The Rajasthan High Court in M/s. Skylark Infra Engineering Pvt. Ltd. v. Union of India & Ors., [D.B. Civil Writ Petition No. 60/2023], has opined that the taxpayer cannot be made to pay tax twice for the same services.
M/S Skylark Infra Engineering Pvt. Ltd. (hereinafter referred to as “Petitioner”) is a private limited company having its registered office in Delhi. The primary business of the Petitioner is to supply manpower to various entities.
In the Assessment years 2017-18, 2018-19, and 2019-2020, the Petitioner has supplied his manpower services to M/S GVK Jaipur Expressway Pvt. Ltd. in Rajasthan, and deposited 18% IGST, treating the aforesaid supply of manpower to be inter-state services.
The Petitioner was served with a Show Cause Notice dated 03.07.2020 (hereinafter referred to as “SCN”) to show cause as to why the demand for Central Goods and Services Tax (CGST) and Rajasthan Goods and Services Tax (RGST) under Section 74 of the CGST/RGST Act, along with interest and penalty, may not be raised against the Petitioner.
Thereafter, the Assessing Authority after considering the reply of the Petitioner to the SCN, issued an order dated 20.10.2020 wherein the Authority assessed and confirmed the demand of CGST+RGST, interest and penalty, as raised against the Petitioner by treating the service of supply of manpower by the Petitioner to be intrastate. The aforesaid order was affirmed by the Joint Commissioner (Appellate Authority) vide order dated 23.09.2022.
Since, the GST Tribunal has not been constituted so far, the Petitioner has preferred this writ petition to challenge the assessment orders and validity of various provisions under the Integrated Goods and Services Tax, 2017 (IGST Act), CGST Act, and RGST Act and the Rules therein.
ISSUES BEFORE THE HIGH COURT
- Whether the assessment order dated 20.10.2020 passed by the Assessing Authority and the order dated 23.09.2022 passed by the Appellate Authority are constitutional?
- Whether Section 19(1) of the IGST Act, Section 77(1) of the CGST Act/RGST Act, and Rule 89(1A) of the CGST Rules are unconstitutional?
CONTENTIONS OF THE PARTIES
The Petitioner raised the contention that the service of supply of manpower to an entity in Rajasthan is an inter-state transaction as the said supply has been undertaken from a place of business outside Rajasthan to a place inside the State of Rajasthan.
In furtherance to the said transaction, the Petitioner has deposited 18% IGST, and hence, the demand of 18% CGST+RGST is unjustified and will eventually amounts to double taxation.
The Petitioner further asserted that the Respondents are incorrectly treating the said transaction as intra-state and so demanding CGST+RGST.
The Petitioner pleaded that the Petitioner was compelled to get itself registered in the State of Rajasthan and the registration was in effect from 25.02.2020, which will ultimately not affect the transaction of services rendered in the years 2017-18, 2018-19, and 2019-2020.
In response to the same, the Respondents submitted that the services provided by the Petitioner, i.e., the supply of manpower is an intra-state transaction and the same is liable for payment of CGST+RGST.
Furthermore, the Respondents also brought it to the notice of the Court that in matters involving revenue, the Court should be very slow in granting interim protection and that even direction for submitting bank guarantee in lieu of deposit of the revenue is not very appropriate.
The Respondent also contended that the Petitioner is registered with GST in Rajasthan and has also disclosed its place of business in Rajasthan; therefore, it is incorrect to allege that the manpower was supplied from a place outside Rajasthan.
The Respondents also drew the attention of the Court to Section 2(71) and Section 2(85) of the CGST Act to demonstrate that the services supplied by the Petitioner are intra-state and not inter-state.
DECISIONS AND FINDINGS
The Hon’ble Court opined that the Petitioner admittedly had deposited 18% of IGST and 35% of CGST+RGST has been already recovered by the Respondents by attaching the accounts of the Petitioner.
Moreover, though the inter-state and intra-state transaction depends upon a case-to-case basis but it is a legal issue and requires deeper consideration.
In view of the validity of the provisions that have been challenged under this petition, the Court considered the petition and directed the State of Rajasthan and the Union of India to submit their responses to the writ petition within a month, so that the matter can be heard finally.
Furthermore, in view of interim protection, the Hon’ble Court held that the Petitioner cannot be compelled to pay tax twice; therefore, the Petitioner may apply for refund of IGST within two weeks, in a prescribed manner.
Moreover, the Petitioner is directed to deposit the balance 65% of CGST+RGST within three months from the date of this Order.
The Court listed the petition for final admission after six months from the date of this Order.
It is the fundamental rule of law of taxation that, unless otherwise expressly provided, no one is entitled to be taxed twice for the same services.
The present case, the Rajasthan High Court has placed the onus on this fundamental rule and has given the directions following the same rule, to both parties for the final hearing of the case after 6 months.
It would be interesting to note the High Court’s views on the same and the constitutional validity of the provisions challenged under the Petition.
– Team AMLEGALS assisted by Ms. Srishti Sinha (Intern)
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