$~20 to 24

* IN THE HIGH COURT OF DELHI AT NEW DELHI

% Judgment delivered on: 22.10.2024

+ W.P.(C) 14945/2023 & CM APPL. 59655/2023 (Interim Relief)

METAL ONE CORPORATION INDIA PVT. LTD

.....Petitioner
Through: Mr. Tushar Jarwal and Mr.
Rahul Sateeja, Advocates.

versus

UNION OF INDIA & ORS. .....Respondents

Through: Ms. Uma Prasuna Bachu, SPC
for UOI.
Mr. Harpreet Singh, Sr. St.
Counsel with Ms. Suhani
Mathur, Adv.
Ms. Sonu Bhatnagar, Sr. St.
Counsel with Ms. Apurva Singh
and Ms. K.S.Mary, Advocates
for R-4.
21
+ W.P.(C) 2039/2024 & CM APPL. 8537/2024 (Stay)
IDEMITSU LUBE INDIA PVT. LTD .....Petitioner
Through: Mr. Rupender Sinhmar,
Advocate.

versus

UNION OF INDIA & ORS. .....Respondent

Through: Mr. Ranvir Singh, CGSPC for
R-UOI.
Mr. Anurag Ojha, Sr. SC with
Mr. Subham Kumar, Mr. Vipul
Kumar, Adv. for R-2.

W.P.(C) 14945/2023 & connected matters Page 1 of 12

Signature Not Verified
Digitally Signed
By:SUNITA KUMARI
Signing Date:28.10.2024
15:59:09
 22
+ W.P.(C) 4834/2024 & CM APPL. 19730/2024 (Stay)
SONY INDIA PRIVATE LIMITED .....Petitioner
Through: Mr. V. Lakshmikumaran, Mr.
Yogendra Aldak, Mr. Kunal
Kapoor and Mr. Yatharth
Tripathi, Advocates.

versus

DIRECTORATE GENERAL OF GST INTELLIGENCE &

ORS. .....Respondents
Through: Mr. Harpreet Singh, Sr. St.
Counsel with Ms. Suhani
Mathur, Adv.

23
+ W.P.(C) 4979/2024 & CM APPL. 20374/2024 (Stay)
PETRONAS ENERGY INDIA PVT. LTD. .....Petitioner
Through: Mr. Akhil Gupta, Advocate.

versus

UNION OF INDIA AND ORS .....Respondents

Through: Ms. Shagun Shahi Chug and
Ms. Shreya Mittal, Adv. for
R/UOI.
Mr. Aditya Singla, SSC, CBIC
with Mr. Ritvik Saha, Mr.
Raghav Bakshi and Mr. Umang
Misra, Advocates.
24
+ W.P.(C) 9801/2024 & CM APPL. 40176/2024 (Interim Relief)
MITSUI AND CO INDIA PRIVATE LIMITED .....Petitioner
Through: Mr. Tarun Gulati, Sr. Adv. with
Mr. Kishore Kunal, Ms.
Runjhum Pare, Mr. Jayesh
Sislani and Mr. Devansh Garg,

W.P.(C) 14945/2023 & connected matters Page 2 of 12

Signature Not Verified
Digitally Signed
By:SUNITA KUMARI
Signing Date:28.10.2024
15:59:09
 Advocates.

versus

ADDITIONAL COMMISSIONER, CGST AUDIT-II, DELHI

& ORS. .....Respondents
Through: Mr. Aditya Singla, SSC, CBIC
with Mr. Ritvik Saha, Mr.
Raghav Bakshi and Mr. Umang
Misra, Advocates.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE RAVINDER DUDEJA

JUDGMENT

YASHWANT VARMA, J. (Oral)

1. These writ petitions impugn the Show Cause Notices1 which

had come to be issued by the respondents and pertained to a perceived
liability of tax under the Central Goods and Services Tax, Act 20172
on supply of services and which in turn was connected with the
placement of foreign expatriates to aid and assist in the functions
being carried out by the writ petitioners.

2. Although the existence of seconded employees in India and

secondment itself appears to have been originally contested, the
petitioners went on to state that they did not propose to agitate those
issues in light of subsequent developments. The petitioners contended
that those issues may no longer be of relevance in light of the
clarification issued by the Central Board of Indirect Taxes and

1
SCNs
2
Act

W.P.(C) 14945/2023 & connected matters Page 3 of 12

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By:SUNITA KUMARI
Signing Date:28.10.2024
15:59:09
 Customs3 and which we propose to notice in the following parts of
this order.

3. Since most of the SCNs proceed on identical lines, we propose

to extract the charge as laid and stands embodied in the SCNs which
came to be issued to the writ petitioner in W.P.(C) 14945/2023,
namely, Metal One Corporation India Pvt. Ltd. In those SCNs dated
29 September 2023, the respondents had alleged as follows:
“15. Now, therefore, M/s Metal One Corporation India Ltd.,
(GSTIN- 07 MFCM1225R1Z7) having Principal Place Business:
Sood Tower, Barakhamba Road, New Delhi 110001is required to
show cause to the Additional/Joint Commissioner of CGST, Delhi
North Commissionerate, 1st Floor, CR Building, LP. Estate, New
Delhi-l 101091within 30 days of receipt of this notice as to why: -

15.1 IGST of Rs.1,94,28,551/- (Rupees One Crore Ninety Four

Lakh Twenty Eight Thousand Five Hundred And Fifty One Only)
not paid on import of Services received from their Overseas
company under Reverse Charge Mechanism for the period July-17
to March-23 should not be demanded, recovered from them under
Section 73( 1) of the CGST Act, 2017 (as amended) read with the
relevant provisions of Section 20 of IGST Act, 2017 (as amended).

15.2 Interest at the appropriate rates on the amount of GST

demanded at Sr. No. 15.1 above, should not be recovered from
them, under Section 50 of the CGST Act, 2017 (as amended) read
with relevant provisions of Section 20 of IGST Act, 2017 (as
amended);

15.3 Penalty under Section 73(9) of the CGST Act 2017 read with
Section 122 (2) (a) of CGST Act, 2017 (as amended) further read
with Section 20 of IGST Act, 2017 (as amended),should not be
imposed upon: them;

16. Now, therefore, M/s Metal One Corporation India Ltd.,

(GSTIN-27AAFCM 1225R1Z5) having Principal Place of
Business: Office No. 809-B, 8th Floor, C-Wing, ONE BKC, G-
Block, Bandra Kurla Complex, Bandra East, Mumbai, Mumbai
Suburban, Maharashtra, 400051 is required to show cause to the
Additional/Joint Commissioner of CGST, Delhi North

3
CBIC

W.P.(C) 14945/2023 & connected matters Page 4 of 12

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By:SUNITA KUMARI
Signing Date:28.10.2024
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 Commissionerate, 1st Floor, CR Building, I.P. Estate, New Delhi-I
10 l 091 within 30 days of receipt of this notice as to why: -
16.1 IGST of Rs. 58,95,317/- (Rupees Fifty Eight Lakh Ninety
Five Thousand Three Hundred And Seventeen Only) not paid on
import of Services received from their Overseas company under
Reverse Charge Mechanism for the period July-17 to March-23
should not be demanded, recovered from them under Section 73(1)
of the CGST Act, 2017 (as amended) read with the relevant
provisions of Section 20 of IGST Act, 2017 (as amended).

16.2 Interest at the appropriate rates on the amount of GST

demanded at Sr. No. 16.1 above, should not be recovered from
them, under Section 50 of the CGST Act, 2017 (as amended) read
with relevant provisions of Section 20 of IGST Act, 2017 {as
amended);

16.3 Penalty under Section 73(9) of the CGST Act 2017 read with
Section 122 (2) (a) of CGST Act, 2017 (as amended) further read
with Section 20 of IGST Act, 2017 (as amended), should not be
imposed upon them;”

4. From the facts as they obtain in the petition of Metal One

Corporation India Pvt. Ltd., we note that the petitioner is an entity
which stands duly registered under the Act in the States of Delhi,
Maharashtra and Tamil Nadu. It is stated to have entered into
individual employment agreements with the employees of Metal One
Corporation Japan, its parent entity, who then also became employees
of the writ petitioner.

5. It is averred that the Supreme Court in CCE & Service Tax vs.
Northern Operating Systems (P) Ltd.4 had held that transactions in
which an overseas entity had seconded employees to an Indian entity
and then charged the employees‟ salaries borne by the Indian
company in the form of reimbursement, the same would qualify as
manpower supply by the overseas group company to the Indian

4
(2022) 17 SCC 90

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By:SUNITA KUMARI
Signing Date:28.10.2024
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 subsidiary. It is this decision which appears to have triggered the
respondents into action and the various SCNs coming to be
consequently issued.

6. We note that in W.P.(C) 14945/2023, during the investigation,

the petitioner appears to have asserted before the authorities that the
judgment in Northern Operating Systems (P) Ltd. could not be ipso
facto applied to all cases irrespective of the factual scenario which
may obtain.

7. The petitioner then discloses the factum of a tax demand

coming to be raised in terms of Section 73(5) of the Act on 20
September 2023. This was followed by the issuance of SCNs
impugned before us in these proceedings.

8. The respondents in their counter affidavit which has been filed

in these proceedings have essentially taken the following position:
“13. That as per provisions of Section 25 of CGST Act, 2017
read with Section 20 of IGST Act, 2017 and Rule 28 of the CGST
Rules, 2017, the value of the services in the facts of the present
case shall be the open market value of the supply. Further, as the
service under consideration is the supply of seconded employee
and supply of such seconded employee is common global practice
between overseas group company and related party based in India;
and for valuation of such services rendered by overseas group
company, total consideration given to the "employee" working on
temporary deputation in India shall be considered. Therefore, the
transaction value of supply of manpower service to the Petitioner
shall be the total of consideration actually paid or payable by the
Petitioner including the expenses incurred in foreign currency
(salary paid by Overseas Group Company in Japan and charged
from the Petitioner) as well as in Indian Rupees (salary paid to
expats in India in INR).

14. That the Petitioner, itself admitted, in para 9 of the present

petition, that the seconded employees in dispute were employees of
its parent overseas company. These seconded employees were
hired for a short span of time by the Petitioner and subsequently

W.P.(C) 14945/2023 & connected matters Page 6 of 12

Signature Not Verified
Digitally Signed
By:SUNITA KUMARI
Signing Date:28.10.2024
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 repatriated to its parent overseas company. Therefore, it is pertinent
to say that a relationship of employer-employee is not established
between the Petitioner and the seconded employees. The Petitioner
has availed the services, which fall under the definition of supply
and subsequently, falls under the ambit of Import of Service as
well. The said fact is also collaborated with the contract of
Employment between the Petitioner and seconded employee,
submitted by the Petitioner during the investigation.”

9. We had, on hearing learned counsels for respective sides at

some length on 03 October 2024, flagged the principal issues which
appeared to survive. That order reads as follows:
“W.P.(C) 9801/2024 & CM APPL. 40176/2024 (INTERIM
RELIEF)
1. We take note of the principal challenge which stands raised
to the Show Cause Notice dated 31 May 2024 as well as the
Intimation Notice dated 16.05.2024.
2. In terms of the aforesaid notices, a GST liability has come
to be foisted upon the petitioner in connection with the secondment
of employees to its India Office. Shorn of unnecessary details, Mr.
Gulati, learned senior counsel, draws our attention to Rule 28 of
the Central Goods and Services Tax Rules, 2017 [“Rules”] which
is extracted hereinbelow:
“Rule 28 – Value of supply of goods or services or both between
distinct or related persons, other than through an agent
The value of the supply of goods or services or both between distinct
persons as specified in sub-section (4) and (5) of section 25 or where
the supplier and recipient are related, other than where the supply is
made through an agent, shall-
(a) be the open market value of such supply;
(b) if the open market value is not available, be the value of supply of
goods or services of like kind and quality;
(c) if the value is not determinable under clause (a) or (b), be the value
as determined by the application of rule 30 or rule 31, in that order:
PROVIDED that where the goods are intended for further supply as
such by the recipient, the value shall, at the option of the supplier, be an
amount equivalent to ninety percent of the price charged for the supply
of goods of like kind and quality by the recipient to his customer not
being a related person:
PROVIDED FURTHER that where the recipient is eligible for full
input tax credit, the value declared in the invoice shall be deemed to be
the open market value of the goods or services.”

3. Mr. Gulati laid emphasis on the Second Proviso to Rule 28

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 and which prescribes that where the recipient is eligible for full
input tax credit, the value as declared in an invoice would be
deemed to be the open market value of goods and services. It was,
thus, submitted that even if it were assumed that the secondment
entailed an import of services, the only tax liability which could
arise would be the one which would be governed by the Second
Proviso.
4. Our attention was also drawn to para 3.7 of the Circular
No.210/4/2024-GST and which reads as follows:
“3.7 In view of the above, it is clarified that in cases where the
foreign affiliate is providing certain services to the related domestic
entity, and where full input tax credit is available to the said related
domestic entity, the value of such supply of services declared in the
invoice by the said related domestic entity may be deemed as open
market value in terms of second proviso to rule 28 (1) of CGST Rules.
Further, in cases where full input tax credit is available to the recipient,
if the invoice is not issued by the related domestic entity with respect to
any service provided by the foreign affiliate to it, the value of such
services may be deemed to be declared as Nil, and may be deemed as
open market value in terms of second proviso to rule 28 (1) of CGST
Rules.”

5. In view of the aforesaid position as taken by the

Department itself, it was Mr. Gulati‟s submission that the
impugned notices would not sustain.
6. In order to enable Mr. Singla, learned counsel appearing for
the respondents to address submissions in light of the above, let the
matter be called again on 22.10.2024.
7. Interim orders granted earlier to continue till the next date
of listing.
W.P.(C) 4834/2024 & CM APPL. 19730/2024 (STAY)
8. Since this writ petition raises issues identical to those which
are engaging our attention in W.P.(C) 9801/2024, this matter shall
also stand tagged with the aforesaid matter to be called again on
22.10.2024.
9. Interim orders granted earlier to continue till the next date
of listing.
W.P.(C) 4979/2024 & CM APPL. 20374/2024 (STAY)
W.P.(C) 14945/2023 & CM APPL. 59655/2023 (INTERIM
RELIEF)
W.P.(C) 2039/2024 & CM APPL. 8537/2024 (STAY
10. Let the matters be tagged with W.P.(C) 9801/2024 to be
called on 22.10.2024.
11. Interim orders granted earlier to continue till the next date

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Signature Not Verified
Digitally Signed
By:SUNITA KUMARI
Signing Date:28.10.2024
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 of listing.”

10. The question thus stands restricted to the value to be ascribed to

the supply of goods and services and which is regulated by Rule 28 of
the Central Goods and Services Tax Rules, 20175. That Rule is
reproduced hereinbelow:
“Rule 28 – Value of supply of goods or services or both between
distinct or related persons, other than through an agent
The value of the supply of goods or services or both between
distinct persons as specified in sub-section (4) and (5) of section 25
or where the supplier and recipient are related, other than where the
supply is made through an agent, shall-
(a) be the open market value of such supply;
(b) if the open market value is not available, be the value of supply
of goods or services of like kind and quality;
(c) if the value is not determinable under clause (a) or (b), be the
value as determined by the application of rule 30 or rule 31, in that
order:
PROVIDED that where the goods are intended for further supply
as such by the recipient, the value shall, at the option of the
supplier, be an amount equivalent to ninety percent of the price
charged for the supply of goods of like kind and quality by the
recipient to his customer not being a related person:
PROVIDED FURTHER that where the recipient is eligible for
full input tax credit, the value declared in the invoice shall be
deemed to be the open market value of the goods or services.”

11. However, and as was noticed by us in our order of 03 October

2024, it is Circular No. 210/4/2024-GST6 of the CBIC which seeks to
place all disputes beyond contestation. We had in our previous order
taken note of the clarification rendered in Para 3.7 and which stands
extracted hereinabove. As per Para 3.7 of that Circular, the CBIC
clarifies that where no invoice is raised by the related domestic entity
in respect of services rendered by its foreign affiliate, the value of
5
Rules
6
Circular

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By:SUNITA KUMARI
Signing Date:28.10.2024
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 such services would be “deemed” to have been declared as „Nil‟ and
that „Nil‟ value liable to be treated as the market value for the
purposes of the Second Proviso to Rule 28.

12. Undisputedly, although payments, as asserted in the counter

affidavit, were made, no invoices came to be raised by the writ
petitioners entities in connection with the services provided by their
related foreign. It is in the aforesaid backdrop that learned counsels
had drawn our attention to the prescriptions contained in Para 3.7 of
the Circular. It would perhaps be impossible for any of the
respondents to assert that once the value of such services were to be
treated or accepted to be „Nil‟, no further tax implication under the
Act would arise.

13. While the correctness of the position as advocated in terms of

that Circular may be questioned on the ground of whether it would be
consistent with the statutory provisions or may be viewed as being
contentious or contrary to the intent of the Second Proviso to Rule 28
itself, we are today constrained to proceed further on the basis thereof.
We so observe since it may possibly be asserted that the Circular is
founded on the tenuous thread of parties choosing to either generate an
invoice or simply avoiding to do so. However, in the present matters,
it is not for this Court to be boggled by or question the wisdom of the
CBIC as the Circular in any case binds the respondents.

14. In the facts of the present writ petitions, it is conceded that no

invoices were generated. In view of the above and in light of the
explicit terms of the Circular, the value of the service rendered would
have to be treated as „Nil‟. This would lead one to the inescapable

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Signing Date:28.10.2024
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 conclusion of no perceivable or plausible tax liability possibly being
created. Consequently, we are of the considered opinion that the
proceedings initiated in terms of the impugned SCNs‟ and their
continuance would be futile and impractical. The impugned SCNs are
essentially rendered impotent and would serve no practical purpose.

15. In view of the above, we allow the instant writ petitions and
quash the impugned SCNs dated 29 September 2023 [W.P.(C)
14945/2023], 28 September 2023 [W.P.(C) 2039/2024], 27 September
2023 [W.P.(C) 4834/2024], 28 September 2023 [W.P.(C) 4979/2024]
and 31 May 2024 [W.P.(C) 9801/2024] to the extent as clarified in
Para 19 below.

16. We further quash the consequential impugned Orders-in-

Original dated 29 December 2023 in W.P.(C) 4834/2024 and 30
December 2023 in W.P.(C) 4979/2024 for reasons aforenoted.

17. Insofar as W.P.(C) 4834/2024 is concerned, we note that a final

Order-in-Original came to be passed on 29 December 2023. The
petitioner, Sony India Private Limited, had of its own violation and
undisputedly, discharged the tax liability proceeding on the basis of
Rule 28 and a perceived obligation to pay tax under the Act. The
Order-in-Original however imposes a liability of interest and penalty
upon that writ petitioner by invoking Section 15 along with Section
73(9). It is also undisputed before us that Sony India Private Limited
had not only paid the tax but had also taken credit on a reverse charge
basis.

18. In our considered opinion, once the position to govern all

assessees pan-India came to be clarified by the CBIC, the continuation
W.P.(C) 14945/2023 & connected matters Page 11 of 12
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By:SUNITA KUMARI
Signing Date:28.10.2024
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 of penalty proceedings or for that matter the imposition of interest
would not sustain. In light of the stand taken by the CBIC, the
petitioner, Sony India Private Limited, would have stood absolved of
all tax liabilities and implications flowing from the Act.

19. All the writ petitions thus stand disposed of on the aforesaid
terms. Though needless to state, we hereby clarify that the present
order shall be confined to the issue of seconded employees alone. All
other issues which are raised in the impugned SCNs‟ shall be open to
be adjudicated by the respondents. We clarify that we have not
expressed any opinion insofar as the other issues which form part of
the impugned SCNs‟ are concerned. All rights and contentions of
respective parties in that respect are kept open.

YASHWANT VARMA, J.

RAVINDER DUDEJA, J.
OCTOBER 22, 2024/ib

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Signature Not Verified
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By:SUNITA KUMARI
Signing Date:28.10.2024
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