An entity discharging tax liability under the reverse charge mechanism qualifies as the 'recipient' entitled to input tax credit. The Input Service Distributor mechanism was optional prior to legislative amendments; thus, distributing credit to branch units without such registration does not invalidate the claim.

JUDGMENT :

ZIYAD RAHMAN A.A., J.

1.This writ petition is submitted by the petitioner, a Company registered under the Companies Act, 2013, challenging Ext.P1 order passed under section 74 of the CGST Act, 2017, by which, it was ordered to reverse the input tax credit claimed by the petitioner to the tune of Rs.1,31,14,220/-, by holding that the same was wrongly availed by the petitioner. It was also found in the said order that, the petitioner had distributed the input tax credit among the other branches of the company (distinct persons) without obtaining a registration for Input Service Distributor (ISD), and thereby violated the provisions of the CGST Act.

2. The facts that led to the filing of this writ petition are as follows: The petitioner is a multinational company having global presence and multiple branches all over the world. Since the petitioner is having business places in various States in the country, separate registrations have been taken in respect of all the said units, in the respective States, as per the requirements of the CGST Act. The units of the petitioner are located at Delhi, Haryana, Karnataka, Maharashtra and Tamil Nadu, apart from the petitioner-unit.

3. During the period from July, 2017 to March 2019, M/s Intertech USA Inc., the parent company of the petitioner (hereinafter referred to as foreign company) provided services such as, email, virus protection, IT management and infrastructure services along with other IT support services to the petitioner company and to the other units of the petitioner company across the country. For the aforesaid transactions, the foreign company issued Ext.P4 invoice dated 31.8.2017 in the name of M/s Intertech India Pvt. Ltd, Delhi, which is the corporate office of the company. However, by following the administrative practice of the company, the payment against Ext.P4 invoice was affected by the petitioner unit. Ext.P5 is the tax invoice evidencing the same. Since the invoice is raised in respect of a transaction with a company outside India, Ext.P6 self invoice was raised by the petitioner, as the liability of tax ought to have been discharged following the reverse charge mechanism (hereinafter referred to as RCM). Ext.P6 is the said invoice. The input tax credit against the said transaction was subsequently claimed by the petitioner.

4. Thereafter, as the services provided by the foreign company were availed by all the units of the company across the country, and the expenses incurred by the petitioner for such services pertain to other units as well, the value and credit in respect of the same had to be cross charged to the respective units. Accordingly, the petitioner raised five invoices on the other units (distinct persons as per section 25(4) of the CGST Act), as evidenced by Ext.P7.

5. On 29.10.2020, the petitioner was issued with form ADT-01 for conducting a GST audit and certain documents were called for from the petitioner. The petitioner furnished all the documents and the explanations, required by the authority concerned. Thereafter, the petitioner was served with Ext.P13 audit enquiry notice where, one of the main discrepancies highlighted was that, the petitioner had wrongly availed and utilized the ITC amounting to Rs. 1,31,14,220/-, and the same is to be reversed. The petitioner submitted Ext.P14 reply to the same opposing the said proposal and ultimately it resulted in Ext.P19 show cause notice. In the show cause notice, apart from the allegation of availing ineligible ITC, it was also alleged that, the distribution of the ITC made by the petitioner to the other units was without obtaining a registration as input service distributor (ISD) and thus the petitioner had violated the provisions of the CGST Act. Even though the petitioner h