Bombay HC Upheld the Constitutional Validity of Section 13(8)(b) and Section 8(2) of IGST Act

Case Details: Dharmendra M. Jani v. Union of India - [2023] 149 taxmann.com 317 (Bombay)

Judiciary and Counsel Details

• • G.S. Kulkarni, J.
  • Bharat Raichandani, Rishabh Jain, Abhishek Rastogi, Pratyushprawa Saha, Mahir Chablani, Ms Kanika Sharma and Marmik Kamdar for the Petitioner. Pradeep Jetly, Sr. Adv.Anil C. Singh, J.B. Mishra, Aditya Thakkar, Dhananjay B. Deshmukh, Ms Jyoti Chavan and Dushyant Kumar for the Respondent.

Facts of the Case

The petitioner was engaged in providing marketing and promotion services to customers located outside India. It was providing services only to the principal located outside India and in lieu thereof receiving consideration in convertible foreign currency from the principal located outside India. The petitioner contended that the transaction entered into by it with the foreign customers would be one of export of service from India earning valuable convertible foreign exchange for the country by an intermediary. However due to deeming fiction by Section 13(8)(b) of IGST Act, the place of supply shall be the location of the supplier of services which is in India and levy of CGST and SGST would arise. It filed writ petition assailing the constitutional validity of section 13(8)(b) of the IGST Act.

The coram of Division Bench Bombay High Court was of two judges. One Judge of Division Bench Bombay High Court observed that Section 13(8)(b) of IGST Act not only falls foul of overall scheme of CGST Act and IGST Act but also offends Articles 245, 246A, 269A and 286(1)(b) of Constitution. Thus, as per one opinion, the provision is unconstitutional, other has expressed his disagreement and has rendered his separate opinion. Therefore, in view of such difference in opinion, the matter was placed before the Hon’ble Chief Justice.

High Court Held

The Honorable Bombay High Court observed that the fiction which is created by Section 13(8)(b) would be required to be confined only to the provisions of IGST and ruled that Section 13(8)(b) and Section 8(2) of the IGST Act are legal, valid, and constitutional. However, the court has also held that these provisions can only be applied to the IGST Act and can’t be used to levy tax on intermediary services under the CGST and SGST Acts.