Juristway Blog

Tag: gst judgment

  • GSTAT Dismisses Dow Chemical’s ₹13.41 Cr GST Refund Bid, Rules Procurement Hub Services Are Not Intermediary

    GSTAT Dismisses Dow Chemical’s ₹13.41 Cr GST Refund Bid, Rules Procurement Hub Services Are Not Intermediary

    Tribunal holds that services rendered by Swiss entity Dow Europe GmbH to its Indian affiliate constitute an import of services liable to GST, rejecting the reclassification as exempt intermediary services.

    GST Appellate Tribunal, Principal Bench | NEW DELHI

    The GST Appellate Tribunal (GSTAT), Principal Bench, has dismissed a batch of six appeals filed by M/s Dow Chemical International Private Limited, declining to grant refunds aggregating approximately ₹13.41 crore in Integrated GST paid under the Reverse Charge Mechanism (RCM) for the period January to June 2022.

    The Bench comprising Hon’ble Justice (Retd.) Dr. Sanjaya Kumar Mishra, President, and Hon’ble Shri Anil Kumar Gupta, Member (Technical), upheld the orders passed by the Joint Commissioner of State Tax (Appeals), Raigad Division, and held that the procurement services provided by Dow Europe GmbH, the Switzerland-based group entity, constitute an import of services taxable in India and do not qualify as “intermediary services” under Section 2(13) of the IGST Act.

    Background

    Dow Chemical India entered into a Procurement Agreement dated 1 July 2021 with Dow Europe GmbH, which functions as the centralised procurement hub for the global Dow Group.

    Under the agreement, Dow Europe undertook a wide range of procurement-related activities, including identification and approval of foreign suppliers, negotiation of procurement terms, development of sourcing strategies, and execution of contracts and purchase orders on behalf of the group.

    During the period in dispute, Dow India treated these services as an “import of services” under Section 2(11) of the IGST Act and discharged IGST under the Reverse Charge Mechanism on payments made to Dow Europe. The tax paid ranged from ₹38.56 lakh for June 2022 to ₹7.81 crore for January 2022, aggregating approximately ₹13.41 crore.

    Subsequently, the company revised its position and contended that the services were in the nature of “intermediary services” as defined under Section 2(13) of the IGST Act. According to the company, the place of supply would therefore be outside India, namely Switzerland, by virtue of Section 13(8)(b) of the IGST Act.

    Based on this position, Dow India reversed the input tax credit and filed refund claims for the IGST paid under RCM. The refund applications were rejected by both the Adjudicating Authority and the First Appellate Authority, leading to the present appeals before the Tribunal.

    Appellant’s Arguments

    Appearing for the appellant, counsel submitted that Dow Europe squarely satisfied the statutory definition of an “intermediary” as it arranged and facilitated the supply of goods between Dow India and independent foreign suppliers without supplying the goods on its own account.

    It was argued that the service fee, fixed at 3.5% of the procurement value, was commission-based and dependent upon actual procurement transactions, which is a characteristic feature of intermediary arrangements. It was further submitted that no consideration was payable in periods when no procurement activity took place.

    Reliance was placed on the Advance Ruling decisions in Airbus Group India Pvt. Ltd. and Global Reach Education Services Pvt. Ltd., where similar facilitation activities were held to qualify as intermediary services.

    The appellant also relied upon CBIC Circular No. 159/15/2021-GST dated 20 September 2021 and argued that all three conditions prescribed therein for intermediary classification were fulfilled, namely:

    • Existence of three parties;
    • Presence of two distinct supplies; and
    • Performance of a facilitative role rather than acting as a principal supplier.

    The appellant submitted:

    “The role of Dow Europe is not limited to a single transaction but extends to the entire procurement lifecycle—from strategy to contract negotiation to final sign-off.”

    Revenue’s Contentions

    The Revenue, represented by Ms. Shwetal Shepal, contended that Dow Europe was independently providing substantive procurement services, including procurement strategy, supplier relationship management, supplier risk management, quality audits, and spend analytics.

    According to the Revenue, the arrangement amounted to procurement outsourcing on a principal-to-principal basis and therefore fell within the exclusionary portion of the intermediary definition contained in Section 2(13) of the IGST Act.

    Reliance was placed on the Karnataka High Court’s decision in Columbia Sportswear India Sourcing Pvt. Ltd. (26 April 2025), where buying support services rendered as an independent contractor were held not to constitute intermediary services.

    The Revenue further pointed out that Clause 6 of the Procurement Agreement expressly provided that Dow Europe was not authorised to bind Dow India, thereby reinforcing its status as an independent service provider.

    Tribunal’s Findings

    The Tribunal noted that there exist divergent judicial authorities on the scope of intermediary services.

    Reference was made to the decisions of the Delhi High Court in Blackberry India Private Limited and the Punjab and Haryana High Court in Genpact India Pvt. Ltd., both of which held that services rendered by Indian entities to foreign affiliates constituted exports rather than intermediary services.

    However, the Tribunal observed that the present matter involved the reverse factual situation, namely a foreign entity rendering services to an Indian company.

    Applying the three-part test contained in CBIC Circular No. 159/15/2021-GST, the Tribunal accepted that three parties were involved in the broader transaction. However, it held that the requirement of two distinct supplies was not satisfied.

    The Tribunal observed that Dow Europe and Dow India are both subsidiaries of Dow Inc. and that the services rendered by Dow Europe as the group’s centralised procurement hub constituted a substantive group-level procurement function rather than a mere facilitation of supplies between independent principals.

    The Tribunal observed:

    “Dow Europe renders services on its own account to service receivers located in India, and its acts are those of an independent contractor that does not represent or bind the Indian client.”

    The Tribunal also disagreed with the First Appellate Authority’s observation that the refund claims were liable to be rejected merely because the tax had initially been paid voluntarily.

    It observed that Section 54 of the CGST Act permits refund claims even where tax has been paid under a mistaken understanding of law, and such claims cannot be rejected solely on that ground.

    Nevertheless, on the substantive issues relating to classification of services, intermediary status, place of supply, and entitlement to refund, the Tribunal decided all issues against the appellant.

    Accordingly, all six appeals were dismissed and the orders of the First Appellate Authority were affirmed.

    Key Takeaway

    The ruling highlights the importance of the exclusionary limb of Section 2(13) of the IGST Act. Where a foreign group entity independently performs substantive services on a principal-to-principal basis, the transaction may be treated as an import of services liable to GST in India even if multiple parties are involved in the broader commercial arrangement.

    Businesses relying upon intermediary classification for inbound group services may need to closely examine whether the overseas entity is merely facilitating supplies between independent parties or is itself providing substantive services on its own account.

    Citation: M/s Dow Chemical International Private Ltd. v. Commissioner of State Tax, Mazgaon, Mumbai — GSTAT, Principal Bench, APL/2–7/PB/2026.

  • Meghalaya High Court Dismisses Jorabat-Shillong Expressway Company’s Writ Against ₹112 Cr GST Demand; Directs Petitioner to Exhaust Statutory Appeal

    Meghalaya High Court Dismisses Jorabat-Shillong Expressway Company’s Writ Against ₹112 Cr GST Demand; Directs Petitioner to Exhaust Statutory Appeal

    Division Bench holds that classification of BOT annuity receipts—whether taxable construction services or exempt road-access services—raises mixed questions of law and fact unsuitable for writ adjudication, and finds no patent jurisdictional defect or violation of natural justice that would warrant bypassing the appellate remedy under Section 107 of the CGST Act.

    Gauhati High Court, Shillong Bench (Meghalaya) | SHILLONG, June 2, 2026

    The Meghalaya Bench of the Gauhati High Court has dismissed a writ petition filed by M/s Jorabat Shillong Expressway Limited (JSEL) challenging a GST demand of ₹112,39,64,394 (comprising CGST and SGST) raised on annuity receipts of ₹864,12,69,958 received from the National Highways Authority of India (NHAI) for the period July 2017 to December 2022.

    The Division Bench of Hon’ble Mr. Justice H.S. Thangkhiew and Hon’ble Mr. Justice B. Bhattacharjee declined to exercise writ jurisdiction under Article 226 of the Constitution, holding that the petitioner had an efficacious alternate remedy by way of a statutory appeal before the appellate authority under Section 107 of the CGST Act, 2017.

    The Court, however, granted liberty to the petitioner to file the appeal within four weeks and directed the appellate authority to consider the same on its own merits, uninfluenced by any observations made in the judgment.

    Background: The BOT Annuity Project

    JSEL was incorporated as a Special Purpose Vehicle (SPV) by a consortium of IL&FS Transportation Networks Limited and Ramky Infrastructure pursuant to a Letter of Acceptance issued by NHAI on 20 May 2010.

    The company entered into a Concession Agreement dated 16 July 2010 for a BOT (Annuity) project covering approximately 61.98 kilometres of the Jorabat–Shillong Section of National Highway No. 40 spanning the States of Assam and Meghalaya.

    Under the BOT (Annuity) model—a Public Private Partnership structure widely used in highway development—the concessionaire finances and constructs the highway, operates and maintains it for a specified concession period, and eventually transfers it back to the government.

    Importantly, the right to collect toll remains with NHAI and not with the concessionaire. Instead, the concessionaire recovers its investment through half-yearly annuity payments made by NHAI after commencement of commercial operations. Under JSEL’s concession agreement, the concession period extends until 2031.

    The Demand and Its Basis

    The dispute originated when GST Intelligence authorities issued a Show Cause Notice dated 30 September 2023 alleging that JSEL had failed to discharge GST on annuity payments received for road construction activities.

    The Department classified the services under SAC 9954 (works contract services taxable at 12% to 18%) rather than SAC 9967 (services by way of access to a road or bridge exempt under Entry 23A of the relevant exemption notification).

    An initial demand of approximately ₹130.57 crore, along with interest and penalty, was proposed.

    JSEL initially challenged the Show Cause Notice before the High Court on the ground that the proceedings were premature. That writ petition was dismissed. Thereafter, a Special Leave Petition filed before the Supreme Court was disposed of on 5 February 2024 with directions requiring the authorities to properly consider the petitioner’s submissions.

    Following a personal hearing held on 19 March 2024, the Additional Commissioner, CGST, Shillong passed an Order-in-Original dated 18 April 2024 confirming a reduced demand of ₹112.39 crore together with applicable interest and penalty.

    The present writ petition challenged both the Show Cause Notice and the Order-in-Original.

    Petitioner’s Grounds of Challenge

    Senior Advocate Mr. S. Ghosh advanced multiple grounds of challenge on behalf of JSEL.

    The central contention was that the entire consideration, including annuity receipts received under the BOT arrangement, was exempt under Entry 23A of the exemption notification dated 28 June 2017, as amended on 13 October 2017, which exempts:

    “Service by way of access to a road or a bridge on payment of annuity.”

    According to the petitioner, the Department had artificially bifurcated an integrated BOT service into separate construction and access components when, in substance, the concessionaire was providing a composite and indivisible service.

    The petitioner also mounted a constitutional challenge to CBIC Circular No. 150/06/2021-GST dated 17 June 2021, which clarified that Entry 23A does not exempt GST on annuity paid for construction of roads.

    It was argued that the Circular effectively overrides a statutory exemption notification, contrary to Section 11(3) of the CGST Act.

    Reliance was placed upon the decision of the Karnataka High Court in M/s DPJ Bidar-Chincholi (Annuity) Road Project Pvt. Ltd. v. Union of India, reported in (2024) 122 GSTR 48, wherein the same Circular was struck down and annuity receipts were held exempt.

    Jurisdictional objections were also raised against:

    • The Additional Director, DGGI, who issued the Show Cause Notice; and
    • The Additional Commissioner, CGST, Shillong, who passed the adjudication order.

    The petitioner contended that neither officer qualified as a “Proper Officer” under Section 2(91) of the CGST Act for initiating and adjudicating proceedings under Section 74.

    Further, it was argued that Section 74, which applies to cases involving fraud, suppression, or wilful misstatement, was inapplicable because the dispute involved only interpretation of law and not any attempt to evade tax.

    Additional grounds included:

    • Taxability of services rendered under pre-GST contracts;
    • Incorrect inclusion of certain exempt receipts;
    • Alleged computational errors in the demand; and
    • Inclusion of interest earned on term deposits, which was claimed to be exempt.

    The petitioner submitted:

    “The case hinges on a pure question of law—whether annuity receipts under BOT road projects are exempt—supported by statutory notifications, judicial precedent, and settled principles on interpretation of exemptions.”

    Revenue’s Defence

    The Union respondents, represented by learned DSGI Dr. N. Mozika, defended both the Show Cause Notice and the Order-in-Original.

    According to the Revenue, JSEL was engaged in a composite supply consisting of:

    • Design;
    • Financing;
    • Construction;
    • Operation; and
    • Maintenance.

    The principal supply, according to the Department, was construction of roads, which is taxable as a works contract service.

    Since the right to collect toll never vested in JSEL, the concessionaire could not claim that it was providing road-access services falling under Entry 23A.

    On jurisdiction, the Revenue relied on Notification No. 14/2017-Central Tax dated 1 July 2017, which conferred powers upon DGGI officers as Central Tax officers.

    The Revenue also relied upon Notification No. 2/2022-Central Tax dated 11 March 2022, which inserted Paragraph 3A and vested Additional Commissioners with adjudication powers in respect of Show Cause Notices issued by DGGI.

    On the issue of pre-GST contracts, reliance was placed on Section 142(10) of the CGST Act and Section 13 dealing with time of supply of continuous services.

    The Revenue further contended that the Karnataka High Court’s decision in DPJ Bidar-Chincholi had not attained finality as appeals were pending.

    The State of Meghalaya, represented by learned Government Advocate Mr. N. Syngkon, argued that Entry 23A was intended to apply only where a concessionaire provides access to a road in lieu of toll collection and receives annuity as compensation.

    Since JSEL never possessed toll collection rights, the principal supply remained construction, making the entire composite supply taxable under Section 8 of the CGST Act.

    Court’s Analysis

    The Division Bench first noted that the legal position concerning GST liability on BOT annuity receipts remains unsettled and is presently the subject of divergent judicial views and pending appeals.

    Against that background, the Court examined the maintainability of the writ petition.

    Challenge to Jurisdiction Rejected

    The Court rejected the petitioner’s challenge regarding the competence of the officers involved.

    It held that the Additional Director, DGGI was a valid Proper Officer by virtue of Notification No. 14/2017, which conferred powers on DGGI officers corresponding to their rank.

    Similarly, the Additional Commissioner, CGST, Shillong possessed adjudicatory authority under Notification No. 2/2022.

    The Court observed:

    “Mere disagreement regarding the interpretation of the scope of powers conferred under statutory notifications cannot by itself convert an issue into a jurisdictional defect warranting interference under Article 226.”

    The Court relied upon the decision of the Allahabad High Court in RC Infra Digital Solution v. Union of India as well as the Supreme Court’s decision in Union of India v. Azadi Bachao Andolan (2004) 10 SCC 1.

    Mixed Questions of Law and Fact

    The Court further held that the controversy involved several intertwined issues requiring detailed factual examination, including:

    • Classification under SAC 9954 or SAC 9967;
    • Applicability of Entry 23A;
    • Characterisation of BOT annuity payments;
    • Interpretation of concession agreements; and
    • Determination of principal supply under the composite supply provisions.

    These issues, according to the Court, constituted mixed questions of law and fact and were therefore unsuitable for adjudication in writ jurisdiction at the first instance.

    Alternate Remedy Cannot Be Bypassed

    The petitioner argued that the appellate remedy under Section 107 would be illusory because appellate authorities are bound by CBIC Circulars issued under Section 168 of the CGST Act.

    The Court rejected this contention.

    It held that while circulars may bind departmental officers, they do not constitute law and do not bind courts.

    The Court observed that acceptance of the petitioner’s argument would effectively permit taxpayers to bypass the statutory appellate framework whenever a departmental circular is involved.

    Approving the principle laid down by the Allahabad High Court, the Bench noted:

    “Though orders or instructions issued by the Board may be binding upon departmental authorities, they do not bind courts and it is needless to cite cases on the point.”

    The Court also noted that the petitioner had fully participated in the adjudication proceedings pursuant to the directions of the Supreme Court, filed detailed replies, attended personal hearings, and presented extensive submissions.

    Whether the conclusions reached by the adjudicating authority were correct or incorrect was a matter appropriately falling within the domain of the appellate authority.

    Outcome

    Finding no exceptional circumstance warranting interference under Article 226, the Court dismissed the writ petition.

    The Court held that none of the recognised exceptions to the rule of alternate remedy were attracted, namely:

    • Lack of jurisdiction;
    • Violation of principles of natural justice; or
    • Infringement of fundamental rights incapable of redress through the statutory mechanism.

    However, the Court granted JSEL liberty to file an appeal under Section 107 of the CGST Act within four weeks from the date of the judgment.

    The appellate authority was directed to decide the appeal independently and strictly on its own merits, without being influenced by any observations made in the writ proceedings.

    Significance

    The judgment reinforces the well-established principle that writ jurisdiction should not ordinarily be invoked where an effective statutory appellate remedy exists.

    The ruling is particularly significant for infrastructure concessionaires operating under BOT (Annuity) models because it indicates that disputes concerning the GST treatment of annuity receipts should generally be pursued through the appellate hierarchy rather than through direct writ proceedings.

    The decision also highlights that the controversy surrounding taxation of BOT annuity receipts remains unresolved. Although the Karnataka High Court in DPJ Bidar-Chincholi held such annuity receipts to be exempt, the Meghalaya Bench noted that the issue remains subject to pending appellate proceedings and cannot yet be regarded as conclusively settled.

    Case: M/s Jorabat Shillong Expressway Limited v. Union of India & Others
    Court: Meghalaya Bench of the Gauhati High Court
    Case No.: WP(C) No. 245 of 2024
    Decision Date: 2 June 2026