The recent months have seen several significant rulings by various High Courts on critical issues under the Goods and Services Tax (GST) regime. These decisions offer much-needed clarity on determining the nature of supply, availing export benefits, procedural compliances, and calculating limitation periods for appeals.
1. Inter-state vs. Intra-state Supply: Delivery Overrides Title Transfer
A common area of dispute between taxpayers and the department has been the determination of the "place of supply" for goods.
Facts: In a recent case, a taxpayer sold goods to customers located in other states. While the title (legal ownership) of the goods was transferred at the taxpayer’s factory gate, the goods were physically delivered to the recipient's location in another state. The taxpayer paid Integrated GST (IGST), treating it as an inter-state supply. The department, however, demanded Central GST and State GST (CGST & SGST), contending that since the title passed within the state, it was an intra-state supply.
Ruling: The Karnataka High Court provided a crucial clarification. It held that under Section 10(1)(a) of the IGST Act, 2017, the place of supply is the location where the movement of goods terminates for delivery to the recipient. The point of transfer of title or the handing over of goods to a carrier is not the deciding factor. The Court affirmed that such supplies are inter-state in nature and validated the payment of IGST. It also noted that demanding CGST & SGST when IGST was already paid would amount to double taxation.
Case: Toyota Kirloskar Motor v. Union of India
2. Export of Services: The Conundrum of Supplies Without Consideration
The eligibility to claim benefits for the export of services, especially when no consideration is charged, has been a contentious issue.
Facts: An Indian company provided services to its overseas group company without receiving any payment (i.e., without consideration). It paid GST on these supplies and subsequently filed for a refund, claiming it as a "zero-rated supply" under Section 16 of the IGST Act. The department denied the refund on the ground that no foreign exchange was realized.
Ruling: The Delhi High Court observed that while the tax liability on the supply remains (as supply includes supplies made without consideration under Schedule I of the CGST Act), the inability to realize foreign exchange deprives the taxpayer of the export benefits linked to such zero-rated supplies. The Court highlighted the need for a harmonious reading of Section 7 of the CGST Act (defining 'supply') and Section 16 of the IGST Act (zero-rated supply). It directed the government to file its affidavit for further consideration.
Case: DHL Express (India) v. Union of India
3. Procedural Maze: Correct Forum for Seeking Interest on Delayed IGST Refund
The overlap between customs and GST laws often leads to confusion regarding the appropriate forum for seeking remedies.
Facts: A taxpayer sought interest on a delayed refund of IGST paid on exported goods. The original application was rejected by the adjudicating authority. The taxpayer then filed an appeal before the Customs Appellate Authority, which rejected it on the grounds of lacking jurisdiction.
Ruling: The Bombay High Court acknowledged the taxpayer's diligent but misguided pursuit of the remedy. It held that the time spent litigating before the incorrect forum (Customs) should not prejudice the taxpayer. The Court permitted the taxpayer to now file an appeal before the correct forum—the GST Appellate Authority—without being barred by the normal limitation period. This ruling underscores the prevailing confusion but protects taxpayers who act in good faith.
Case: Gulabdas International Trading v. Union of India
4. Limitation for Appeal: Time Spent in Rectification Proceedings is Excludable
Calculating the correct timeline for filing an appeal is vital, and the exclusion of certain periods can be crucial.
Facts: A taxpayer filed an application for rectification of an adjudication order. After this application was rejected, it filed an appeal before the Appellate Authority. The Authority dismissed the appeal as time-barred, as it included the period during which the rectification application was pending.
Ruling: The Allahabad High Court delivered an important procedural relief. It held that although Section 107(4) of the CGST Act explicitly excludes the application of Section 5 of the Limitation Act (which allows for condonation of delay), the principle underlying Section 14 of the Limitation Act is still applicable. Section 14 provides for the exclusion of time spent pursuing a remedy in good faith before a wrong forum. The Court equated the time spent in rectification proceedings to this principle and held that such time should be excluded when computing the limitation period for filing an appeal.
Case: Prakash Medical Stores v. Union of India
Conclusion: These judgments collectively provide significant guidance on substantive and procedural aspects of GST law. They reinforce the principle of substance over form (in determining place of supply), highlight gaps in the export benefit framework, offer protection to taxpayers caught in jurisdictional overlaps, and ensure that time spent in bona fide procedural steps is not counted against them for filing appeals. Taxpayers and advisors should take note of these developments for effective compliance and litigation strategy.
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