In a recent ruling, the Bombay High Court has determined that the State GST (SGST) Department lacks jurisdiction to retain the amount of tax on export transactions. The court directed the state government to transfer the tax amount to the Central Government, following the relevant laws and regulations.
Brief Facts:
In this particular case, the petitioners found themselves in a situation where the State Government demanded the deposit of tax on the export transaction under the CGST Act and/or the MGST Act. However, the petitioner firmly stated that these authorities did not have the jurisdiction to demand any tax on the export of services. The petitioner also submitted refund applications for the tax deposited with the CGST/MGST authorities, but these were subsequently rejected before the aforementioned decision in Dharmendra M. Jani Vs. The Union of India & Ors.
Contentions by the Parties:
The case, titled Media Net Software Services (India) Pvt. Ltd. Vs. Union of India & Ors. saw arguments from various parties, including the petitioner's counsel, the State representing CGST and MGST authorities, and the counsel for the Union of India. It was not disputed by the parties that the jurisdiction of the respective authorities under the IGST Act and CGST/MGST Act are separate. The court referred to a previous decision in Dharmendra M. Jani Vs. The Union of India & Ors., which established that the export of service falls under the purview of the IGST Act, and it is the Central authorities under this act who have jurisdiction over such transactions.
Observations by the Court:
Based on the legal position outlined in the aforementioned decision, the court concluded that the CGST/MGST authorities cannot retain the tax amount on export transactions. Instead, the amount is required to be transferred to the Assistant Commissioner of Central Tax, who has jurisdiction under the IGST Act. The court further directed the State authorities to transfer the tax amount, along with any applicable statutory interest, to the designated Central Authority.
Consequently, the court set aside the order issued by the Deputy Commissioner of Sales Tax, which rejected the petitioner's refund application. The refund application was restored and will now be transferred to the Assistant Commissioner (Central Taxes) for appropriate consideration, taking into account the court's decision in Dharmendra M. Jani Vs. The Union of India & Ors. The court ordered the transfer of the application within two weeks, with the Assistant Commissioner required to decide within six weeks thereafter.
It is important to note that all contentions of the parties regarding the refund application and associated issues are expressly kept open, allowing for further examination and resolution if necessary. With this ruling, the Bombay High Court clarifies the jurisdictional boundaries for taxation on export transactions and ensures that the appropriate authorities handle such matters following the law.
The decision of the Court:
Accordingly, the Court restored the refund application of the petitioner to the Assistant Commissioner (Central Taxes) for appropriate orders to be passed.
Case Name: Media Net Software Services (India) Pvt. Ltd. Versus Union of India & Ors.
Coram: Hon’ble Mr. Justice G. S. Kulkarni and Hon’ble Mr. Justice Jitendra S. Jain
Case No.: Writ Petition No. 749 Of 2021
Advocates of the Petitioners: Mr. Sandeep Chicana and Suhana Manjesh i/b. Ms. Devyani Kulkarni for Petitioner.
Advocates of the Respondent: Mr. Himanshu Takke, AGP with Mr. Hemant Haryan, AGP for State. Mr. Jitendra Mishra for Respondent No.2 in WP 749/21 and for Respondent Nos. 1, 3 & 4 in WP 4052/22.
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