturing cost an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel, would lead one to the inevitable conclusion that the phrase integrated tax was used solely for the purposes of compendiously describing the duties of customs which would get attracted at the time of import of goods. 73. Proceeding further Mr. Ojha submitted that the levy under Section 3 (7) is liable to be appreciated with reference to the source of power to legislate itself. The submission was based on the tax on the supply of goods or services being referable to Article 246A while a duty of customs owing its genesis to the plenary powers of legislation comprised in Article 246 of the Constitution read along with Entry 83 contained in List-I of the Seventh Schedule. It was thus submitted that the Court must discern the true character of the levy and the taxable event, both of which are traceable to separate powers of legislation comprised in the Constitution. 74. In order to lend credence to the aforesaid contention, Mr. Ojha also relied upon the following passages as they appear in the judgment of the Constitution Bench in Godfrey Philips vs. State of U.P (2005) 2 SCC 515. "*** In our opinion to read Entry 62 List II as including articles of luxury cannot all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue. The juxtaposition of the different taxes within Entry 62 itself is in our "'view of particular significance. The entry speaks of "taxes on luxuries including taxes on entertainments, amusements, betting and gambling". The word "including" must be given some meaning. In ordinary parlance it indicates that what follows the word "including" comprises or is contained in or is a part of the whole of the word preceding. The nature of the included items would not only partake of the character of the whole, but may be construed as clarificatory of the whole. It has also been held that the word 'includes' may in certain contexts be a word of limitation (South Gujarat Roofing Tiles Manufacturers v. State of Gujarat, [1976] 4 SCC 60 I. In the context of Entry 62 of List II this would not mean that the word 'luxuries' would be restricted to entertainments, amusements, betting and gambling but would only emphasise the attribute which is common to the group. If luxuries is understood as meaning something which is purely for enjoyment and beyond the necessities of life, there can be no doubt that entertainments, amusements, betting and gambling would come within such u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is principle of interpretation known as 'noscitur a sociis' has received approval in Rainbow Steels Ltd v. C.S.T., [1981] 2 SCC 141,145 although doubted in its indiscriminate application in State of Bombay v. Hospital Mazdoor Sabha, AIR (1960) SC 610. In the latter case this Court was required to construe Section 2(j) of the Industrial Disputes Act which read: "Section 2(j) provides that 'industry' means any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft or industrial occupation or avocation of workmen". It was found that the words in the definition were of very wide and definite import. It was suggested that these words should be read in a restricted G sense having regard to the included items on the principle of 'noscitur a sociis'. The suggestion was rejected in the following language: "It must be borne in mind that noscitur a sociis is merely a rule of construction and it cannot prevail in cases where it is clear that the wider words have been deliberately used in order to make the scope H of the defined word correspondingly wider. It is only where the intention of the Leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, either directly or indirectly, the entries in the legislative lists have specifically said so or the impost is such that the subject matter of tax follows by necessary implication. In List II itself, the State legislature has been given the right to levy taxes on the entry of goods under Entry 53, on 'carriage of goods and passengers' under Entry 56, on 'vehicles' under Entry 57 and on 'animals and boats under Entry 58. There is no instance in any of the legislative lists of a tax being leviable only with reference to an attribute. An attribute as an object of taxation without reference to the object it qualifies would lead to legislative mayhem, blur the careful demarcation between taxation entries and upset the elaborate scheme embodied in the Constitution for the collection and distribution of revenue between the Union and the States. For example would a luxury vehicle be subjected to tax under Entry 62 or Entry 57 of List II? In the latter case, the levy would be subject to provisions of Entry 35 of List III and hence capable of being over-ridden by Parliament. If it is referable to Entry 62 there would be no such concurrent power in Parliament. Henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he way this Board has reconciled the provisions of section 91 and section 92, by recognizing that the subjects which fall within section 91 in one aspect, may, under another aspect, fall under section 92. Indeed, the law 'with respect to' a subject might incidentally 'affect' another subject in some way; but that is not the same thing as the law being on the latter subject. There might be overlapping; but the overlapping must be in law. The same transaction may involve two or more taxable events in its different aspects. But the fact that there is an overlapping does not detract from the distinctiveness of the aspects, Lord Simonds in Governor General in Council v. Province of Madras MANU/FE/0008/1945 : [1945] FCR 179 P.C. at 193 in the context of concepts of Duties of Excise and Tax on Sale of Goods said: ...The two taxes the one levied on a manufacturer in respect of his goods, the other on a vendor in respect of his sales, may, as is there pointed out, in one sense overlap. But in law there is no overlapping. The taxes are separate and distinct imposes. If in fact they overlap, that may be because the taxing authority, imposing a duty of excise, finds it conv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd scope of the legislation : that the word is used subjectively of the legislator, rather than objectively of the matter legislated upon." 77. In this connection, Mr. Ojha also relied upon the following passages from Gujarat Ambuja Cement vs. Union of India & Anr. (2005) 4 SCC 214 while seeking to espouse the core principles which form part of the aspects theory as commonly understood in tax jurisprudence: "24. Undisputedly, Chapter V of the Finance Act, 1994 was enacted with reference to the residuary power defined in Entry 97 of List I. But as has been held in International Tourist Corpn. v. State of Haryana [(1981) 2 SCC 318 : 1981 SCC (Tax) 103] : (SCC pp. 325-26, para 6-A) "Before exclusive legislative competence can be claimed for Parliament by resort to the residuary power, the legislative incompetence of the State Legislature must be clearly established. Entry 97 itself is specific in that a matter can be brought under that entry only if it is not enumerated in List II or List III and in the case of a tax if it is not mentioned in either of those lists." 25. In that case Section 3 (3) of the Punjab Passengers and Goods Taxation Act, 1952 was challenged by transport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubjected to tax under the entry. The ambit and purport of the entry has been dealt with in Rai Ramkrishna v. State of Bihar [(1964) 1 SCR 897 : AIR 1963 SC 1667] where it was said in language which we cannot better: (SCR p. 908) "Entry 56 of the Second List refers to taxes on goods and passengers carried by road or on inland waterways. It is clear that the State Legislatures are authorised to levy taxes on goods and passengers by this entry. It is not on all goods and passengers that taxes can be imposed under this entry; it is on goods and passengers carried by road or on inland waterways that taxes can be imposed. The expression 'carried by road or on inland waterways' is an adjectival clause qualifying goods and passengers, that is to say, it is goods and passengers of the said description that have to be taxed under this entry. Nevertheless, it is obvious that the goods as such cannot pay taxes, and so taxes levied on goods have to be recovered from some persons, and these persons must have an intimate or direct connection or nexus with the goods before they can be called upon to pay the taxes in respect of the carried goods. Similarly, passengers who are carried are taxed un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers to the different kinds of services provided. Most of the taxable services cannot be said to be in any way related to goods or passengers carried by road or waterways. For example, Section 65 (41) (g) provides for service rendered to a client by a consulting engineer, Section 65 (41) (k) refers to service to a client by a manpower recruitment agency, Section 65 (41) (o) refers to service by pandal or shamiana contractors and so on. The rate of service tax has been fixed under Section 66. Section 67 provides for valuation of taxable service for the purposes of charging tax. The provision for valuation of service rendered by clearing and forwarding agents has been dealt with under clause (j) and service provided by goods transport operators has been provided under clause (l) [subsequently renumbered as clause (m-a)]. These clauses read respectively as under: "67. (j) in relation to service provided by a clearing and forwarding agent to a client, shall be the gross amount charged by such agent from the client for services of clearing and forwarding operations in any manner;" "67. (m-a) in relation to service provided by a goods transport operator to a customer, shall be the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Parliament under Entry 97 of List I." 78. Mr. Ojha submitted that in the facts of that case, the Supreme Court had found that the transport of goods and passengers by road or inland waterways was based on two separate aspects which had led to the imposition of a tax by both the State as well as the Union. It was submitted that the Supreme Court had held that while Parliament had the legislative competence to tax the service aspect of that transaction, the States were empowered to legitimately impose a tax by virtue of Entry 56 of List-II falling in the Seventh Schedule. 79. Mr. Ojha then submitted that the contention of the writ petitioners based on Section 5 of the IGST is also clearly misconceived. It was argued that Section 5 (1) merely relates to a tax on the inter-state supply of services. The submission was that it is not a charging provision in respect of the import of goods. The aforesaid submission was in essence a reiteration of the distinction which Mr. Ojha bids us to bear in mind between an inter-state supply of imported goods and the import of goods itself. It was then submitted that the mere treatment of the transaction as a supply of service would have no bear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evied and collected in accordance with Section 3 of Customs Tariff Act". According to learned counsel, there could be no starker manifestation of a legislative intent to preserve the additional duty which gets attracted by virtue of Section 3 (7) of the CTA. According to Mr. Ojha, the only significance of the Proviso to Section 5 is its objective to indicate that the levy of an additional duty under Section 3 (7) would be over and above the tax which comes to be attracted on the supply component of the transaction. This too was thus an extension of Mr. Ojha's principal argument of the import of goods being a separate and distinct taxable event. 82. It was further argued that the treatment of a transaction under the GST regime which purports to classify supplies in the distinctive categories of goods or services cannot be stretched to the extent of wiping out a charge that is created and a tax which becomes imposable under a plenary statute. The submission was that merely because the CGST and the IGST describe activities or transactions as a supply of goods, services or both, the same cannot apply to all legislations universally. In view of the above, it was his submission that whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en it come to the question of grant of immunity. We thus find ourselves unable to countenance the challenge as raised. 30. Accordingly, and for all the aforesaid reasons, the writ petition fails and shall stand dismissed." 85. Mr. Ojha lastly sought to distinguish the judgment of the Supreme Court in Mohit Minerals by submitting that unlike the facts as they obtained in that case, here we are concerned with a transaction in respect of a single supply albeit having two aspects. According to Mr. Ojha, Mohit Minerals was concerned with a CIF contract and thus the principal question was the service element involved in the case of transportation. However, according to learned counsel, unlike what would obtain in a CIF contract where the obligation to transport goods up to the port is on the supplier and which in the facts of that case was the foreign exporter, here the repair services have been received directly by the petitioner. Therefore, according to Mr. Ojha, the decision in Mohit Minerals has no application. It is the aforenoted rival submissions which fall for determination. THE INTERSTATE LEVY ON SUPPLY OF GOODS, SERVICES OR BOTH 86. From a constitutional standpoint, it bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to strike a just balance between the powers of the Union and the States and built a foundation for the broad federal structure which the Constitution intended to espouse. The Articles noticed above were thus intended to act in furtherance of the constitutional goal of fiscal federalism. 89. The Constitution Amending Act and the paradigm shift that it introduced cannot possibly be overemphasized. In 2016, amendments came to be introduced in the Constitution which ushered in seminal changes in the distribution of taxing powers between Parliament and Legislatures of individual States. Article 246A thus ordains that both Parliament as well as the Legislature of every State would have the power to make laws in respect of a goods and services tax that may be imposed either by the Union or a State. Article 246A(2), however, reserves exclusive power in Parliament to make laws with respect to the levy of a goods and services tax where the supply of goods, services or both were to take place in the course of interstate trade or commerce. It is also pertinent to note that Article 246A itself came to be introduced in the Constitution by way of a non-obstante clause which thus accorded primacy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 93. The Constitution Amendment Act also saw various amendments which came to be introduced in Article 270. As that Article originally stood, it had provided that taxes on income other than agricultural income, though levied and collected by the Union Government, would be distributed between the Union and the States in the manner provided in that provision. That Article had initially undergone amendments by virtue of the Constitution Eightieth Amendment Act, 2000 and whereafter the words "income" and other than "agricultural income" were substituted by the employment of the phrase "all taxes and duties referred to in the Union List". The distribution of taxes and duties which Article 270 sought to regulate was however subjected to the sweep of Articles 268, 269 and 269A post the promulgation of the Constitution Amendment Act. Similar and corresponding provisions which were intended to give effect to the insertion of Articles 246A and 269A came to be inserted with the addition of sub-articles (1A) and (1B) therein. The broad subject of distribution of the goods and services tax amongst the Union and the States came to be made the subject of consideration of the Goods and Services Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tution Amendment Act, parallel amendments also came to be inserted in Article 366. For instance, the expression "goods" came to be defined in Article 366 (12) as including all materials, commodities and articles. The expression "goods and services tax" was explained by Article 366 (12)(a) to mean a tax on the supply of goods, services or both but to the exclusion of taxes on the supply of alcoholic liquor for human consumption. The word "services" was succinctly defined by Article 366(26)(a) as meaning anything "other than goods". 97. Post the fundamental alternation of the landscape pertaining to taxation, Parliament then took upon itself the task of framing an appropriate legislation to deal with the levy and collection of a goods and services tax which was envisioned under the prominent Articles of the Constitution noted hereinabove. However, before we proceed to notice some of the salient provisions forming part of the CGST and IGST, it would also be pertinent to briefly take note of some of the amendments which came to be made in the three legislative lists placed in the Seventh Schedule to the Constitution. 98. As was noticed in the preceding parts of this decision, List I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Articles of the Constitution. While we have extracted most of the provisions of the CGST and IGST which in our opinion would have a bearing on the principal issues that are posited for our consideration, we for the purposes of sketching a backdrop for the discussion which follows and to lend context to the same deem it appropriate to briefly revisit some of those provisions. 101. The CGST, as is evident from its Preamble, was envisaged to be a legislation which would make appropriate provisions for a levy and collection of tax on all intra-state supply of goods, services or both. This legislation essentially represented the essay of Parliament in extension of the power conferred by Article 246A(1) which enabled it to levy a goods and services tax on supplies. From out of the various expressions and words which came to be defined by Section 2 of the CGST, it would be pertinent to recall how that provision defines and assigns a meaning to expressions such as composite supply, continuous supply of goods, continuous supply of services, goods, integrated tax, intra-state supply of goods or services, fixing location of the recipient of services, recipient of supply of goods or service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified in the Schedule to the CGST. By virtue of sub-section (3) the Union Government was statutorily empowered to specify transactions which would either be treated as a supply of goods as opposed to a supply of service and vice versa on the recommendation of the GST Council. 104. Sections 8 and 9 are the charging sections which speak of the tax which would be leviable and attracted on all intra-state supply of goods and services as well as the manner in which the tax liability of a composite or mixed supply would be determined. By virtue of Sections 12 and 13 the statute fixed a steady point at which a liability to pay taxes on goods or services would arise. 105. This then takes us to the Schedule appended at the end of the CGST Act and which broadly classifies activities and transactions and guides us in determining which would constitute a supply of goods, a supply of services or a mixed supply. Schedule I lists out activities which would be liable to be treated as supplies even if made without consideration. Included within this Schedule is the subject of import of services by a person from a related entity or from any of its other establishments outside India in the course o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to impose a tax which would flow from Article 246 of the Constitution. It is equally important to bear in mind the indubitable fact that since the Union, as well as the States, came to be empowered to levy a goods and services tax, and what the Supreme Court has aptly chosen to describe as the exercise of simultaneous power, the non-obstante was also ordained to override Article 254 of the Constitution. Article 246A thus represents and acknowledges the authority of both constituents to have the authority to levy a goods and services tax notwithstanding anything contained in the Seventh Schedule and which in any case saw suitable amendments being introduced to synchronize with the amendments made in the various covenants of the Constitution noticed above. 109. The second key point that merits notice is the treatment of inter-state trade and commerce which was a subject that came to be placed solely in the province of the Union and liable to be regulated by parliamentary legislation. By virtue of Article 269A a goods and services tax which becomes leviable in the course of interstate trade and commerce thus came to be placed in the exclusive domain of the Union which now stands ena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions. 113. However, reverting back to our review of the constitutional amendments, we find upon a consideration of the SOR of the Constitution Amendment Act that its cornerstone was the avowed objective of replacing a multitude of indirect taxes being imposed by the Union and the States. Parliament thus deemed it appropriate to adopt measures which would enable trade and commerce to overcome the "cascading effect" of innumerable individual levies, dismantle the barriers to the free flow of goods and services and the creation of a common market for goods and services. While introducing the amendments, the SOR further explains that the goods and services tax would subsume the various Union and State levies which were otherwise being imposed. These were spelt out to include indirect taxes and levies such as the additional duty of excise, service tax as well as the additional/special additional duties of customs, surcharges and cesses "so far as they relate to the supply of goods and services". It was thus clearly envisaged that all of the aforenoted levies and taxes would get submerged in and replaced by the common goods and services tax. 114. The mandate of Articles 246, and 269A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adopted and embraced by the IGST in terms of Section 20 of that statute. This exercise of a statutory classification and characterization of the genre of supply is clearly in accordance with the mandate of Articles 246A and 269A of the Constitution. Although Sections 7 and 8 of the IGST thereafter proceed to declare when a supply of goods or services would be treated as a supply in the course of interstate trade or commerce or intra-state, these provisions do not undertake a de novo classification or categorization of supplies between that of goods or services. Section 7 thus and insofar as imports are concerned, confines itself to specifying when an import of goods or services would be treated as in the course of interstate trade or commerce. 118. What thus emerges from the aforesaid discussion is the following. The goods and services tax is clearly intended to wipe away the erstwhile regime of multiple taxes and levies and replace it with the imposition of a common levy which could be simultaneously levied by both the Union and the States. The Constitution thereafter proceeds to lay in place an elaborate machinery for the apportionment of those levies amongst the constituents of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the service tax on taxable services, the value added tax on sale or purchase of goods and certain other taxes shall be subsumed in the goods and services tax. Therefore, it requires certain consequential amendments in the Customs Act, 1962, the Customs Tariff Act, 1975, the Central Excise Act, 1944, the Finance Act, 2001 and the Finance Act, 2005 and repeal of certain enactments. 3. The Customs Act, 1962 provides for removal of goods from a customs station to a warehouse without payment of duty. It is proposed to amend the said Act to include 'warehouse' in the definition of "customs area" to ensure that an importer would not be required to pay the proposed integrated goods and services tax at the time of removal of goods from a customs station to a warehouse. It is also proposed to amend the said Act to insert new provisions therein so as to provide for furnishing of information by specified persons in respect of import or export of goods, on the lines of the Income-tax Act, 1961, the Central Excise Act, 1944, Chapter V of the Finance Act, 1994 and the legislations referred to in paragraph 1. 4. The Customs Tariff Act, 1975 is proposed to be amended to provide for le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1944, the Central Sales Tax Act, 1956, the Finance Act, 2001 and the Finance Act, 2005 and to repeal certain enactments. Be it enacted by Parliament in the Sixty-eighth Year of the Republic of India as follows:- 1. Short title and commencement.- (1) This Act may be called the Taxation Laws (Amendment) Act, 2017. (2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint: Provided that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the commencement of that provision. CHAPTER I Customs 2. Amendment of section 2.- In the Customs Act, 1962 (52 of 1962) (hereinafter referred to as the Customs Act), in section 2, in clause (11), after the words "the area of a Customs station", the words "or a warehouse" shall be inserted. 3. Insertion of new sections 108A and 108B.- In the Customs Act, after section 108, the following sections shall be inserted, namely:- "108A. Obligation to furnish information.- (1) Any person, being- (a) a local authority or other public body or association ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of registration or statement of accounts or holding any other information under any of the Acts specified above or under any other law for the time being in force, which is considered relevant for the purposes of this Act, shall furnish such information to the proper officer in such manner as may be prescribed by rules made under this Act. (2) Where the proper officer considers that the information furnished under sub-section (1) is defective, he may intimate the defect to the person who has furnished such information and give him an opportunity of rectifying the defect within a period of seven days from the date of such intimation or within such further period which, on an application made in this behalf, the proper officer may allow and if the defect is not rectified within the said period of seven days or, further period, as the case may be, so allowed, then, notwithstanding anything contained in any other provision of this Act, such information shall be deemed as not furnished and the provisions of this Act shall apply. (3) Where a person who is required to furnish information has not furnished the same within the time specified in sub-section (1) or sub-section (2), the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stoms, but does not include the tax referred to in sub-section (7) or the cess referred to in sub-section (9). (9) Any article which is imported into India shall, in addition, be liable to the goods and services tax compensation cess at such rate, as is leviable under section 8 of the Goods and Services Tax (Compensation to States) Cess Act, 2017 on a like article on its supply in India, on the value of the imported article as determined under sub-section (10). (10) For the purposes of calculating the goods and services tax compensation cess under sub-section (9) on any imported article where such cess is leviable at any percentage of its value, the value of the imported article shall, notwithstanding anything contained in section 14 of the Customs Act, 1962, (52 of 1962) be the aggregate of- (a) the value of the imported article determined under sub-section (1) of section 14 of the Customs Act, 1962 or the tariff value of such article fixed under sub-section (2) of that section, as the case may be; and (b) any duty of customs chargeable on that article under section 12 of the Customs Act, 1962, and any sum chargeable on that article under any law for the time being in forc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Integrated Goods and Services Tax Act, 2017 on a like article on its supply in India, on the value of the imported article as determined under sub-section (8) [or sub-section (8A), as the case may be]. 124. The stage now stands set for us to examine Section 5 of the IGST alongside Section 3 (7) of the CTA. However, before we proceed to commence down that path, we deem it apposite to render the following prefatory remarks which would guide us in appreciating the interplay between the different Articles of the Constitution and the entries comprised in the three legislative lists placed in the Seventh Schedule. Undisputedly, Article 246 constitutes the source of the legislative power and embodied the broad distribution of subjects between Parliament and the State Legislatures. It is this scheme which also informs Article 246A and which now enables both Parliament and the State Legislatures to frame laws with respect to the levy of a goods and service tax. That power, however, is made subject to the primacy accorded to Parliament insofar as supplies made in the course of interstate trade or commerce are concerned. 125. It is also pertinent to bear in consideration that in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter of construing the entries. The power to legislate is given to the appropriate legislatures by Article 246 of the Constitution. The entries in the three Lists are only legislative heads or fields of legislation : they demarcate the area over which the appropriate legislatures can operate. It is also well settled that widest amplitude should be given to the language of the entries. But some of the entries in the different Lists or in the same List may overlap and sometimes may also appear to be in direct conflict with each other. It is then the duty of this Court to reconcile the entries and bring about harmony between them. When the question arose about reconciling Entry 45 of List I, duties of excise, and Entry 18 of List II, taxes on the sale of goods, of the Government of India Act, 1935, Gwyer, C.J., in In re Central Provinces and Berar Act 14 of 1938 [(1939) FCR 18, 42, 44] observed: "A grant of the power in general terms, standing by itself, would no doubt be construed in the wider sense; but it may be qualified by other express provisions in the same enactment, by the implication of the context, and even by considerations arising out of what appears to be the ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve Entry 2 of all its content and reduce it to useless lumber". This rule of construction has not been dissented from in any of the subsequent decisions of this Court. It may, therefore, be taken as a well settled rule of construction that every attempt should be made to harmonize the apparently conflicting entries not only of different Lists but also of the same List and to reject that construction which will rob one of the entries of its entire content and make it nugatory." 127. In State of A.P. vs. National Thermal Power Corpn. Ltd. (2002) 5 SCC 203, an interesting question cropped up before the Supreme Court and that being whether States could tax an interstate sale of electricity notwithstanding the restrictions imposed by Articles 269 and 286. Answering that question, the Supreme Court pertinently observed thus:- "25. Having seen the properties of electricity as goods and what is inter-State sale, let us examine the effect of Entry 53 List II, having been left unamended by the Sixth Amendment from another angle. The Sixth Amendment did not touch Entry 53 in List II and so the contents of Entry 53 were not expressly made subject to the provisions of Entry 92-A of List I an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) made it clear that the situs of the sale or purchase is wholly immaterial as regards the inter-State trade or commerce. In view of Section 3 of the Central Sales Tax Act, 1956, all that has to be seen is whether the sale or purchase (a) occasions the movement of goods from one State to another; or (b) is effected by a transfer of documents of title to the goods during their movement from one State to another. If the transaction of sale satisfies any one of the two requirements, it shall be deemed to be a sale or purchase of goods in the course of inter-State trade or commerce and by virtue of Articles 269 and 286 of the Constitution the same shall be beyond the legislative competence of a State to tax without regard to the fact whether such a prohibition is spelled out by the description of a legislative entry in the Seventh Schedule or not. 27. It is well settled, and hardly needs any authority to support the proposition, that several entries in the three lists of the Seventh Schedule are legislative heads or fields of legislation and not the source of legislative empowerment. (To wit, see Calcutta Gas Co. Ltd. v. State of W.B. [AIR 1962 SC 1044 : 1962 Supp (3) SCR 1] ) Compet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritorial operation of State legislation." 128. It is thus manifest that one cannot lose sight of the pre-eminence which the Constitution accords upon positive covenants enshrined therein and the various entries in the three legislative lists merely intended to broadly delineate and demarcate fields of legislation. An entry in those lists, however, cannot be read or construed as either restricting or impinging upon the primary power to legislate which the body of the Constitution positively confers. 129. Way back in 1952, Patanjali Shastri, the learned Chief Justice, in the State of Bihar vs. Kameshwar Singh (1952) 1 SCC 528 pithily observed: - "16. It is true that under the common law of eminent domain as recognised in the jurisprudence of all civilized countries, the State cannot take the property of its subject unless such property is required for a public purpose and without compensating the owner for its loss. But, when these limitations are expressly provided for and it is further enacted that no law shall be made which takes away or abridges these safeguards, and any such law, if made, shall be void, there can be no room for implication, and the words "acquisition of prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to. The court sometimes is duty-bound to guard against extending the meaning of the words beyond their reasonable connotation in anxiety to preserve the power of the legislature. 7. It is further a well-settled principle that entries in the different lists should be read together without giving a narrow meaning to any of them. Power of Parliament as well as the State Legislature are expressed in precise and definite terms. While an entry is to be given its widest meaning but it cannot be so interpreted as to override another entry or make another entry meaningless and in case of an apparent conflict between different entries, it is the duty of the court to reconcile them. When it appears to the court that there is apparent overlapping between the two entries the doctrine of "pith and substance" has to be applied to find out the true nature of a legislation and the entry within which it would fall. In case of conflict between entries in List I and List II, the same has to be decided by application of the principle of "pith and substance". The doctrine of "pith and substance" means that if an enactment substantially falls within the powers expressly conferred by the Constitution up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s treatment under the IGST. 133. It would consequently and on a fundamental plane be wholly impermissible to attempt to alter or recharacterize the character so accorded from a supply of service to one being a supply of goods. The conferment of character, its placement as a supply of goods or alternatively as a service and how a particular supply is liable to be viewed for purposes of taxation falls within the exclusive domain of Parliament. By virtue of the Constitution, all interstate supplies affected in the course of interstate trade or commerce, and which would include import thereof, thus come to be classified either as a supply of goods or of services. This exercise of classification is embossed with a stamp of finality by virtue of the provisions of the CGST which is then embraced by the IGST without any further modification or amendment. This exercise of classification is neither random nor unregulated nor left to the vagaries of individual perception. The statutory structure with sufficient clarity classifies and categorises supplies between those relating to goods and those pertaining to services. 134. The view that we take in this regard is further fortified by bearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nificantly, however, while Section 5 (1) speaks of goods, services or both, the levy of integrated tax which forms the heart of its Proviso speaks only of goods imported into India. This assumes significance since both the CGST as well as the IGST envisage the levy of a tax on both goods as well as services. What we seek to lay emphasis upon is the existence of a conspicuous, pronounced and critical omission of services in the Proviso to Section 5 (1). The Legislature has thus deliberately refrained from providing for the levy of an integrated tax on the import of services into India as part of an additional levy as contended by the respondents. 139. It would be pertinent to recall that Article 366 (12) defines goods to include all materials, articles or commodities. The word "services" is however defined by Article 366 (26A) as meaning anything other than goods. We would thus necessarily have to bear in mind the distinction in which the Constitution itself creates goods and services. It would be well neigh impossible for one to contend that Parliament was either unaware of this distinction or that this was a case of a legislative omission or accidental slip. At least this was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rizon. 143. As noticed hereinabove, prior to its amendment in 2017, the levy of an additional duty in terms of Section 3 (7) was statutorily ordained to be a duty chargeable in addition to any other duties imposable either under the CTA or under any other law for the time being in force. It was this part which was deleted completely and Section 3 (7) was recast to essentially mirror and complement the Proviso to Section 5 (1). This becomes even more evident from the language in which that provision stands cast and when it uses the expressions "integrated tax" and "as is leviable under Section 5 of the Integrated Goods and Services Tax Act, 2017......". Of equal import is the employment of the words 'any article', 'like article' and 'imported article'. The word article would undoubtedly have to draw colour from Article 366 (12) when it defines goods. We are fortified in the view that we take in light of the indubitable fact of neither the Customs Act nor for that matter the CTA being even remotely concerned with the levy of a duty on services. We are thus of the firm opinion that it would be wholly incorrect to view or recognise Section 3 (7) as either contemplating or sanctioning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctment. Usually, a proviso cannot be interpreted as a general rule that has been provided for. Nor it can be interpreted in a manner that would nullify the enactment, or take away in entirety, a right that has been conferred by the statute. In case the language of the main enactment is clear and unambiguous, a proviso can have no repercussion on the interpretation of the main enactment, so as to exclude by implication, what clearly falls within its expressed terms. If, upon plain and fair construction, the main provision is clear, a proviso cannot expand or limit its ambit and scope. [Vide CIT v. Indo Mercantile Bank Ltd. [AIR 1959 SC 713], Kush Saigal v. M.C. Mitter [(2000) 4 SCC 526 : AIR 2000 SC 1390] , Haryana State Coop. Land Development Bank Ltd. v. Employees Union [(2004) 1 SCC 574 : 2004 SCC (L&S) 257], Nagar Palika Nigam v. Krishi Upaj Mandi Samiti [(2008) 12 SCC 364 : AIR 2009 SC 187] and State of Kerala v. B. Six Holiday Resorts (P) Ltd. [(2010) 5 SCC 186] ] 21. The proviso to a particular provision of a statute, only embraces the field which is covered by the main provision, by carving out an exception to the said main provision. (Vide Ram Narain Sons Ltd. v. CST [AIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CTA. The amendment itself and by virtue of which the expression "integrated tax" came to be inserted in sub-section (7) was contemporaneously moved and promulgated in anticipation of the CGST and IGST being energised. We had also in the previous parts of this decision had an occasion to notice that the SOR of the Taxation Laws (Amendment) Act, 2017 had in unequivocal terms alluded to the aforenoted developments. It would thus be wholly incorrect to view Section 3 (7) as envisaging the levy of a tax independent of the liability that Section 5 creates under the IGST. Both the Proviso to Section 5 (1) as well as Section 3 (7), in our considered opinion, are liable to be read in conjunction since both parallelly speak of the levy of an integrated tax on imported goods. While Section 5 (1) speaks of that tax being levied and collected in accordance with Section 3 of the CTA, Section 3 (7) of the latter uses the expression "as is leviable under Section 5". The plain language in which these two provisions stand cast and placed in the statute leaves us in no doubt that Section 3 (7) merely constitutes the point at which the integrated tax alluded to in Section 5 (1) would be levied an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction can be taxed through separate provisions. However, this Court in BSNL [BSNL v. Union of India, (2006) 3 SCC 1] observed that the aspect theory does not allow the value of goods to be included in services and vice versa. In BSNL [BSNL v. Union of India, (2006) 3 SCC 1], this Court dealt with the question of whether provision of telephone services involved a transfer of goods which would be amenable to sales tax. In this context, the Court observed : (SCC p. 42, para 88) "88. No one denies the legislative competence of the States to levy sales tax on sales provided that the necessary concomitants of a sale are present in the transaction and the sale is distinctly discernible in the transaction. This does not however allow the State to entrench upon the Union List and tax services by including the cost of such service in the value of the goods. Even in those composite contracts which are by legal fiction deemed to be divisible under Article 366 (29-A), the value of the goods involved in the execution of the whole transaction cannot be assessed to sales tax." 164. In the present case, the question is whether the imposition of IGST on supply of services can be sustained when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the text of the contract between the foreign shipping line and the foreign exporter to identify the Indian importer as the recipient of the services. This Court has upheld the validity of the impugned notifications on this ground. The Union Government is contradicting the main plank of its submission now by contending that the two legs of the transaction are separate standalone agreements. That would imply, that while on the one hand the Union Government seeks to levy tax on the Indian importer by going beyond the text of the contract between the foreign shipping line and foreign exporter (for the purpose of identifying the Indian importer as the recipient of services), on the other hand, as far as the submissions on composite supply are concerned, the Union Government urges that the contracts must be viewed as separate transactions, operating in silos. We are unable to subscribe to this view. The Union of India cannot be heard to urge arguments of convenience-treating the two legs of the transaction as connected when it seeks to identify the Indian importer as a recipient of services while on the other hand, treating the two legs of the transaction as independent when it seeks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision recognized the application of the aspect theory being dependent on whether the transaction could be said to involve two or more taxable events. 155. We fail to appreciate how the transaction in respect of the subject goods could possibly be construed as giving birth to two separate and divisible taxable events. The transaction remained that of supply of services in the shape of repair or refurbishment. It clearly did not constitute a supply of goods. The entire edifice of this argument of the respondents based on the aspects theory is itself dependent upon the premise that Section 3 (7) constituted an independent levy of tax. This as held hereinabove, cannot possibly be sustained or countenanced in law. As observed earlier, the transaction remained an import of service with no discernible break in the chain connected with the movement of the articles and their departure from Indian shores. The service rendered upon those articles came to be indelibly embedded in those goods and it was the work expended by the MROs' on those goods which constituted the principal purpose of their movement and imbued the articles. This was, therefore, not a case where one could legitimately a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of doubt" could be validly employed provided it was manifest that the position which is sought to be clarified was inherent and existed in the statute from its very origin. 159. As has been repeatedly explained by our courts, the mere usage of the title 'Explanation' or the phrase 'removal of doubt' is neither conclusive nor determinative of the question of whether the clarification really amounts to an explanation of a position which was implicit and duly recognized by the statue or a notification as it originally stood. This position in law becomes apparent upon a review of the following precedents which we find are pertinent to the issue which is raised. 160. The true nature of an 'Explanation' was lucidly explained by the Supreme Court in S. Sundaram Pillai vs. V.R. Pattabiraman (1985) 1 SCC 591 where their Lordships had held as under: "46. We have now to consider as to what is the impact of the Explanation on the proviso which deals with the question of wilful default. Before, however, we embark on an enquiry into this difficult and delicate question, we must appreciate the intent, purpose and legal effect of an Explanation. It is now well settled that an Explanation added ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 316] "On the basis of the language of the Explanation this Court held that it did not widen the scope of clause (c). But from what has been said in the case, it is clear that if on a true reading of an Explanation it appears that it has widened the scope of the main section, effect be given to legislative intent notwithstanding the fact that the Legislature named that provision as an Explanation." 52. In Dattatraya Govind Mahajan v. State of Maharashtra [(1977) 2 SCC 548 : (1977) 2 SCR 790 : AIR 1977 SC 915] Bhagwati, J. observed thus: (SCC p. 563, para 9) "It is true that the orthodox function of an Explanation is to explain the meaning and effect of the main provision to which it is an Explanation and to clear up any doubt or ambiguity in it.... Therefore, even though the provision in question has been called an Explanation, we must construe it according to its plain language and not on any a priori considerations." 53. Thus, from a conspectus of the authorities referred to above, it is manifest that the object of an Explanation to a statutory provision is- "(a) to explain the meaning and intendment of the Act itself, (b) where there is any obscurity or vagueness in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on it appears to the Court in a given case that the effect of the Explanation is to widen the scope of the main section then effect must be given to the legislative intent. It was held that in all such cases the Court has to find out the true intention of the legislature. Therefore, there is no single yardstick to decide whether an Explanation is enacted to clarify the ambiguity or whether it is enacted to widen the scope of the main section. On the facts it was held that before the 1948 Amendment to the Bihar and Orissa Cooperative Societies Act, 1935, there was an Explanation on the statute-book and the subsequent Explanation was only to clarify the earlier Explanation and, therefore, the Court held that the purpose of the subsequent Explanation was not to enlarge the scope of Section 48(1)(e) in the Bihar and Orissa Cooperative Societies Act, 1935. In the present case prior to amending Act 27 of 1996, there was no Explanation covering banks, LICs, etc. As stated above, Explanation IV was added for the first time by the said amending Act 27 of 1996. The definition of the word "dealer" thus stands expanded by the said amending Act 27 of 1996. In our view, therefore, Explanation IV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stributor are that of promotion or marketing of lottery tickets for their clients i.e. the State Governments. Hence, the Board decided that the services of the distributor fall under the 'business auxiliary service' and, therefore, be chargeable to service tax. The value of taxable service shall be taken into account as the total face value of the tickets sold minus (a) the total cost of the tickets paid by the distributor to the State Government, and (b) the prize money paid by the distributor. In other words, the value is the mark up between the buying and selling of lottery tickets." (emphasis supplied) A bare perusal of the said circular letter would clearly show that lottery tickets were considered to be goods. It is with that mindset, the circular was issued. However, it must have been realised that resale of lottery tickets by the distributor or by others is not permissible. 31. Whether sub-clause (ii) of clause (19) of Section 65 had been applied in case of any other distributor or agent of such lottery tickets is not known. If the assertion of Mr Salve that nobody had demanded tax under the second clause is correct, we do not know why the principle of "small repairs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent having the force of law, which is clarificatory or explanatory in nature and purport and which seeks to clear doubts or correct an obvious omission in a statute, would generally be retrospective in operation, vide Ramesh Prasad Verma. Therefore, in order to determine whether the Government Order dated 29th March, 2001 may be made applicable retrospectively, it is necessary to consider whether the said order was a clarification or a substantive amendment. 46. In order to effectively deal with the aspect as to retrospective operation of the Government Order dated 29th March, 2001 it may be useful to refer to the following extract from the treatise, Principles of Statutory Interpretation, 11th Edition (2008) by Justice G.P. Singh on the sweep of a clarificatory/declaratory/explanatory provision: "The presumption against retrospective operation is not applicable to declaratory statutes. As stated in Craies and approved by the Supreme Court : For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any Statute. Such acts are usually held to be retrospective. [...] An explanatory Act is generally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and distinguished from a substantive amendment. 50. An explanation/clarification may not expand or alter the scope of the original provision, vide Bihta Cooperative Development Cane Marketing Union Ltd. v. Bank of Bihar, AIR 1967 SC 389. Merely describing a provision as an "Explanation" or a "clarification" is not decisive of its true meaning and import. On this aspect, this Court in Virtual Soft Systems Ltd. v. Commissioner of Income Tax, Delhi, (2007) 289 ITR 83 (SC) observed as under: "Even if the statute does contain a statement to the effect that the amendment is declaratory or clarificatory, that is not the end of the matter. The Court will not regard itself as being bound by the said statement in the statute itself, but will proceed to analyse the nature of the amendment and then conclude whether it is in reality a clarificatory or declaratory provision or whether it is an amendment which is intended to change the law and which applies to future periods." 51. This position of the law has also been subscribed to in Union of India v. Martin Lottery Agencies Ltd., (2009) 12 SCC 209 wherein it was stated that when a new concept of tax is introduced so as to widen the net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 29th March, 2001 has restricted the eligibility of lecturers for advance increments at the time of placement in the selection grade, only to those who do not have a Ph.D. degree at the time of recruitment and subsequently acquire the same." 164. In Kirloskar Ferrous Industries Ltd. vs. Union of India (2025) 1 SCC 695, the Supreme Court reiterated the aforenoted precepts in the following words:- "66. What can be discerned from the above is that an explanation must be read so as to harmonise with and clear up any ambiguity in the main section. It should not be so construed as to widen the ambit of the section. An explanation does not enlarge the scope of the original section that it is supposed to explain. It is axiomatic that an explanation only explains and does not expand or add to the scope of the original section. The purpose of an explanation is, however, not to limit the scope of the main provision. The construction of the explanation must depend upon its terms, and no theory of its purpose can be entertained unless it is to be inferred from the language used. An "explanation" must be interpreted according to its own tenor. Sometimes an explanation is appended to stress ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the very inception of the provisions to which the Explanation is added. 30. In C.I.T. v. S.R. Patton, [(1992) 193 ITR 49], the Kerala High Court was considering the effect of the Explanation to Section 9(1)(ii) of the Act. The Bench held at page 55: "The mere use of the label "Explanation" is not decisive of the true meaning and scope of the provision. Ordinarily, the purpose of an Explanation in a statute is to clarify or explain or settle any doubt or ambiguity or controversy. It may even widen the scope of the main provision in rare cases. The words used alone can reflect the true intent and they should be construed on their own terms. In this regard, the context, background and history of the legislation may be looked into-See Aphali Pharmaceuticals Ltd. v. State of Maharashtra, [(1989) 4 SCC 378 : AIR 1989 SC 2227, p. 393, paragraph 33]-wherein the Supreme Court has analysed the entire law on the point". xxx xxx xxx 34. Keshavji Ravji and Co. v. Commissioner of Income-tax, [(1990) 183 ITR Page 1] is also a decision of the Supreme Court. One of the questions that arose for consideration was whether Explanation 1 added to Section 40 (b) of the Act in the year 1984 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation will be hijacking the intention of the legislature into an impermissible area. 36. The declaration and the clarification involved in the Explanation 2, are only for the purposes of assessments with effect from 1-4-1976. This provision, widens the concept of 'entertainment expenditure' by including in its scope, such of the expenditures which are otherwise, traditionally understood as the routine business expenditures incurred in connection with the 'business-hospitality'. Therefore, the widened meaning cannot be extended to the past period when the amended Explanation 2 was not in operation." 166. It would be profitable in this context to notice the following pertinent observations which appear in CIT vs. Telstra Singapore (P) Ltd 2024 SCC OnLine Del 5016. "71. It was the aforesaid precepts which appear to have guided the court in DIT v. New Skies Satellite BV[(2016) 382 ITR 114 (Delhi); 2016 SCC OnLine Del 796.] and where the amendments introduced in section 9 were sought to be pressed into aid by the Department. In DIT v. New Skies Satellite BV [(2016) 382 ITR 114 (Delhi); 2016 SCC OnLine Del 796.], the court firstly doubted the characterization of those amendmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e when it purports to annul, or has the undeniable effect of annulling, an interpretation given by the courts to the term sought to be clarified. In other words, does the rule against clarificatory amendments laying down new principles of law extend to situations where law had been judicially interpreted and the Legislature seeks to overcome it by declaring that the law in question was never meant to have the import given to it by the court? The general position of the courts in this regard is where the purpose of a special interpretive statute is to correct a judicial interpretation of a prior law, which the Legislature considers inaccurate, the effect is prospective. Any other result would make the Legislature a court of last resort. United States v. Gilmore [75 US 330 (1869); 8 Wall. 330; 19 L.Ed. 396.] , Peony Park v. O'Malley [223 F.2d 668 (8th Cir. 1955).]. It does not mean that the Legislature does not have the power to override the judicial decisions which in its opinion it deems as incorrect, however to respect the separation of legal powers and to avoid making a Legislature a court of last resort, the amendments can be made prospective only (Ref. County of Sacramento ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... national instrument effected between two sovereign States prior to such amendment. In the context of international law, while not every attempt to subvert the obligations under the treaty is a breach, it is nevertheless a failure to give effect to the intended trajectory of the treaty. Employing interpretive amendments in domestic law as a means to imply contoured effects in the enforcement of treaties is one such attempt, which falls just short of a breach, but is nevertheless, in the opinion of this court, indefensible.... 54. Neither can an act of Parliament supply or alter the boundaries of the definition under article 12 of the Double Taxation Avoidance Agreement by supplying redundancy to any part of it. This becomes especially important in the context of Explanation 6, which states that whether the 'process' is secret or not is immaterial, the income from the use of such process is taxable, none the less. Explanation 6 precipitated from confusion on the question of whether it was vital that the 'process' used must be secret or not. This confusion was brought about by a difference in the punctuation of the definitions in the double taxation avoidance agreements and the dome ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epair value, insurance and freight." 168. Suffice it to note that the Circular of the CBIC does not refer to any prior decision that may have been taken by the GST Council opining that a reimport of goods sent abroad for repairs would attract not just IGST but also an additional duty under the CTA. Notification No. 45/2017 came to be promulgated as per the considered case of the respondents themselves in implementation of a policy decision that a reimport of goods sent abroad for repairs would attract IGST on a value equal to the repair value. This part of the levy is one which is not even questioned by the writ petitioners. The question which, however, merits consideration is whether Notification no. 45/2017 envisaged a duty or a tax other than or over and above the BCD. 169. We find ourselves unable to read or interpret Notification No.45/2017 as embodying an intendment to levy a tax or cess referable to the CTA especially since the original notification only spoke of a duty of customs. It would thus be wholly impermissible to view the amendment sought to be introduced by Notification No. 36/2021 as being either in the nature of an explanation, a removal of doubt clause or clar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Notification 36/2021-Customs, dated 19.07.2021 (SI. No. 1 to 163 of Annexure) 5.4 The ground taken by the Appellant for this period is primarily that Notification No. 45/2017-Customs refers to 'duty of customs' at sl. no. '2' and such 'duty of customs' would mean basic customs duty and does not include IGST. It is also observed that in similar matter, Appellant's appeals were accepted by the CESTAT Delhi vide Final Order No 51226-51571/2020 dated 02.11.2020 and 50608-51022 dated 15.01.2021. In both the orders, Hon'ble Tribunal had analyzed the meaning of word "duty of Customs" used in SI. No 2 of the Notification No 45/2017-Cus. The Hon'ble Tribunal also negated the arguments of the Revenue that the Government intended to include integrated tax and compensation cess in the expression "duty of Customs". 5.5 I note that post these judgements, CBIC has issued Circular No 16/2021-Customs dated 19.07.2021 in this matter. The relevant portion of the circular is as below:- "4. GST rate and exemptions are prescribed on the recommendation of the GST Council. The Council, at the time of roll out of GST decided to continue the concession as were a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Hon'ble Supreme Court against the said Order. 7. In the above background, the matter was placed before the GST Council in its 43rd Meeting held on the 28th May, 2021. The GST Council deliberated on the issue and recommended that a suitable clarification, including any clarificatory amendment, if required, may be issued for removal of any doubt, to clarify the decision of the GST Council that re-import of goods sent abroad for repair attracts IGST and cess (as applicable) on a value equal to the repair value, insurance and freight. 8. Accordingly, as recommended by the GST Council, it is clarified that notification Nos. 45/2017-Customs and 46/2017-Customs, both dated the 30th of June, 2017 were issued to implement the decision of the GST Council taken earlier, that re-import of goods sent abroad for repair attracts IGST on a value equal to the repair value, insurance and freight. Further, in the light of the recommendations of the GST Council in its 43rd Meeting, a clarificatory amendment has been made in the said notifications, vide notification Nos. 36/2021-Customs and 37/2021-Customs, both dated 19th July, 2021, without prejudice to the leviability of IGST, as above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, under said serial numbers, is only from the amount of said tax, cess and duty over and above the amount so calculated." 5.8 Conjoint reading of Circular No 16/2021-Cus dated 19.07.2021 and the said notification make it crystal clear that the explanation 'd' is clarificatory in nature. The intentions of GST council amplified in the said circular have been implemented by this amendment. As it had always been intention of the legislature that IGST should be leviable on such re-imports, the explanation added in the notification 45/2017-Cus by Notification No 36/2021-Customs dated 19.07.2021 will have retrospective effect as it does not change position of law but only clarifies it in more specific terms. 5.9 I refer to the ruling of the Hon'ble Supreme Court's judgement in case of W.P.I.L. Ltd. Vs Commissioner Of Central Excise, Meerut, U.P. [2005 (181) E.L.T. 359 (S.C.)] which held that clarificatory notifications shall have retrospective effect. The relevant portion is as under - "14. In our opinion, therefore, the authorities were in error in upholding the demand and in directing the appellant to pay excise duty. 15. The learned Counsel for the appellant is also ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nus, commission or remuneration made by the firm, to the partners, as not deductible in computing the taxable income of the firm. This ignored bona fide payments and the different capacities in which the partners may receive the payment. In fact, this literal meaning of the words resulted in an unwarranted artificial situation, and therefore, when the Explanations were added to explain the real situation, Court thought it proper to apply these Explanations as giving the true meaning of Section 40 (b) all along. In fact, one of us (K. S.Bhat, J) is a party to a similar decision of the Karnataka High Court in Commissioner of income Tax Vs Mangalore Ganesh Beedi Works, [(1992) 193 ITR 77]. 27. After referring to the several decisions the Karnataka High Court observed at page 87: "We have quoted elaborately from several decisions to highlight the problem posed by the wording of Section 40 (b) without the Explanation now added to it." 28. Again, as to the normal principle governing the Explanation, the Court held: "The normal principle in construing an Explanation is to understand it as explaining the meaning of the provision to which it is added; the Explanation does not enlarge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be construed according to its literal and grammatical meaning whatever the result may be. Unless otherwise provided, the same words must normally be construed throughout the Act in the same sense, and in the case of old statutes regard must be had to its contemporary meaning if there has been no change with the passage of time." That strict interpretation does not encompass strict-literalism into its fold. It may be relevant to note that simply juxtaposing 'strict interpretation' with literal rule' would result in ignoring an important aspect that is 'apparent legislative intent'. We are alive to the fact that there may be overlapping in some cases between the aforesaid two rules. With certainty, we can observe that, 'strict interpretation' does not encompass such literalism. which lead to absurdity and go against the legislative intent. As noted above, if literalism is at the far end of the spectrum, wherein it accepts no implications or interferences, then 'strict interpretation' can be implied to accept some form of essential inferences which literal rule may not accept." (Emphasis supplied). 5.12 From above two paragraphs, it is eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment done as per the Notification. 5.17 I must add that validity of levy of IGST as per Notification No. 45/2017- Customs, dated 30.06.2017 as amended by Notification 36/2021-Customs, dated 19.07.2021 is not open to challenge before this Office. In this regard I refer to Order of Hon'ble Tribunal in Sparkle International 2015 (325) E.L.T. 926 (Tri. - Del.) in which it was held- 6. We have considered the contentions of both sides. The appellant had claimed exemption from Special Additional Duty under Notification No. 20/2006-Cus. in respect of the impugned goods in terms of entry No. 50 in the table appended to Notification No. 20/2006-Cus. The said entry is reproduced below: - 50 Any Chapter All goods specified in the First Schedule to the Additional Duty of Excise (Goods Special Importance) Act, 1957 (58 of 1957) Nil It is, thus, evident from the above entry (No. 50) that once the impugned goods were removed from the said 1st Schedule vide Finance Act, 2011, the benefit of exemption Notification No. 20/2006-Cus. no longer remained available to the appellant in respect of the impugned goods. The appellant has not disputed the fact that the impugned goods were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat he has produced the Exemption Notification is sufficient enough to admit the refund claim. In other word, when the subject goods is exempted from Sales Tax, it necessary follows that he is not required to pay the CVD. When the Item imported is exempted from Sales Tax/VAT, the same should have also been exempted from. CVD. This would have simplified the matter. 5. It is pertinent to mention here that what is abated cannot be taken away indirectly. In these circumstances, we do not find any reason to stay the operation of the impugned Orders-in-Appeal. Stay Petitions are dismissed." We find that CESTAT in this order has prima facie disregarded the fact that the appellant was not entitled to the benefit of Notification No. 102/2007-Cus. and in effect held that the Central government could not collect the impugned SAD in that case. As CESTAT is not competent to challenge the legality of a Notification issued by Central Govt., prima facie, the order is issued without jurisdiction and an order issued without jurisdiction is a nullity. More importantly, the said CESTAT order (in the case of Katyal Metal Agencies) is only an interim order dismissing stay petition of Revenue and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as such make it clarificatory. For an amendment to be legitimately classified as an 'Explanation' or a 'removal of doubts' provision, it must be demonstrably evident that the position it seeks to clarify was already incorporated, contained or rooted in the original statute or the notification or even intended to be as such. 174. An explanation or clarification could be validly construed as meeting the tests as propounded if it attempts to elucidate a pre-existing legal position that was implicit in the statute or the notification from its inception. It thus seeks to explain and remove ambiguities and uncertainties surrounding the meaning liable to be ascribed to a word or a provision. However, before it can be legitimately accepted to be clarificatory, one would have to be satisfied that its true intent got obscured in the course of judicial interpretation. However and as we have found hereinabove, there was no ambiguity in the notification adverting to a duty of customs alone. We thus find ourselves unable to concur with or uphold the view to the contrary as expressed by the CESTAT. SUMMATION 175. We accordingly and for all the aforesaid reasons are of the considered opinion th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 3 (7) of the CTA are indelibly connected to the levy and collection of the tax contemplated under the former. We find ourselves unable to construe or interpret Section 3 (7) as envisaging an independent levy. 178. The impugned amendments ushered in by virtue of Notification No. 36/2021 together with the clarification issued by the CBIC were clearly intended to expand the tax net and cannot, therefore, be termed to be merely clarificatory. The original notifications were in unambiguous terms restricted to the levy of a BCD. It was this position which was sought to be drastically amended by those changes. In any event, the levy of an additional duty even after the transaction has been subjected to the imposition of a tax treating it to be a supply of service would be clearly unconstitutional and cannot be sustained. DISPOSITION 179. We accordingly allow the instant writ petitions. Notification No. 36/2021 insofar as it purports to levy an additional levy over and above the IGST imposed under Section 5 (1) by adding the words "....tax and cess" is declared unconstitutional, ultra vires the IGST and is quashed to the aforesaid extent. For reasons aforenoted, we also declare ..... 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