Heard Mr.Kailash Nath P S S, learned counsel for the petitioner; Mr.B.Mukherjee, learned counsel appearing on behalf of learned Assistant Solicitor General of India for respondent No.1/ Union of India; and Mr.B.Narasimha Sarma, learned counsel for respondent Nos. 2 to 4.

2. This writ petition has been filed under Article 226 of the Constitution of India for quashing of the order dated 30.07.2021 passed by respondent No.2 under the Central Goods and Services Tax Act, 2017 (briefly, ‘the CGST Act’ hereinafter) as being illegal and arbitrary. Petitioner further seeks a direction to the respondents to issue refund of excess tax collected from the petitioner to the extent of ₹ 7,51,487.00 for the period from September, 2019 to August, 2020.

3. The controversy in question was summed up in our order dated 08.11.2021 when we had issued notice. Relevant portion of the order dated 08.11.2021 reads as under:

Petitioner’s claim for refund of Input Tax Credit was rejected by 3rd respondent, and affirmed by 2nd respondent in appeal on the ground that the holding overseas company of the petitioner was an overseas branch, and that services provided by the petitioner to the overseas branch would not be eligible as “Export of Services”.  

Learned counsel for the petitioner submits that Central Board of Indirect Taxes and Customs has clarified the position by issuing Circular dated 29.09.2021, whereby, such holding companies have been declared as separate persons under the Central Goods and Services Tax Act, 2017, and thus, are separate legal entities. He submits that if that be so, then petitioner’s claim to refund is liable to be allowed”.

4. Learned counsel for the petitioner has relied upon the circular dated 20.09.2021 issued by the Central Board of Direct Taxes and Customs (page 68 of the paper book). Paragraphs 4.4 and 5.2 of the said circular are relevant and those are extracted hereunder:

4.4 From the perusal of the definition of “person” under sub-section (84) of section 2 of the CGST Act, 2017 and the definitions of “company” and “foreign company” under Section 2 of the Companies Act, 2013, it is observed that a company incorporated in India and a foreign company incorporated outside India, are separate “person” under the provisions of CGST Act and accordingly, are separate legal entities. Thus, a subsidiary/sister concern/ group concern of any foreign company which is incorporated in India, then the said company incorporated in India will be considered as a separate “person” under the provisions of CGST Act and accordingly, would be considered as a separate legal entity than the foreign company.

5.2 Therefore, supply of services by a subsidiary/sister concern/group concern, etc. of a foreign company, which is incorporated in India under the Companies Act, 2013 (and thus qualifies as a ‘company’ in India as per Companies Act), to the establishments of the said foreign company located outside India (incorporated outside India), would not be barred by the condition (v) of the sub-section (6) of the section 2 of the IGST Act, 2017 for being considered as export of services, as it would not be treated as supply between merely establishments of distinct persons under Explanation 1 of section 8 of IGST Act, 2017 . Similarly, the supply from a company incorporated in India to its related establishments outside India, which are incorporated under the laws outside India, would not be treated as supply to merely establishments of distinct person under Explanation 1 of section 8 of IGST Act, 2017. Such supplies, therefore, would qualify as ‘export of services’, subject to fulfilment of other conditions as provided under sub-section (6) of section 2 of IGST Act”.

5. Mr.Narasimha Sarma, learned counsel for respondent Nos.2 to 4 has referred to the counter affidavit filed by the said respondents and fairly submits that in view of the above circular, the matter may have to go back to the original authority for re-consideration. Relevant portion of the counter affidavit reads as under:

“However, the present writ petition was filed by the claimant adverting to Circular No.161/17/2021-GST dt.20.09.2021 issued by Central Board of Indirect Taxes and Customs, GST Policy Wing, Department of Revenue, Government of India. It may be seen that the said Circular was issued on a date subsequent to the dates of issue of both the Orders-in-Original of the Deputy Commissioner dated 30.12.2020 and Order-in-Appeal of the Joint Commissioner (Appeals.II) dated 20.07.2021. It is evident that the said circular was materially not in existence, to be taken cognizance of, when the said Orders were issued.

However, it appears that it may be a case which requires re-consideration by the Original Authority in the light of the said Circular dated 20.09.2021 especially in terms of Para 4.4 therein, which is reproduced below:

From the perusal of the definition of “person” under sub-section (84) of section 2 of the CGST Act, 2017 and the definitions of “company” and “foreign company” under Section 2 of the Companies Act, 2013, it is observed that a company incorporated in India and a foreign company incorporated outside India, are separate “person” under the provisions of CGST Act and accordingly, are separate legal entities. Thus, a subsidiary/sister concern/group concern of any foreign company which is incorporated in India, then the said company incorporated in India will be considered as a separate “person” under the provisions of CGST Act and accordingly, would be considered as a separate legal entity than the foreign company.

6. In view of the above, we set aside the impugned order dated 30.07.2021 and remand the matter back to respondent No.3 for taking a fresh decision on the claim of refund made by the petitioner, having regard to the above circular dated 20.09.2021. Let the above decision be taken within a period of six weeks from the date of receipt of a copy of this order after giving due notice and hearing to the petitioner.

7. Writ petition is, accordingly, disposed of.

8. Miscellaneous applications, if any pending, shall stand closed.

9. No costs.