State GST Department lacks jurisdiction on IGST Act, Says HC: Cannot retain the amount of tax on export transactions

The Bombay High Court in the matter of Media Net Software Services (India) Pvt. Ltd. Vs. Union of India & Ors. held that State GST Department lacks jurisdiction to retain the amount of tax on export transactions.

We have heard Mr. Chicana, learned counsel for the petitioner, Mr. Takke, learned AGP for the State representing CGST and MGST authorities and Mr. Mishra, learned counsel for Union of India.

Learned counsel for the parties would not dispute that the decision of this Court in Dharmendra M. Jani Vs. The Union of India & Ors. (supra), would hold that the jurisdiction of the respective authorities under the IGST Act and CGST/MGST Act are compartmentalized. In so far as the export of service is concerned, the Division Bench has held that it would lie within the purview of the IGST Act and it would be the Central authorities under the IGST Act who would have jurisdiction in regard to any transaction in respect of export of service.

In the present case, it has so happened that the petitioner on the impugned action as taken by the State Government was required to deposit tax on the export transaction in question with the authorities under the CGST Act and/or the MGST Act. The petitioner had taken a clear position before such authorities would not have jurisdiction to demand any tax on export of service. The petitioner also had filed applications for refund of tax deposited with the CGST/MGST/authorities. Such refund applications are stated to have been rejected by orders dated 15 October, 2020 and 27 November, 2020 respectively. Such rejection was admittedly much prior to the decision of the Division Bench in Dharmendra M. Jani Vs. The Union of India & Ors. (supra) and A.T.E. Enterprises Pvt. Ltd. Vs. The Union of India & Ors. (supra).

Now in view of the position in law as laid down in the said decision, the CGST/MGST authorities would not have jurisdiction to retain such amount of tax on the export transactions, and retain such amounts which in fact would be required to be transferred to the Central Government. Thus as fairly submitted at the Bar, the amount would now required to be transferred to the Assistant Commissioner of Central Tax having his address at Division VI, Mumbai (East) Commissionerate 10th Floor, Near Lotus Info Centre, Near Parel Station (East), Mumbai – 400 012. Let the tax as deposited by the petitioner along with the statutory interest as applicable be transferred by the State authorities to the said Central Authority having jurisdiction under the IGST Act.

In these circumstances, the order passed by the Deputy Commissioner of Sales Tax rejecting the refund application of the petitioner is required to be set aside. It is accordingly set aside. The refund application of the petitioner is restored and the same be transferred to the Assistant Commissioner (Central Taxes) for appropriate orders to be passed in view of the decision of this Court in Dharmendra M. Jani Vs. The Union of India & Ors. (supra) and A.T.E. Enterprises Pvt. Ltd. Vs. The Union of India & Ors. (supra). Let the application be transferred within two weeks from today and the same be decided by the Assistant Commissioner (Central Taxes) within a period of six weeks thereafter.

All contentions of the parties on the refund application and issues arising thereunder are expressly kept open.

The petitions are disposed of in the above terms.

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