The Hon’ble HC, Kerala in the matter of Sutherland Mortgage Services Inc. vs. The Principal Commissioner and Ors. WP (C). No. 32634 OF 2019(D) dated February 3, 2020 quashed Authority for Advance Ruling (“AAR”) order to hold that AAR has jurisdiction to determine ‘Place of Supply’ while clarifying that same will be covered within larger entry pertaining to ‘determination of liability to pay tax’ and remitted to the concerned AAR for a fresh consideration.
Sutherland Mortgage Services Inc. (“the Petitioner”) having its branch office in the Cochin Special Economic Zone of its principal, M/s. Sutherland Mortgage Service Inc. USA. The Petitioner is engaged in the business of providing information technology enabled services (“ITeS”) such as mortgage orientation, primary servicing, special servicing, cash management and analytics & reporting. The principal company, M/s. Sutherland Mortgage Service Inc. USA. is incorporated in the USA and, as per the applicable laws of that country, the principal company which is engaged in such mortgage business is prevented from outsourcing its work to any other third party. Therefore, by the compulsion of the US laws, the principal company has made an intra company agreement with the Petitioner, in order to provide services to customers outside India. Principal company has also entered into agreement with customers outside India for providing services from the USA and India branch.
The Petitioner was of the opinion that the services are provided by the Petitioner directly to the customers located outside India and not providing those services to the principal office in USA, therefore, those services would eminently qualify as ‘Exporter services” which is considered zero rated supply.
The Petitioner filed an application for advance ruling on the above premises and the AAR held that the issue of “determination of place of supply”, does not come within the permissible issues to be determined by the AAR in terms of Section 97(2) of the Central Goods and Services Tax Act, 2017 (“CGST Act”) and therefore the AAR lacks jurisdiction to entertain AAR application.
Whether the determination of the issue of place of supply can be the subject matter of advance ruling?
The Hon’ble HC, Kerala in WP (C). No. 32634 OF 2019(D) dated February 3, 2020 held as under:
- It is common ground that if an order is passed under Section. 97(2) of the CGST Act, then the same is not appealable in terms of Section 100 of the CGST Act as Section 100(1) clearly provides that only if the applicant concerned is aggrieved by any advance ruling pronounced under Section 98(4) of the CGST Act that the appeal would lie. Since the stand of the AAR is that it has rendered its decision under Section 98(2) of the CGST Act, it cannot be the subject matter of an appeal under Section 100 of the CGST Act. Since the Petitioner does not have any alternative statutory remedy, he can challenge the same mainly by way of judicial review in writ proceedings under Art. 226 of the Constitution of India. No dispute has been raised by the respondent regarding the maintainability of the present writ proceedings.
- A reading of clauses (a) to (g) of Section 97(2) of the CGST Act would make it clear that 7 items are enumerated as per clauses (a) to (g) of Section 97(2) of the CGST Act and all those clauses other than clause (e) thereof, are in specific terms. Whereas clause (e) of Section 97(2) of the CGST Act clearly mandates that the larger issue of “determination of liability to pay tax on any goods or services or both” would also come within the ambit of the questions to be raised and decided by the AAR on which advance ruling could be sought and rendered under the said provisions. Whereas Clauses (a), (b), (c), (d), (f) & (g), are in specific “pigeon holes” and the provision as per clause (e) of Section 97(2) of the is in wide terms and the Parliament has clearly mandated that the latter issue of determination of liability to pay tax on any goods or services or both, should also be matters on which the applicant concerned could seek advance ruling from the AAR on which the said authority is obliged to render answers thereto.
- In the instant case, it is true that the issue relating to determination of place supply is not expressly enumerated in any of the clauses as per clauses (a) to (g) of Section 97(2) of the CGST Act, but there cannot be any two arguments that the said issue relating to determination of place of supply, which is one of the crucial issues to be determined as to whether or not it fulfils the definition of place of service, would also come within the ambit of the larger of issue of “determination of liability to pay tax on any goods or services or both” as envisaged in clause (e) of Section 97(2) of the CGST Act. The AAR has proceeded on a tangent and has missed the said crucial aspect of the matter and has taken a very hyper technical view that it does not have jurisdiction for the simple reason that the said issue is not expressly enumerated in Section 97(2) of the CGST Act.
- Held that the view taken by the AAR is legally wrong and faulty and therefore the matter requires interdiction in judicial review in the instant writ proceedings.
- Ordered that the application will stand remitted to the concerned AAR for fresh consideration and decision in accordance with law.
Section 97(2) of the CGST Act
“Application for advance ruling.
- (2) The question on which the advance ruling is sought under this Act, shall be in respect of,–
(a) classification of any goods or services or both;
(b) applicability of a notification issued under the provisions of this Act;
(c) determination of time and value of supply of goods or services or both;
(d) admissibility of input tax credit of tax paid or deemed to have been paid;
(e) determination of the liability to pay tax on any goods or services or both;
(f) whether applicant is required to be registered;
(g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.”
Section 98(2) and (4) of the CGST Act
“Procedure on receipt of application.
- (2) The Authority may, after examining the application and the records called for and after hearing the applicant or his authorised representative and the concerned officer or his authorised representative, by order, either admit or reject the application:
Provided that the Authority shall not admit the application where the question raised in the application is already pending or decided in any proceedings in the case of an applicant under any of the provisions of this Act:
Provided further that no application shall be rejected under this sub-section unless an opportunity of hearing has been given to the applicant:
Provided also that where the application is rejected, the reasons for such rejection shall be specified in the order.
(4) Where an application is admitted under sub-section (2), the Authority shall, after examining such further material as may be placed before it by the applicant or obtained by the Authority and after providing an opportunity of being heard to the applicant or his authorised representative as well as to the concerned officer or his authorised representative, pronounce its advance ruling on the question specified in the application.”
Section 100 of the CGST Act
Appeal to Appellate Authority.
- (1) The concerned officer, the jurisdictional officer or an applicant aggrieved by any advance ruling pronounced under sub-section (4) of section 98, may appeal to the Appellate Authority.
(2) Every appeal under this section shall be filed within a period of thirty days from the date on which the ruling sought to be appealed against is communicated to the concerned officer, the jurisdictional officer and the applicant:
Provided that the Appellate Authority may, if it is satisfied that the appellant was prevented by a sufficient cause from presenting the appeal within the said period of thirty days, allow it to be presented within a further period not exceeding thirty days.
(3) Every appeal under this section shall be in such form, accompanied by such fee and verified in such manner as may be prescribed.”