UNION OF INDIA & ANR. v. M/s MOHIT MINERALS PVT. LTD. THROUGH DIRECTOR

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63Copy pinpoint63. Section 5 of the IGST Act provides for the levy and collection of tax on inter-State supplies of goods or services. The power to impose such tax is derived from Article 286(2) read with Article 269A(1). Sub- Section (1) of Section 5 provides for the levy of the integrated goods and services tax on all inter-State supplies of goods or services or both. B Section 5 reads as follows:

“5. Levy and collection.— (1) Subject to the provisions of sub- section (2), there shall be levied a tax called the integrated goods and services tax on all inter-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 of the Central Goods and Services Tax Act and at such rates, not exceeding forty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person:

Provided that the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 on the value as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962.”

The proviso to Section 5(1) of the IGST Act clarifies that the tax is levied on goods imported into India, in accordance with Section 3 of the Customs Tariff Act 1975. The value is determined under the Customs F Tariff Act at the point when the customs duties are levied in accordance with the Customs Act.

64Copy pinpoint64. The payment of IGST on a reverse-charge basis is contemplated in sub-sections (3) and (4) of Section 5. Sub-section (3) G provides that IGST may be paid on a reverse charge basis on specified categories of supply of goods or services or both. The Central Government is empowered to specify these categories on the recommendations of the GST Council. Hence, on its plain terms, the payment of IGST on a reverse charge basis is envisaged on specific categories of supply of goods or services, or both as notified by the Central Government. The H

UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 403 DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

tax on a reverse charge basis is payable by the recipient of such goods or services, or both. The power, in other words, is to specify categories of goods or services (or both). The provision does not empower the government to specify the recipient of the supply of goods or services. The unamended Sub-section (4) of Section 585 provided that the tax in respect of the supply of goods or services by an unregistered supplier, shall be paid on a reverse charge basis by a specified registered person, as the recipient of such supply of goods or services. The above provisions read as follows:

“(3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. D (4) The integrated tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation E to the supply of such goods or services or both.”

65Copy pinpoint65. On 28 June 2017, the Central Government issued Notification 8/2017, in exercise of its powers under Section 5(1), Section 6(1) and Section 20 of the IGST Act, read with Section 15(5) and Section 16(1) F of the CGST Act. Entry 9(ii) of Notification 8/2017 reads as follows:

85 Sub-Section 4 of Section 5 was amended by The Integrated Goods and Services Tax (Amendment) Act 2018 w.e.f. 1 February 2019 and reads as follows: G “(4) The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to such supply of goods or services or both.” H

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D By Entry 9(ii) of Notification 8/2017, an integrated tax of 5 per cent was levied on supply of specified services, including transportation of goods in a vessel from a place outside India up to the customs station of clearance in India.

66Copy pinpoint66. On 28 June 2017, Notification 10/2017 was issued by the E Central Government in exercise of powers conferred by Section 5(3) of the IGST Act. Notification 10/2017 specified the importer as the recipient of transportation of service when the supplier is location in a non-taxable territory and the service of transportation is supplied by a person in a non-taxable territory. Entry 10 of Notification 10/2017 states the following: F SI Category of Supply of Services Supplier of Recipient of Service No. (2) (3) (4) 0) Services supplied by a person A person Importer, as defined in clause 10 located in non-taxable territory located in (26) of section 2 of the Customs G by way of transportation of non-taxable Act 1962 (52 of 1962), located goods by a vessel from a place territory in the taxable territory outside India up to the customs station of clearance in India

Thus, Entry 10 of Notification 10/2017 deems an importer of goods as the ‘recipient of service’ of transportation of goods by a foreign H shipping line.

UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 405 DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

67Copy pinpoint67. Both the impugned notifications, Notification 8/2017 and A Notification 10/2017, have been challenged as ultra vires the IGST Act. Before adverting to the challenges raised by the parties, it becomes necessary to advert to some of the key provisions contained in the CGST Act, IGST Act and Customs Act. These provisions are necessary to respond to several contentions raised by the respondents, including: (i) B whether the taxable event stipulated by the impugned notifications constitutes a ‘supply’ under the IGST Act; (ii) whether the importer of goods on a CIF basis can be deemed to be the ‘recipient’ of shipping services when they do not pay the consideration; and (iii) whether the import of goods constitutes a composite supply, among others.

68Copy pinpoint68. The provisions of the IGST Act apply to the whole of India as provided under Section 1. Section 5 of the IGST Act is the charging section. Sub-section (1) of Section 5 provides that the levy of IGST shall be paid by the taxable person. The term ‘taxable person’ is defined in Section 2(107) of the CGST Act: “(107) “taxable person” means a person who is registered or liable to be registered under section 22 or section 24"

69Copy pinpoint69. Section 2(98) of the CGST Act defines ‘reverse charge’: “(98) “reverse charge” means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or sub- section (4) of section 5 of the Integrated Goods and Services Tax Act;” As defined in the above clause, under the reverse charge mechanism, the liability to pay is on the recipient of the supply of goods or services, as opposed to the supplier of goods or services. Section 24(iii) of the CGST Act provides for compulsory registration of “persons who are required to pay tax under the reverse charge”. “24. Compulsory registration in certain cases.—Notwithstanding G anything contained in sub-section (1) of Section 22, the following categories of persons shall be required to be registered under this Act,— (i) persons making any inter-State taxable supply; (ii) casual taxable persons making taxable supply; H

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A (iii) persons who are required to pay tax under reverse charge; […..] (xii) such other person or class of persons as may be notified by the Government on the recommendations of the B Council.” (emphasis supplied)

70Copy pinpoint70. Section 2 (105) of the CGST Act defines the ‘supplier’ in relation to goods or services as:

C “(105) “supplier” in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied;”

71Copy pinpoint71. Section 2(93) of the CGST Act defines the ‘recipient’ of supply of goods or services or both and provides: “(93) “recipient” of supply of goods or services or both, means— (a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration; (b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and (c) where no consideration is payable for the supply of a service, the person to whom the service is rendered, and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied;”

72Copy pinpoint72. Sections 2(14) and 2(15) of the IGST Act define the location of the recipient of services and the supplier of services as follows: “(14) “location of the recipient of services” means,–– (a) where a supply is received at a place of business for which the registration has been obtained, the location of such place of business;

UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 407 DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

(b) where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment; (c) where a supply is received at more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and (d) in absence of such places, the location of the usual place of residence of the recipient; (15) “location of the supplier of services” means,–– (a) where a supply is made from a place of business for which the registration has been obtained, the location of such place of business; (b) where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment; D (c) where a supply is made from more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the provision of the supply; and (d) in absence of such places, the location of the usual place of E residence of the supplier;”

73Copy pinpoint73. Chapter IV of the IGST Act determines the nature of the supply. Section 7 of the IGST Act determines the nature of supply as inter-State supply, Section 8 provides for intra-State supply and Section 9 provides for supplies in territorial waters. F

74Copy pinpoint74. Section 7 of the IGST Act lay down the conditions for a supply to be construed as an “inter-State supply”. The relevant provisions, particularly sub-Sections (3) and (4) of Section 7 are as follows: “7. Inter-State supply.—(1) Subject to the provisions of Section 10, supply of goods, where the location of the supplier and the G place of supply are in— (a) two different States; (b) two different Union territories; or (c) a State and a Union territory, H

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A shall be treated as a supply of goods in the course of inter-State trade or commerce. […..] (3) Subject to the provisions of Section 12, supply of services, where the location of the supplier and the place of supply are in— B (a) two different States; (b) two different Union territories; or (c) a State and a Union territory,

C shall be treated as a supply of services in the course of inter-State trade or commerce. (4) Supply of services imported into the territory of India shall be treated to be a supply of services in the course of inter-State trade or commerce.” D (emphasis supplied)

75Copy pinpoint75. The term ‘supply’ has been defined in the IGST Act with reference to the CGST Act. Section 2(21) of the IGST Act provides that: “(21) “supply” shall have the same meaning as assigned to it in E section 7 of the Central Goods and Services Tax Act” Section 7(1) of the CGST Act provides that: “7. Scope of supply. (1) For the purposes of this Act, the expression “supply” includes— F (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;

G [(aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration. Explanation.—For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, H

UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 409 DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

tribunal or authority, the person and its members or constituents A shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another;] [(b) import of services for a consideration whether or not in the course or furtherance of business; [and] B (c) the activities specified in Schedule I, made or agreed to be made without a consideration;” (emphasis supplied) The term ‘taxable territory’ is defined in Section 2(22) of the IGST C Act to mean the “territory to which the provisions of this Act [IGST Act] apply”.

76Copy pinpoint76. Section 13 of the IGST Act deals with determining the place of supply of services where the location of supplier or location of recipient is outside India: D “13. Place of supply of services where location of supplier or location of recipient is outside India.— (1) The provisions of this section shall apply to determine the place of supply of services where the location of the supplier of services or the location of the recipient of services is outside India. E (2) The place of supply of services except the services specified in sub-sections (3) to (13) shall be the location of the recipient of services: Provided that where the location of the recipient of services is not available in the ordinary course of business, the place of supply F shall be the location of the supplier of services. (3) The place of supply of the following services shall be the location where the services are actually performed, namely:— […..] G (6) Where any services referred to in sub-section (3) or sub- section (4) or sub-section (5) is supplied at more than one location, including a location in the taxable territory, its place of supply shall be the location in the taxable territory. [….] H

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A (9) The place of supply of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of such goods. (10) The place of supply in respect of passenger transportation services shall be the place where the passenger embarks on the conveyance for a continuous journey. (12) The place of supply of online information and database access or retrieval services shall be the location of the recipient of services. Explanation.—For the purposes of this sub-section, person receiving such services shall be deemed to be located in the taxable territory, if any two of the following non-contradictory conditions are satisfied, namely:— (a) the location of address presented by the recipient of services through internet is in the taxable territory; D (b) the credit card or debit card or store value card or charge card or smart card or any other card by which the recipient of services settles payment has been issued in the taxable territory; (c) the billing address of the recipient of services is in the taxable territory; E (d) the internet protocol address of the device used by the recipient of services is in the taxable territory; (e) the bank of the recipient of services in which the account used for payment is maintained is in the taxable territory;

F (f) the country code of the subscriber identity module card used by the recipient of services is of taxable territory; (g) the location of the fixed land line through which the service is received by the recipient is in the taxable territory. (13) In order to prevent double taxation or non-taxation of the G supply of a service, or for the uniform application of rules, the Government shall have the power to notify any description of services or circumstances in which the place of supply shall be the place of effective use and enjoyment of a service.” (emphasis supplied) H

UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 411 DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

77Copy pinpoint77. Chapter IX of the IGST Act contains miscellaneous provisions, A under which Section 20 of the IGST Act provides that the provisions in the CGST Act relating to the scope of supply, composite or mixed supply, time and value of supply, shall apply mutatis mutandis to integrated tax. In this regard, the time of supply of services is provided in Section 13 of the CGST Act, while the value of taxable supply is determined under B Section 15 of the CGST Act.

78Copy pinpoint78. Section 13 of the CGST Act states that the liability to pay tax on services arises at the time of supply. Sub-section (3) of Section 13 provides for the time of supply when tax is paid on a reverse charge basis: C “13. Time of supply of services. […] (3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earlier of the following dates, namely:— (a) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or (b) the date immediately following sixty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier: Provided that where it is not possible to determine the time of supply under clause (a) or clause (b), the time of supply shall be the date of entry in the books of account of the recipient of supply: F Provided further that in case of supply by associated enterprises, where the supplier of service is located outside India, the time of supply shall be the date of entry in the books of account of the recipient of supply or the date of payment, whichever is earlier.” Sub-section (5) of Section 13 provides for the time of supply when G it cannot be determined under sub-Section (2), (3) or (4): “(5) Where it is not possible to determine the time of supply under the provisions of sub-section (2) or sub-section (3) or sub-section (4), the time of supply shall— H

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A (a) in a case where a periodical return has to be filed, be the date on which such return is to be filed; or (b) in any other case, be the date on which the tax is paid.”

79Copy pinpoint79. Section 15 of the CGST Act provides for the determination of the value of taxable supply. Sub-section (1) provides that the value of supply of goods or services shall be the transaction value; sub-section (2) provides that the value of supply shall include taxes, duties, fees etc. charged separately under the goods and services tax regime, incidental expenses, interest, late fee penalty, etc. Sub-sections (4) and (5) provide for the value of the supply of goods or services if it cannot be determined under sub-section (1). “15. Value of taxable supply.—(1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. [….] (4) Where the value of the supply of goods or services or both cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed. E (5) Notwithstanding anything contained in sub-section (1) or sub- section (4), the value of such supplies as may be notified by the Government on the recommendations of the Council shall be determined in such manner as may be prescribed.”

F D.2 Do the impugned notifications suffer from excessive delegation?

80Copy pinpoint80. Article 286(1) stipulates that the State shall not levy tax when the supply of goods or services takes place outside the State or in the course of import or export of goods or services from the territory of G India. Clause (2) of Article 286 states that Parliament may by law formulate principles for determining when there is a supply of goods or services as prescribed by clause (1): “286(1): No law of a State shall impose, or authorize the imposition of, a tax, or authorize the imposition of, a tax on the supply of goods or services or both, where such supply takes place H

UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 413 DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

a) outside the State; or A b) in the course of import of the goods or services or both into, or export of the goods or services or both out of, the territory of India. (2) Parliament may by law formulate principles for determining when a supply of goodsor of services or both in any of the ways B mentioned in clause (1).”

81Copy pinpoint81. Article 269A provides that GST on supplies in the course of inter-state trade or commerce shall be levied and collected by the Union Government. The manner of apportionment between the Union and the States has to be provided by Parliament on the recommendations of the C GST Council. The explanation to Article 269A(1) states that supply of goods or services in the course of import shall be deemed to be supply in the course of inter-State trade or commerce. Clause (5) provides that Parliament may by law formulate principles for determining the place of supply and when the supply of goods or services takes place in the course of inter-state trade or commerce: “269A. (1) Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council. Explanation — For the purposes of this clause, supply of goods, or of services, or both in the course of import into the territory of India shall be deemed to be supply of goods, or of services, or both in the course of inter-State trade or commerce. […] (5) Parliament may, by law, formulate the principles for determining the place of supply, and when a supply of goods, or of services, or both takes place in the course of inter-State trade or commerce.” (emphasis supplied)

82Copy pinpoint82. Articles 269A stipulates that Parliament may by law formulate principles for determining: (a) the place of supply and; (b) when the H

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A supply of goods or services or both takes place in the course of inter- State trade or commerce. Article 286(1) empowers Parliament to formulate the principles by law for determining when a supply of goods or services, or both, takes place (a) outside the state; and (b) in the course of import into or export outside the territory of India. Parliament enacted the IGST Act prescribing the principles as required under Articles B 269A and 286(1). The provisions of the IGST Act deal with the levy and collection of tax (Section 5(1)), export of goods and services (Section 2(5) and 2(6)), import of goods and services (Section 2(10) and 2(11)), identification of the location of the supplier and recipient of services (Sections 2(14) and 2(15)), determination of the nature of inter-State C supply (Section 7), supplies in territorial waters (Section 9), place of supply with respect to import to India and export from India (Section 11), and place of supply of services where the location of the supplier and recipient is in India and outside India (Sections 12 and 13).

83Copy pinpoint83. The contention of the respondents is that Section 5(3) of the D IGST Act only delegates the power to identify the categories of goods or services on which the tax shall be paid on reverse charge basis. It is contended that since Notification 10/2017 identifies an importer as a service recipient for the purposes of Section 5(3), it is ultra vires the parent Act on the ground of excessive delegation.

84Copy pinpoint84. The legislature is required to perform its essential legislative functions. Once the skeletal structure of the policy is framed by the legislature, the details can emerge through delegated legislations.86 It is a settled position that the legislature cannot delegate its ‘essential legislative functions’.87 The essential legislative functions with respect to the GST law are the levy of tax, subject matter of tax, taxable person, rate of taxation and value for the purpose of taxation. The principles governing these essential aspects of taxation find place in the IGST Act: Section 5(1) identifies the subject matter of taxation as inter-State supplies of goods, services or both; Section 2(107) of the CGST Act identifies a taxable person; Section 5(1) provides a maximum cap of 40% as the rate of taxation; and Section 5(1) stipulates that the value of taxation be determined under Section 15 of the CGST Act.

86 Municipal Corporation of Delhi v. Birla Cotton Spinning and Weaving Mills, AIR 1968 SC 1232; Avinder Singh v. State of Punjab, 1979 1 SCC 137 87 In re Delhi Laws Act 1912, AIR 1951 SC 332; Edward Mills Co. Ltd. v. State of H Ajmer, AIR 1955 SC 25; A.N Parasaran v. State of Tamil Nadu, (1989) 4 SCC 683

UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 415 DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

85Copy pinpoint85. Section 2(98) of the CGST Act defines “reverse charge” as the liability of the recipient of the supply of goods or services or both to pay tax instead of the supplier. Section 2(93) of the CGST Act defines “recipient” with reference to three situations (i) when consideration is payable for the supply of goods or services or both; (ii) when no consideration is payable for the supply of goods; and (iii) when no consideration is payable for the supply of services. In the first situation, the recipient is the person by whom consideration is payable. In the second situation, the recipient is the person to whom (a) the goods are delivered or made available; or (b) possession or the use of the goods is given or made available. The CGST Act also stipulates a two-fold requirement for a recipient to be taxed on reverse charge basis- the recipient must be a ‘person’ as defined under Section 2(84) of the CGST; and the person is a “taxable person” only if registered or is liable to be registered under Section 22 or Section 24. Section 24(iii) of the CGST Act states that persons who are required to pay tax under reverse charge must be registered. Therefore, both the IGST and CGST Act clearly define reverse charge, recipient and taxable persons. Thus, the essential legislative functions vis-à-vis reverse charge have not been delegated.

86Copy pinpoint86. Section 5(3) of the IGST Act provides the Government the power to specify categories of supply of goods or services or both on which tax shall be paid on a reverse charge basis by the recipient. The Government is to exercise this power on the recommendation of the E GST Council. The Government in exercise of its power under Section 5(3) of the IGST Act issued the impugned Notification 10/2017 specifying the ‘categories of the supply’ which shall be subject to reverse charge. The notification, besides specifying the criteria, has also mentioned the corresponding recipient in those categories. As discussed above, the F IGST Act and the CGST Act define reverse charge and prescribe the entity that is to be taxed for these purposes. Therefore, the stipulation of the recipient in each of the categories is only clarificatory. The Government by notification did not specify a taxable entity different from that which is prescribed in Section 5(3) of the IGST Act for the purposes of reverse charge. G

D.3 Charging Section: taxable person, taxable rate and manner of determining value

87Copy pinpoint87. In determining the vires of the impugned notifications, a few preliminary contentions raised by the respondents would have to be H

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A addressed. The respondents have argued that no charge has been created for the ocean freight transaction to be taxed in the hands of the importer. It has been alleged that only Section 5(1) is a charging provision and Sections 5(3) and 5(4) cannot independently create a charge.

88Copy pinpoint88. In assessing this claim, this Court is bound by a decision of the B Constitution Bench in Mathuram Agrawal (supra) which has identified three essential elements of taxation: (i) The subject of the tax; (ii) The person who is liable to pay the tax; and (iii) The rate at which the tax is to be paid. C This test has been further elaborated by a two-judge Bench of this Court in Gobind Saran Ganga Saran (supra) by further requiring the designation of the measure or the value to which the rate of the tax will be applied. Thus, the four canons of taxation are as follows: (i) The taxable event; D (ii) The person on whom the levy is imposed; (iii) The rate at which the levy is imposed; and (iv) The measure or the value to which the rate will be applied.

89Copy pinpoint89. Section 5(1) of the IGST Act specifically identifies the four E canons of taxation: (i) the inter-State supply of goods and services as the taxable event; (ii) the “taxable person” as the person on whom the levy is imposed; (iii) the taxable rate as such a rate notified by the Union Government on the recommendation of the GST Council, capped at forty per cent; and (iv) the taxable value as the value determined under Section F 15 of the CGST Act.

90Copy pinpoint90. Section 5(3) and Section 5(4) of the IGST Act are inextricably linked with Section 5(1) of the IGST Act which is the charging provision. They must be construed together in determining the vires of the taxation. In CIT v. B C Srinivas Setty88, a three-judge Bench of this Court has held that the machinery provisions of an Act and the charging sections G are inextricably linked. The Court observed: “A transaction to which those provisions cannot be applied must be regarded as never intended by Section 45 to be the subject of the charge. This inference flows from the general arrangement 88 H AIR 1981 SC 972

UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 417 DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

of the provisions of the Income Tax Act, where under each head of income the charging provision is accompanied by a set of provisions for computing the income subject to that charge. The character of the computation provisions in each case bears a relationship to the nature of charge. Thus the charging section and the computation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section.” (emphasis supplied) Taxable person C

91Copy pinpoint91. The respondents have alleged that the importer cannot be validly termed as a taxable person. However, this argument has to fail on a close reading of the impugned notifications alongside Sections 2(107) and 24 of the CGST Act. Section 24(iii) of the CGST Act mandates persons required to pay tax under reverse charge to be compulsorily registered under the CGST Act. Section 2(107) of the CGST Act defines a “taxable person” to mean a person who is registered or liable to be registered under Section 24 of the CGST Act. Neither Section 2(107) nor Section 24 of the CGST Act qualify the imposition of reverse charge on a “recipient of service” and broadly impose it on “the persons who are required to pay tax under reverse charge”. Since the impugned notification 10/2017 identifies the importer as the recipient liable to pay tax on a reverse charge basis under Section 5(3) of the IGST Act, the argument of the failure to identify a specific person who is liable to pay tax does not stand.

92Copy pinpoint92. The decision in Laghu Udyog (supra), rendered by a two- F judge Bench of this Court, invalidated certain service tax rules formulated under the Finance Act 1997 to give effect to the collection of service tax. Section 66 read with Section 68(1)(a) of the Finance Act 1997 specifically identified the taxable person to include only those persons responsible for collecting the service tax. The rules had sought to effect G a reverse charge by identifying the customers of goods transport operators and of clearing and forwarding agents as the assessee, even though they were not responsible for collecting the service tax. The basis for nullifying the rules was that the Finance Act 1997 did not enable the imposition of such a reverse charge on the person who is not supplying the service. The Court held: H

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A “9. Section 68(1-A) is a special provision which has been inserted by the Finance Act, 1997. According to Section 68(1) “every person who was providing the taxable service is the one who is required to collect the service tax at the rate specified in Section 66”. With respect to the taxable services referred in Items (g) to (r) of clause (41) of Section 65, Section 68(1-A) provides that the service tax for such service shall be collected from such person and in such manner as may be prescribed and to such person all the provisions shall apply as if he is the person responsible for collecting the service tax in relation to such service. As we read Section 68 it does not in any way seek to alter or change the charge of service tax levied under Section 66, which is on the person responsible for collecting the service tax. It also does not to our mind, in any way, amend any of the clauses of Section 65 which contain the definitions of different expressions. All that Section 68(1-A) enables to be done is that with regard to the assessees or the persons who are responsible for collecting the service tax, the individual or the officer concerned can be identified and it is that person who would be a person responsible for collecting the service tax. In other words this provision, namely, Section 68(1-A) cannot be so interpreted as to make a person an assessee even though he may not be responsible for collecting the service tax. The service tax is levied by reason of the services which are offered. The imposition is on the person rendering the service. Of course, it may be an indirect tax; it may be possible that the same is passed on to the customer but as far as the levy and assessment are concerned it is the person rendering the service who alone can be regarded as an assessee and not the customer. This is the only way in which the provisions can be read harmoniously. […]

G 10. By amending the definition of “person responsible for collecting of service tax” in the impugned rules with regard to services provided by the clearing and forwarding agents and the goods transport operator a person responsible is said to be the client or the customer of the clearing and forwarding agents and the goods transporter. In relation to the services provided by others and H

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referred to in sub-rules (i) to (xi) and (xiii) to (xvi) of Rule 2(d), A the definition of the person responsible is in consonance with the definition of that expression occurring in Section 65 of the Act. However, with regard to the services rendered by the clearing and forwarding agents and the goods transport operator the definitions contained in Rule 2(d)(xii) and (xvii), which seek to make the customers or the clients as the assessee, are clearly in conflict with Sections 65 and 66 of the Act.” (emphasis supplied) The decision in Laghu Udyog (supra) has no applicability to the facts of the present case since Parliament has statutorily incorporated the concept of a reverse charge under Sections 5(3) and 5(4) of the IGST Act. The impugned notification 10/2017 clearly specifies a taxable person who is liable to pay a reverse charge that is envisaged in the statute. Thus, the impugned notifications cannot be invalidated for an alleged failure to identify a taxable person. D Taxable value

93Copy pinpoint93. By a corrigendum dated 8 June 2016, Notification 8/2017 was amended to include the measure of taxable value to be ten per cent of the CIF value. Section 5(1) of the IGST Act enables the taxable value to be determined under Section 15 of the CGST Act. The respondents E have argued that the value has to be strictly determined by Section 15(1)89 of the CGST Act and not by way of delegated legislation. However, Sections 15(4) and 15(5) enable delegated legislation to prescribe methods for determination of value, on the recommendations of the GST Council. Section 15 is extracted below : F “Section 15- Value of Taxable Supply: […] (4) Where the value of the supply of goods or services or both cannot be determined under sub-section (1), the same shall be G determined in such manner as may be prescribed.

89 “Section 15: Value of Taxable Supply- (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.” H

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A (5) Notwithstanding anything contained in sub-section (1) or sub- section (4), the value of such supplies as may be notified by the Government on the recommendations of the Council shall be determined in such manner as may be prescribed.” Rules 27 to 31 of Chapter IV of the CGST Rules 2017, prescribe the manner of determining value of supply. Rule 31 also provides for residual powers to the GST Council for prescribing modes of valuation. “31. Residual method for determination of value of supply of goods or services or both.— Where the value of supply of goods or services or both cannot be determined under Rules 27 to 30, the same shall be determined using reasonable means consistent with the principles and the general provisions of Section 15 and the provisions of this Chapter: Provided that in the case of supply of services, the supplier may opt for this rule, ignoring Rule 30.”

94Copy pinpoint94. The respondents have urged that the determination of the value of supply has to be specified only through rules, and not by notification. However, this would be an unduly restrictive interpretation. Parliament has provided the basic framework and delegated legislation provides necessary supplements to create a workable mechanism. Rule 31 of the CGST Rules 2017 specifically provides for a residual power to determine valuation in specific cases, using reasonable means that are consistent with the principles of Section 15 of the CGST Act. This is where the value of the supply of goods cannot be determined in accordance with Rules 27 to 30 of the CGST Rules 2017. Thus, the impugned notification 8/2017 cannot be struck down for excessive delegation when it prescribes 10 per cent of the CIF value as the mechanism for imposing tax on a reverse charge basis. D.4 Taxable event: Is an ocean freight transaction for import of goods a valid category of supply of services under Section 5(3) of IGST Act?

95Copy pinpoint95. The other limb for contesting the validity of the impugned notification is with respect to its identification of a “taxable event”. The question that falls for the determination is whether the impugned notifications issued in 2017, under Section 5(3) of the IGST Act, validly prescribe a taxable event that constitutes an inter-State supply of goods and services with the importer being a recipient of shipping services in H CIF transactions.

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96Copy pinpoint96. The analysis of whether import of goods under CIF contracts A constitutes a valid import of service has to be answered on two prongs: (i) whether classification of imports as a specific category of supply of shipping service is valid under Section 5(3) read with Section 5(1) of the IGST Act; and (ii) whether the recipient of the imported goods is also a recipient of shipping services in CIF transactions under Section B 5(3). D.4.(a) Do imported goods procured on a CIF basis constitute an inter-state supply or is it an extra-territorial tax?

97Copy pinpoint97. Notification 8/2017 specifically delineates the service that is accompanied with the transportation of goods from a non-taxable territory as a specified category of service under Section 5(3) of the IGST Act. This categorization taxes the recipient of such transportation service on a reverse charge basis. The respondents have argued that the supply of service of shipping in a CIF contract is from the foreign shipping line to the foreign exporter. It is alleged that this transaction has no territorial nexus to India and does not constitute “supply” that can be taxed within the meaning of the CGST Act and IGST Act.

98Copy pinpoint98. We shall now advert to certain key provisions relevant to determine whether the taxable event in the present case that is, “services supplied by a person located in a non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India” constitutes an ‘inter-State supply’ for the purposes of the charging Section 5(1) of the IGST Act, read with Sections 5(3) and the unamended Section 5(4).

99Copy pinpoint99. Section 5(1) levies IGST on all “inter-state supplies” of goods or services or both. Section 5(3) of the IGST Act confers power on the F Central Government, on the recommendation of the GST Council, to specify categories of supply of goods or services or both where the tax shall be paid on a reverse charge basis by the recipient. While analysing the respondents’ contention, it is important to contextualize the purpose of GST and the constitutional amendment to effect it. In modern G commerce, the distinction between goods and services is increasingly becoming a matter of degree than substance. GST seeks to focus on the taxation of “supply” of goods or services. The provisions of the IGST and CGST Act focus on implementing a workable machinery to adequately capture the complexities of supply in a global and digital age. H

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100Copy pinpoint100. The term ‘supply’ has been defined in the IGST Act with reference to the CGST Act. Section 2(21) of the IGST Act provides that: “(21) “supply” shall have the same meaning as assigned to it in section 7 of the Central Goods and Services Tax Act” B Section 7(1) of the CGST Act provides thus: “7. Scope of supply. (1) For the purposes of this Act, the expression “supply” includes— (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; [(aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration. Explanation.—For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another;] [(b) import of services for a consideration whether or not in the course or furtherance of business; [and] F (c) the activities specified in Schedule I, made or agreed to be made without a consideration; [….] (3) Subject to the provisions of sub-sections (1), (1-A) and (2), G the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as— (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods.” (emphasis supplied) H

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Further, Section 7 of the IGST Act defines the scope of inter- A State supply. Section 7(4) of the IGST Act states that “supply of services imported into the territory of India shall be treated to be a supply of services in the course of inter-State trade or commerce”: “7. Inter-State supply.— (1) Subject to the provisions of Section 10, supply of goods, where the location of the supplier and the place of supply are in— (a) two different States; (b) two different Union territories; or (c) a State and a Union territory, shall be treated as a supply of goods in the course of inter-State trade or commerce. (2) Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-State trade or commerce. (3) Subject to the provisions of Section 12, supply of services, where the location of the supplier and the place of supply are in— (a) two different States; (b) two different Union territories; or E

(c) a State and a Union territory, shall be treated as a supply of services in the course of inter-State trade or commerce. (4) Supply of services imported into the territory of India F shall be treated to be a supply of services in the course of inter-State trade or commerce. […]” (emphasis supplied) G

101Copy pinpoint101. Section 7 of the CGST Act defines the term “supply” with a broad brush and provides for an inclusive definition. Section 7(1)(b) of the CGST Act considers import of services for a consideration to constitute “supply”. Section 7(1)(c) of the CGST Act captures any and all activities in Schedule 1 of the CGST Act, irrespective of whether H

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A they are made for a consideration. Additionally, Section 7(3) confers the power on the Central Government to specify which transactions are to be treated as a supply of goods and not a supply of services, and vice- versa. Section 7(4) of the IGST Act states that supply of services imported into India would be considered as a supply of services in the course of “inter-State trade or commerce”. Thus, an Indian importer B could also be considered as an importer of the service of shipping which is liable to IGST on inter-state supply, if the activity falls within the definition of “import of service” for the IGST Act and CGST Act.

102Copy pinpoint102. The term ‘importer’ is not defined in the IGST Act or the CGST Act. Section 2(26) of the Customs Act defines an ‘importer’ as: C “(26) “importer”, in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes [any owner, beneficial owner] or any person holding himself out to be the importer”

D The term ‘import of goods’ is defined in Section 2(10) of the CGST Act as: “(10) “import of goods” with its grammatical variations and cognate expressions, means bringing goods into India from a place outside India” E “Import of services” is defined in Section 2(11) of the CGST Act as: “(11) ‘‘import of services” means the supply of any service, where–– (i) the supplier of service is located outside India; F (ii) the recipient of service is located in India; and (iii) the place of supply of service is in India;” The conditions for an “import of service” would entail three aspects: (i) the supplier of service must be located outside India; (ii) the recipient of the service must be located in India; and (iii) the place of G supply of service ought to be in India. The respondents have argued that conditions (ii) and (iii) are not satisfied in the case of CIF contracts since the recipient of shipping services would be the foreign exporter and the place of supply would be the place of business of such foreign exporter. However, in interpreting the expressions “recipient” and “place of supply”, H this Court would have to analyse these terms vis-à-vis the IGST Act and

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the CGST Act and not exclusively from the provisions of the contract A between the foreign exporter and the foreign shipping line.

103Copy pinpoint103. Chapter V of the IGST Act provides for methodologies to determine the place of supply of goods or services or both. Section 13 of the IGST Act provides the place of supply of services where the location of the supplier or location of recipient is outside India: B “13. Place of supply of services where location of supplier or location of recipient is outside India-— (1) The provisions of this section shall apply to determine the place of supply of services where the location of the supplier of services or the location of the recipient of services is outside India. C

(2) The place of supply of services except the services specified in sub-sections (3) to (13) shall be the location of the recipient of services: Provided that where the location of the recipient of services is not available in the ordinary course of business, the place of supply shall be the location of the supplier of services. […] (9) The place of supply of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of such goods.” (emphasis supplied) Section 13(9) of the IGST Act appears to create a deeming fiction, where in case of supply of services of transportation of goods by a supplier located outside India, the place of supply would be the place of destination of such goods. The supplier, the foreign shipping line, in this case would be a non-taxable person. However, its services in a CIF contract for transport of goods would enter Indian taxable territory as the destination of such goods. The place of supply of shipping service by a foreign shipping line, would thus be India. G

104Copy pinpoint104. The respondents argued that since Section 7(1)(b) of the CGST Act does not define “supply” of import of service without consideration, other than the ones specified in Schedule 1, this would be inapplicable to importers with CIF contracts as the consideration is paid by the exporter. Thus, the importer of goods cannot be said to be an H

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A importer of shipping service since the latter is not an import of service for a consideration under Section 7(1)(b) of the CGST Act. However, this argument misses out on some crucial definitions. The term ‘supply’ has been defined in the IGST Act with reference to the CGST Act. Thus, the three conditions for “import of services” under Section 2(11)(iii) must be understood with reference to the provisions of the CGST and B IGST Acts, including the provisions for determination of place of supply under Section 13(9) of the IGST Act. As mentioned previously, Section 13(9) of the IGST Act creates a deeming fiction of place of supply of transportation services to be in India when the destination of goods is in India. In this case, it is clear the supplier of service- the foreign shipping line - is located outside India; and the place of supply is India. Accordingly, Section 13 of the CGST Act would be applicable to determine the time of such supply.

105Copy pinpoint105. The respondents have argued that the ocean freight transaction cannot be considered as “supply” since Section 7(1)(b) of the IGST act requires the import of service to be for a “consideration”. The definition of “consideration” in Section 2(31) of the CGST Act is instructive: “(31) “consideration” in relation to the supply of goods or services or both includes— E (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State F Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government G or a State Government: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;” H (emphasis supplied)

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Thus, Section 2(31) of the CGST Act defines ‘consideration’ to A include payment made or to be made, in money or any other form, for the inducement of supply of goods or services to be made by the recipient or by any other person. Thus, in the case of goods imported on a CIF basis, the fact that consideration is paid by the foreign exporter to the foreign shipping line would not stand in the way of it being considered as B a “supply of service” under Section 7(4) of the IGST Act which is made for a consideration, thereby constituting “supply of service” in the course of inter-state trade or commerce that can be subject to IGST under Section 5(1) of the IGST Act.

106Copy pinpoint106. At this stage, we note that the respondents have also challenged the impugned levy on the ground that the transaction takes place beyond the territory of India and is thus, extra territorial in nature. Mr Arvind Datar and Mr Harish Salve, learned senior counsel have urged that the service of transportation occurs outside India, that is outside the taxable territory and bears a nexus with India only as the destination of goods is India. However, the submission is that since the import of goods is taxed under Section 5(1) as ‘supply of goods’, there remains no territorial nexus of the transportation service with the Indian territory. An extension of this argument is that in case Parliament seeks to levy a tax outside its territory, it makes a deeming fiction in the statute and not by way of delegated legislation. E

107Copy pinpoint107. A Constitution Bench in GVK Industries (supra), considered the question whether Parliament is competent to enact legislation with regard to extra-territorial aspects of certain events. Answering the question in affirmative, Justice B Sudarshan Reddy, speaking for the Constitution Bench, held: F “124. […] The answer to the above would be yes. However, Parliament may exercise its legislative powers with respect to extra-territorial aspects or causes—events, things, phenomena (howsoever commonplace they may be), resources, actions or transactions, G and the like—that occur, arise or exist or may be expected to do so, naturally or on account of some human agency, in the social, political, economic, cultural, biological, environmental or physical spheres outside the territory of India, and seek to control, modulate, mitigate or transform H

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A the effects of such extra-territorial aspects or causes, or in appropriate cases, eliminate or engender such extra- territorial aspects or causes, only when such extra- territorial aspects or causes have, or are expected to have, some impact on, or effect in, or consequences for: (a) the territory of India, or any part of India; or (b) the interests of, welfare of, well-being of, or security of inhabitants of India, and Indians.

125. It is important for us to state and hold here that the powers of legislation of Parliament with regard to all aspects or causes that are within the purview of its competence, including with respect to extra-territorial aspects or causes as delineated above, and as specified by the Constitution, or implied by its essential role in the constitutional scheme, ought not to be subjected to some a priori quantitative tests, such as “sufficiency” or “significance” or in any other manner requiring a predetermined degree of strength. All that would be required would be that the connection to India be real or expected to be real, and not illusory or fanciful.

126. Whether a particular law enacted by Parliament does show such a real connection, or expected real connection, between the extra-territorial aspect or cause and something in India or related to India and Indians, in terms of impact, effect or consequence, would be a mixed matter of facts and of law. Obviously, where Parliament itself posits a degree of such relationship, beyond the constitutional requirement that it be real and not fanciful, then the courts would have to enforce such F a requirement in the operation of the law as a matter of that law itself, and not of the Constitution:” (emphasis supplied) The decision in GVK Industries (supra) clearly recognises the G power of Parliament to legislate over events occurring extra-territorially. The only requirement imposed by the Court is that such an event must have a real connection to India.

108Copy pinpoint108. The impugned levy on the supply of transportation service by the shipping line to the foreign exporter to import goods into India has a two-fold connection: first, the destination of the goods is India and H

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thus, a clear territorial nexus is established with the event occurring A outside the territory; and second, the services are rendered for the benefit of the Indian importer. Thus, the transaction does have a nexus with the territory of India.

109Copy pinpoint109. As an alternative, the respondents submitted that though the levy may have a nexus with the Indian territory, the levy of tax extra- B territorially must be provided by Parliament through statute and not by the Union Government through delegated legislation. We do not find any applicability of this submission to the facts at hand. As stated above, the IGST Act under Section 13(9) recognises the place of supply of services as the destination of goods when the supplier is located outside India. Since the destination of goods is India, the statute itself is broad enough C to cover a taxable event that has extra-territorial aspects, which bears a nexus to India.

110Copy pinpoint110. In determining the vires of the impugned notifications, the only question that falls for determination is whether the importer of goods can be considered as the recipient of the service of shipping in CIF D contracts. D.4.(b) Are importers service recipients under CIF contracts?

111Copy pinpoint111. The impugned notification 8/2017, inter alia, identifies several categories of supply of services such as hotels, restaurants, transportation by rail/road/air and legal and accounting services. The respondents, as importers of goods under CIF transactions, are aggrieved by the following categorization: “Transport of goods in a vessel including services provided or agreed to be provided by a person located in non-taxable territory to person located in non-taxable territory by way of transportation of goods by a vessel from a, place outside India up to the customs station of clearance in India up to the customs station of clearance in India.” The respondents are aggrieved by the fact that this categorization, coupled with impugned notification 10/2017, deems the importer of goods as the recipient of the service of shipping, irrespective of whether the import of goods was on the basis of a CIF or FOB contract.

112Copy pinpoint112. Section 5(3) of the IGST Act enables taxation of the recipients of certain specified categories of supply of services on a reverse charge H

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A basis. It is pertinent to note that the tax is payable “by the recipient” of such services, in contradistinction to broad language such as “any person as may be prescribed” which was otherwise used in Section 98(2) of the Finance Act 1994 which taxed services. Section 5(3) states: “(3) The Government may, on the recommendations of the Council, B by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both…” C (emphasis supplied) The term “recipient” of a supply of service has been exhaustively defined by Section 2(93) of the CGST Act: “(93) “recipient” of supply of goods or services or both, means— D (a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration; (b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and (c) where no consideration is payable for the supply of a service, the person to whom the service is rendered, and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied;” (emphasis supplied) Thus, the language employed in Section 2(93)(a) of the CGST G Act clearly stipulates that when a consideration is payable for the supply of services, the recipient would mean the person who is liable to pay that consideration. However, when no consideration is payable for the supply of a service, Section 2(93)(c) states that the recipient shall be the person to whom the service is rendered. Further, Section 2(93) provides that H “any reference to a person to whom supply is made shall be construed

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as a reference to the recipient”. Hence, where the statute refers to a A person to whom a supply is made, it has to be construed as a reference to the recipient of service.

113Copy pinpoint113. In a CIF transaction, the foreign exporter contracts with a foreign shipping line. The service of shipping is rendered by the foreign shipping line to the foreign exporter and the consideration is accordingly payable by the latter to the former. The cost of such shipping may form a component of the price that is eventually charged to the importer, based on the negotiated terms. If an FOB contract were to be negotiated, the importer would independently avail of the service of shipping and pay for the consideration. The Union Government has argued that import of goods on a CIF basis would be construed as import of services where sub-clause (c) of Section 2(93) applies to determine the recipient. The respondents have argued that the importer in a CIF contract can be considered as a recipient of the service only in a colloquial sense. The mere destination of the service of shipping would not convert it into a service vis-à-vis the importer without any elements of a contract. Hence, D they urge that in the absence of specific deeming provisions in the statute, over-arching principles of privity of contract are relevant for interpreting the term “recipient” deployed in Section 5(3) of the IGST.

114Copy pinpoint114. The Union Government has argued that Section 2 of the CGST Act is prefaced with the term “unless the context otherwise E requires”, and hence would enable taxation of the importer on a reverse charge basis as the “recipient” of service under Section 2(93). However, this argument overlooks the context of Section 5(3) of the IGST Act which reiterates the taxable person to be the recipient of the service and only enables the Union Government to notify categories of inter-state supply of goods and services. F

115Copy pinpoint115. The Union Government has attempted to make a far-fetched argument that Section 24(iii) of the CGST Act mandating compulsory registration of persons liable to pay tax on a reverse charge basis extends to designating any person to pay the tax on a reverse charge basis, irrespective of their status as either a recipient or a supplier of service. G This argument inverts the identification of a category of goods and services under Section 5(3) and the recipient therein, who is then liable to compulsorily register themselves under Section 24(iii) of the CGST Act. The power of the Central Government to designate persons and categories of supply for reverse charge derives from Sections 5(3) and H

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A 5(4) of the IGST Act and not Section 24(iii) of the CGST Act which mandates the compulsorily registration as a logical corollary to ensure tax collection. Section 2(98) of the CGST Act, which defines “reverse charge” reiterates that it means the “liability to pay tax by the recipient of supply of goods or services or both instead of the supplier…”. It cannot be construed to imply that any taxable person identified for B payment of reverse charge would automatically become the recipient of such goods or service. The deeming fiction of treating the importer as a recipient must be found in the IGST Act. As it currently stands, Section 5(3) of the IGST Act enables the delegated legislation to create a deeming fiction on categories of supply of goods/services alone. C

116Copy pinpoint116. Interpreting the term “by the recipient” vis-à-vis the categories of goods and services identified in Section 5(3) of the IGST Act should necessarily be governed by the principles governing the definition of “recipient” under Section 2(93) of the CGST Act. Contrary to the arguments of the Union Government, such an interpretation would not annihilate the mandate of compulsory registration under Section 24(iii) of the CGST Act. It would be applicable to suitably worded provisions in the CGST or IGST Act which permit the Central Government to identify a taxable person for a reverse charge. In any event, it would be applicable to all the recipients liable for reverse charge under Sections 5(3) and 5(4) of the IGST Act. The ineffectiveness of a tax collection mechanism under Section 24(iii) of the CGST Act cannot be argued to obfuscate the concept of a “recipient” of a good or service that is uniformly understood across the IGST Act, CGST Act and tax jurisprudence.

117Copy pinpoint117. The Union Government has argued that the expression “by the recipient” in Section 5(3) of the IGST Act does not impede the authority of the GST Council in making recommendations for issuance of notifications for identifying such persons who shall be governed by reverse charge and once the identification is complete, such taxable person would automatically be interpreted as “the recipient”. This argument requires the Court to completely discard the principles of determining the recipient of a service and replace it with whichever taxable person is identified. The appellant may argue for such an interpretation to achieve a favourable outcome in this case. However, in matters of inter-state supply when the supplier and recipient are within the territory of India, this Court would have to follow this artificially bifurcated interpretation which identifies recipients vis-à-vis the nature H

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of service and supply in some cases, and by a simple equation of the identified taxable person in others without considering the literal and contextual definition of recipient. This is against settled rules of interpretation and would be an act of judicial legislation. If Parliament’s intention were to designate certain persons for reverse charge, irrespective of them being the recipient of such goods and services, it must make a suitable amendment to confer such power for exercise of delegated legislation.

118Copy pinpoint118. The only argument that supports the case of the appellant is that of Section 13(9) of the IGST Act read together with Section 2(93)(c) of the CGST Act which defines a “recipient”. As noted in Section D.4.(a) above, Section 13(9) of the IGST Act creates the deeming fiction of place of supply of service to be the destination of goods when they are transported by means other than mail or courier. No specific exemptions for importers have been carved out. This Court is inclined to accept this reasoning and read it into the definition of recipient in Section 2(93) of the CGST Act which is as follows: D “(93) “recipient” of supply of goods or services or both, means— (a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration; (b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and (c) where no consideration is payable for the supply of a service, the person to whom the service is rendered, and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied;” (emphasis supplied) G Since a reference to a person to whom a supply is made, is a reference to the recipient, the place of supply is critical. By virtue of Section 13(9) of the IGST Act, the place of supply is the destination of goods. The time of supply is then determined through the provisions of Section 13 of the CGST Act. Sections 2(14) and 2(15) of the IGST Act H

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A also define the location of the recipient and supplier of services with respect to the physical location where the supply of services is made or received. “(14) _location of the recipient of services means,–– (a) where a supply is received at a place of business for which B the registration has been obtained, the location of such place of business; (b) where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment; C (c) where a supply is received at more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and

D (d) in absence of such places, the location of the usual place of residence of the recipient; (15) location of the supplier of services means,–– (a) where a supply is made from a place of business for which the registration has been obtained, the location of such place of business; (b) where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment; (c) where a supply is made from more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the provision of the supply; and (d) in absence of such places, the location of the usual place of residence of the supplier;” G (emphasis supplied) In such a scenario, when the place of supply of services is deemed to be the destination of goods under Section 13(9) of the IGST Act, the supply of services would necessarily be “made” to the Indian importer, who would then be considered as a “recipient” under the definition of H

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Section 2(93)(c) of the CGST Act. The supply can thus be construed as being “made” to the Indian importer who becomes the recipient under Section 2(93)(c) of the CGST Act.

119Copy pinpoint119. This conclusion comports with the philosophy of the GST to be a consumption and destinated based tax. The services of shipping are imported into India for the purpose of consumption that is routed through the import of goods. Although the consideration for shipping is payable by the foreign supplier to the foreign shipping line in CIF contracts, the price is consequently factored into the price of the shipment. The ultimate benefactor of the shipping service is also the importer in India who will finally receive the goods at a destination which is within the taxable territory of India. Thus, the meaning of the term “recipient” in the IGST Act will have to be understood within the context laid down in the taxing statute (IGST and CGST Act) and not by a strict application of commercial principles.

120Copy pinpoint120. Some of the respondents have argued that the possibility of two different recipients of services would create absurdities since whether a supply of service is an inter-state supply under Section 7(3) or intra-state supply under Section 8(2) of IGST Act depends on the location of the supplier and the place of supply, which in most cases is the location of the recipient of service. Since there can effectively be two recipients on a reading of Section 2(93)(a) and (c) of the CGST E Act, the respondents argue that the transaction may simultaneously become an inter-state or intra-state supply. This could also mean that two recipients can claim ITC. However, this argument is inapplicable to the case at hand since Sections 7(3) and 8(2) of the IGST Act do not conflate the concept of imports. Section 8(2) deals with a scenario where the location of the supplier and place of supply are within the same State/Union Territory in India. This is inapplicable to determining imports where the supplier is located outside India. Similarly, Section 7(3) deals with inter-state supply within the territory of India. Further, both these sections are subject to the provisions of Section 12 of the IGST Act where both- the supplier and recipient are located in India. Section 12 of the IGST Act does not create the deeming fiction under Section 13(9) of the IGST Act which is applicable only when the supplier is located outside India. The applicable section in this case would be Section 7(4) of the IGST Act which clearly stipulates that “Supply of services imported into the territory of India shall be treated to be a supply of services H

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A in the course of inter-State trade or commerce”. Thus, no absurdity is created by the deeming fiction argued by the Union Government. In no scenario would the foreign exporter be claiming ITC in India.

121Copy pinpoint121. The respondents’ arguments of identification of two recipients do not have any bearing on the determination of the present dispute as the foreign exporter is not sought to be taxed in this case. In the digital age, the concepts of supplier and recipient of service have also been altered and are not necessarily understood as two parties with a direct chain of supply. The IGST Act tends to create several such deeming fictions to adequately capture such complexities. For instance, Section 5(5) of the IGST Act taxes the electronic commerce operator as the supplier of service in spite of it only being a conduit, in the commercial sense. These deeming fictions need to be respected for the purpose of the statute, as long as they have constitutional and parliamentary sanction. Similarly, Section 2(14)(c) of the IGST Act recognizes the possibility of the supply being received in more than one establishment: D “(14) “location of the recipient of services” means,— (a) where a supply is received at a place of business for which the registration has been obtained, the location of such place of business; E (b) where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment; (c) where a supply is received at more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and (d) in absence of such places, the location of the usual place of residence of the recipient;”

122Copy pinpoint122. Section 13 of the IGST Act is critical to effectively meet the aim of the GST statute to tax the destination of supplies, as opposed to their origins. The deeming fiction therein is critical to interpret the charging provision under the IGST Act (Section 5). The respondents’ argument for the irrelevance of determining the beneficiary of the supply or who has received the supply in view of the definition of ‘recipient’ of Section H 2(93) of the CGST Act mis-reads Section 2(93) which identifies the

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recipient, inter alia, on the basis of the person to whom “supply is made” A i.e. the place of supply.

123Copy pinpoint123. GST laws mark a departure from the previous policy of taxing sale/consignments and focuses on the taxing of supplies. The concept of a supply-centric and destination-based tax runs through the scheme of the statutory provisions and the proposals issued by the GST Council. B Thus, an amendment to the Constitution was introduced in the form of Article 366(12-A) to create a tax on the supply of goods, or services, or both. In the commercial reality of the times, the conceptual lines between goods and services wear thin. Hence, the focus is on the taxation of supply, as opposed to the creation of neat compartments between goods and services. Section 7(1)(c) of the CGST Act specifically characterizes import of services for a consideration to constitute “supply”. The only question that falls for determination is whether the imports of goods on a CIF basis would also constitute import of shipping services, by way of deeming fiction. We have held that Section 5(3) of the IGST does not confer the powers on the Central Government to create a deeming fiction vis-à-vis who constitutes the recipient. Section 5(3) merely enables the Central Government to identify certain categories of goods and services, where the recipient of such services is subject to a reverse charge, as opposed to the usual mode of taxation where the supplier of the service is charged on a forward charge basis. However, Section 13(9) of the IGST Act read with Section 2(93)(c) of the CGST Act inherently create E a deeming fiction of the importer of goods to be the recipient of shipping service. D.5 Applicability of Section 5(4) of IGST Act

124Copy pinpoint124. By way of an arguendo, the Union Government has argued that if the importers do not qualify as service recipients, the impugned notifications would derive their validity from Section 5(4) of the IGST Act. The unamended Section 5(4) of the IGST Act stated as follows: “(4) The integrated tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.” (emphasis supplied) H

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A On 29 August 2018, Section 5(4) was amended by Amending Act 32 of 2018, to state the following: “(4) The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of B goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to such supply of goods or services or both.” C (emphasis supplied) The amended Section 5(4) came into effect on 1 February 201990. Amending Act 32 of 2018 enables the Central Government to create a deeming fiction of declaring a class of registered persons “as the recipient” D of the supply of taxable goods or service. In deploying the language “as the”, and not “by the” recipient, the applicability of the definition of recipient vis-à-vis Section 2(93) of the CGST Act is no longer necessary for determining the validity of such a notification. The effect of the Amending Act 32 of 2018 has been as follows:- (i) the powers of the Central Government to specify through a notification has been clarified; and (ii) the power to specify a class of registered persons as the recipient has been recognised.

125Copy pinpoint125. The Union Government has argued that Notifications 8/2017 and 10/2017 dated 28 June 2017 issued under Section 5(3) may also be read as issued under Section 5(4) of the IGST, in which case, the importers would be liable to tax with effect from 1 February 2019 though exempted for the period 13 October 2017 – 31 January 2019.

126Copy pinpoint126. The respondents have argued that the amended and unamended Section 5(4) do not save the impugned notifications since they still make the reference to the term “recipient”. However, the respondents crucially miss out that Section 5(4) employs the language “as the recipient”, in contradistinction to Section 5(3) of the IGST Act which uses “by the recipient”. We have held that recipient includes the importer in Part D above. Further, Section 5(4) clarifies that it may

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designate a class of registered persons as the recipient, thereby broadening the scope of Section 2(93) of the CGST Act, which is anyway an inclusive definition since Section 2 is prefaced with “unless the context otherwise requires”.

127Copy pinpoint127. It is settled law that non-reference of the source of power may not vitiate its exercise and application in given facts and circumstances of a case. In Union of India v. Tulsi Ram Patel91, a Constitution Bench held that when a source of power legally exists, a non-reference or an incorrect reference during its exercise does not vitiate the action. Speaking in the context of the Railway Service Rules which did not account for the power of the Disciplinary Authority under C Article 311(2), this Court held: “126. As pointed out earlier, the source of authority of a particular officer to act as a disciplinary authority and to dispense with the inquiry is derived from the service rules while the source of his power to dispense with the disciplinary inquiry is derived from the second proviso to Article 311(2). There cannot be an exercise of a power unless such power exists in law. If such power does not exist in law, the purported exercise of it would be an exercise of a non-existent power and would be void. The exercise of a power is, therefore, always referable to the source of such power and must be considered in conjunction with it. The Court’s attention in Challappancase [(1976) 3 SCC 190 : 1976 SCC (L&S) 398 : (1976) 1 SCR 783] was not drawn to this settled position in law and hence the error committed by it in considering Rule 14 of the Railway Servants Rules by itself and without taking into account the second proviso to Article 311(2). It is also well settled that where a source of power exists, the exercise of such power is referable only to that source and not to some other source under which were that power exercised, the exercise of such power would be invalid and without jurisdiction. Similarly, if a source of power exists by reading together two provisions, whether statutory or constitutional, and the order refers to only one of them, the validity of the order should be upheld by construing it as an order passed under both those provisions. Further, even the mention of a wrong

91 1985 3 SCC 398 H

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A provision or the omission to mention the provision which contains the source of power will not invalidate an order where the source of such power exists. (See Dr Ram Manohar Lohia v. State of Bihar [AIR 1966 SC 740 : (1966) 1 SCR 709, 721 : 1966 Cri LJ 608] and Municipal Corporation of the City of Ahmedabad v. Ben Hiraben Manilal [(1983) 2 SCC B 422 : (1983) 2 SCR 676, 681] .) The omission to mention in the impugned orders the relevant clause of the second proviso or the relevant service rule will not, therefore, have the effect of invalidating the orders and the orders must be read as having been made under the applicable clause of the second proviso to C Article 311(2) read with the relevant service rule. It may be mentioned that in none of the matters before us has it been contended that the disciplinary authority which passed the impugned order was not competent to do so.” (emphasis supplied)

128Copy pinpoint128. Similarly, in Titagarh Paper Mills v. Orissa State Electricity Board92, a three-judge Bench of this Court, in the context of the Electricity Supply Act 1948, held that a mislabelling of the source of power would not vitiate its exercise: “9. …..But, if there is one principle more well settled than any E other, it is that, when an authority takes action which is within its competence, it cannot be held to be invalid, merely because it purports to be made under a wrong provision, if it can be shown to be within its power under any other provision. A mere wrong description of the source of power — a mere wrong label — F cannot invalidate the action of an authority, if it is otherwise within its power..” Thus, as long as a source of power to legislate or issue a notification is available, the lack of a mention, an incorrect reference or mistake does not vitiate the exercise of such power.

129Copy pinpoint129. The impugned notifications were issued with the intention of creating a level playing field between the Indian and foreign shipping lines. In the Eighteenth GST Council meeting held on 31 June 2017, the agenda of taxing importers on a reverse charge basis was discussed:

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“”Para 6.7.1: Agenda Item 3(v)- Value for the purpose of levy of A GST on transportation of goods by a vessel from a place outside India up to the customs station in India 6.7.1. In the existing Service Tax Law, with a view to provide level playing field to the Indian shipping companies, it has been provided that in cases where the goods are imported by an importer B in India on CIF (Cost, Insurance and Freight) basis and the service of transportation of goods by a vessel from a place outside India up to the customs station in India is provided by a person located in non-taxable territory (a foreign shipping line) to a person located in non-taxable territory (overseas supplier/ exporter of goods), the importer in India shall be liable to pay Service Tax on freight. C In view of the representations that where the importer purchases goods on CIF basis, he may not have the invoice issued by the shipping line for freight and may not know the amount of freight charged by the foreign shipping line from the foreign supplier; it was stipulated in the Service Tax Rules that in such cases the importer shall have the option to pay an amount calculated at the rate of 1.4% of the CIF value of imported goods. This provision was stipulated on the basis that freight roughly constitutes 10% of the CJF value of goods on an average. Under GST too, it was decided that the liability to pay GST on such transportation service provided by a foreign shipping line to a foreign supplier shall be of the importer in India and the notifications are being issued accordingly. It is proposed that the similar provision deeming value of such service at 10% of the CIF value may be incorporated in the IGST notification. Considering the nature of the service, this provision is not required in the CGST, SGST or UTGST F notifications. The Council approved the proposal. [….] 8(v)…..in respect of agenda item 3 the Council approved to incorporate a provision in the IGST notification that in cases where the goods are imported by an importer in India on CIF G basis and the service of transportation of goods by a vessel from a place outside India up to the customs station in India is provided by a person located in non-taxable territory (a foreign shipping line) to a person located in non-taxable territory (overseas supplier/exporter of goods) and in case the importer did not know H

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A the amount of freight charged by the foreign shipping line from the foreign supplier the deemed value of such service shall be 10% of the CIF value.”

130Copy pinpoint130. The impugned notifications were issued after the GST Council took note of the fact that since transport of imported goods by Indian B shipping lines to India is not treated as export of service, the Indian shipping lines pay IGST on the same on a forward charge basis. On the other hand, on the same transportation service, the foreign shipping lines are not required to pay tax as they are not taxable persons in India. Therefore, to provide a level playing field to Indian shipping lines, the importer in India has been made liable to pay IGST on transportation of C goods by foreign shipping lines on a reverse charge basis. If Indian shipping lines continue to be taxed and not their competitors, namely, the foreign shipping lines, the margins arising out of taxation from GST would not create a level playing field and drive the Indian shipping lines out of business.

131Copy pinpoint131. It was contended by the respondents that instead of course correcting the input tax mechanism, the Union Government has chosen to tax the Indian importer on reverse charge. However, this Court is not in a position to adjudicate the desirability of a taxation scheme, as long as it is legally issued. Commenting on the efficacy of the tax intervention with the desired goals would be delving into the arena of policy. D.6 Composite Supply and Issues of Double Taxation

132Copy pinpoint132. Having examined whether the impugned levy is permissible under Section 5 of the IGST Act, we shall now advert to the arguments raised by the respondents regarding the impugned notifications amounting to double taxation. The respondents have submitted before this Court that the transaction between the foreign exporter and the respondents is already subject to IGST under Sections 5 of the IGST Act read with Sections 3(7) and 3(8) of the Customs Tariff Act as “supply of goods”. An additional levy of IGST on imported goods, that is on the supply of transportation service, by designating the importer as the recipient would amount to double taxation.

133Copy pinpoint133. The transaction at hand involves three parties- the foreign exporter, the Indian importer and the shipping line. The first leg of the transaction involves a CIF contract, wherein the foreign exporter sells the goods to the Indian importer and the cost of insurance and freight H

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are the responsibility of the foreign exporter. In other words, the foreign A exporter is liable to ensure that the goods reach their place of destination and the Indian importer pays the transaction value to the exporter. The second leg of the transaction involves an agreement between the foreign exporter and the shipping line (whether foreign or Indian) for providing services for transport of goods to the destination, i.e., in the territory of B India.

134Copy pinpoint134. On the first leg of the transaction, between the foreign exporter and the Indian importer, the latter is liable to pay IGST on the transaction value of goods under Section 5(1) of the IGST Act read with Section 3(7) and 3(8) of the Customs Tariff Act. Although this transaction involves the provision of services such as insurance and freight it falls C under the ambit of ‘composite supply’. We note from the written submissions of the Union that the ASG has fairly submitted that this transaction would include value elements of freight and insurance, and yet the IGST is levied as a tax on supply of goods only. Such transactions are termed as “composite supply” under the CGST Act. D

135Copy pinpoint135. Section 2(30) of the CGST Act defines “composite supply” as “(30) “composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are E naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply; Illustration.— Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a F principal supply;”

136Copy pinpoint136. Section 2(30) of the CGST Act clearly provides that a transaction may have two or more taxable supplies, where one of them is a principal supply. The illustration to Section 2(30) further clarifies that a transaction such as the CIF contract for supply of goods reflects G a composite supply under the CGST Act, where the principal supply is the supply of goods.

137Copy pinpoint137. The tax liability on composite supply is provided under Section 8 of the CGST Act. H

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A “8. Tax liability on composite and mixed supplies.— The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:— (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a B supply of such principal supply; and (b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.” (emphasis supplied) C Section 8 of the CGST Act provides that the tax liability on a composite supply which comprises of two or more supplies, will only be levied on the ‘principal supply’. In a CIF transaction, the principal supply, according to Section 2(30), is supply of goods. Thus, the tax would be levied as if the transaction was one of supply of goods. D

138Copy pinpoint138. Section 20 of the IGST Act provides that the provisions relating to ‘composite supply’ under the CGST Act would apply mutatis mutandis under the IGST Act. By extension, the IGST in a transaction of composite supply would be levied on the principal supply of goods.

139Copy pinpoint139. The respondents have urged before this Court that the impugned levy which seeks to impose IGST on the ‘service’ aspect of the transaction would be in violation of the principle of ‘composite supply’ incorporated under Section 2(30) read with Section 8 of the CGST Act, which applies equally to the imposition of IGST under Section 20 of the IGST Act. In contrast, the Union Government has submitted that the impugned levy is on the second leg of the transaction, which is a standalone contract between the foreign exporter and the foreign shipping line. Thus, the Union has urged that the contract between the foreign exporter and the foreign shipping line- of which the Indian importer is not a party- cannot be deemed to be a part of ‘composite supply’. While the first leg of the transaction, between the foreign exporter and Indian importer, is G (according to the submission) a composite supply, the second leg is an independent transaction. In this regard, the Union has relied on the decision of this Court in McDowell (supra) to contend that a single element can constitute a levy and a part of the value for another transaction. Further the Union Government has urged that the levy is on different aspects of the transaction.

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140Copy pinpoint140. We are unable to agree with the Union Government on this count. The aspect theory that the Union Government has relied on finds its place in various decisions of this Court, such as in Federation of Hotels & Restaurant Association of India v. Union of India93 and BSNL (supra).

141Copy pinpoint141. In Federation of Hotels & Restaurants Association of B India (supra), a challenge was raised regarding the imposition of an expenditure tax by the Union Government. In discussing the various aspects of a transaction, this Court, speaking through Justice MN Venkatachaliah (as the learned Chief Justice then was), observed that “31. Indeed, the law “with respect to” a subject might incidentally “affect” another subject in some way; but that is not the same thing as the law being on the latter subject. There might be overlapping; but the overlapping must be in law. The same transaction may involve two or more taxable events in its different aspects. But the fact that there is an overlapping does not detract from the distinctiveness of the aspects. Lord Simonds in Governor General-in- Council v. Province of Madras [AIR 1945 PC 98 : 1945 FCR 179, 193] in the context of concepts of Duties of Excise and Tax on Sale of Goods said: “... The two taxes, the one levied on a manufacturer in respect of his goods, the other on a vendor in respect of, his sales, may, as is there pointed out, in one sense overlap. But in law there is no overlapping. The taxes are separated and distinct imposts. If in fact they overlap, that may be because the taxing authority, imposing a duty of excise, finds it convenient to impose that duty at the moment when the excisable article leaves the factory or workshop for the first time on the occasion of its sale....”” (emphasis supplied) There is no doubt that different aspects of a transaction can be taxed through separate provisions. However, this Court in BSNL (supra) observed that the aspect theory does not allow the value of goods to be included in services and vice versa. In BSNL (supra), this Court dealt

93 (1989) 3 SCC 634 H

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