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2025 Supreme(Online)(Del) 6765
IN THE HIGH COURT OF DELHI AT NEW DELHI
Prathiba M. Singh, Shail Jain, JJ
M/S. ROTARY INTERNATIONAL SOUTH ASIA OFFICE – Appellant
Versus
JOINT COMMISSIONER CGST, DELHI SOUTH – Respondent
W.P.(C) 12539/2025
For the Appellants/Petitioners: Mr.V.Lakshmikumaran, Mr.Yogendra Aldak, Mr. Kunal Kapoor, Mr. Yatharth Triparthi
For the Respondents: Sh. Atul Tripathi, Mr. Gaurav Mani Tripathi, Mr. Shubham Mishra
The court addressed the implications of the Reverse Charge Mechanism under GST and the attribution of dues concerning the operations of the petitioner.
Headnote:(A) Central Goods and Services Tax Act, 2017 - Reverse Charge Mechanism - Challenge to Show Cause Notice demanding significant tax liabilities from the petitioner. The Court observed that the petitioner has been called to pay demands of over ₹96 crores, asserting the nature of transactions and liabilities. (Paras 2, 5, 6, 7)
(B) Proceeding under GST - The petitioner's organization collected dues and declared them in GST returns, serving the interests of their parent entity while appearing to circumvent tax obligations. The Court has stayed proceedings pending a counter affidavit. (Paras 6.1, 6.2, 8)
Facts of the case:
The petition is against a Show Cause Notice issued to the petitioner regarding the payment of dues amounting to over ₹96 crores under the CGST regime, based on the perceived mismanagement of funds related to the import of services.
Findings of Court:
Clarifying the tax obligations and surrounding context of the financial transactions, raising issues on how dues are attributed and assessed.
Issues: The critical questions include the proper attribution of dues to the petitioner's parent entity and the legitimacy of the perceived tax circumvention.
Ratio Decidendi: The flow of funds and the status of dues collected suggest a need for correct identification of service provision liabilities and procedural compliance.
Result: The proceedings in the SCN are stayed pending further filings.
| Table of Content |
|---|
| 1. challenge to a high-value show cause notice regarding gst obligations. (Para 2 , 5) |
| 2. court stays proceedings for further clarifications. (Para 3 , 8) |
O R D E R
% 26.08.2025
1. This hearing has been done through hybrid mode.
2. The present petition has been filed by the Petitioner challenging the Show Cause Notice dated 30th June,2025 (hereinafter, 'the SCN') by which the Petitioner, i.e. M/s Rotary International, South Asia Office, a subsidiary of Rotary International, USA, has been called upon to pay various demands to the tune of more than Rs.96 crores.
3. On the last date of hearing, Mr. Atul Tripathi, ld. SSC accepted notice on behalf of the Respondent and was to seek instructions in the matter.
4. Today,Mr.Tripathi,ld.SSCseekssomemoretime toseekinstructions in the matter.
5. The Court has considered the SCN, which has been issued in this case.
Paras 6.1 to 6.3 of the SCN are set out below:
“6. Quantification of Tax Liability:
6.1. As appeared in the preceding paragraphs, Rotary International South Asia Office (RISAO) is engaged in the collection of various dues on behalf of its parent entity,RotaryInternational(RI),USA.Thesecollections include, but are not limited to, Membership (Per Capita andProrata)Dues,CouncilonLegislation(COL)Levy, fees for new club registrations (Charter Fees), and royalties from official RI Licensees. While RISAO has been declaring these collections in its GSTR-3B returns and paying GST on forward charge basis, the fundamental nature of these transactions appears to have been misconstrued. These dues are legally attributable to RI, USA, and under normal circumstances, should have been repatriated to the parent entity. Subsequently, any funds required by RISAO for its administrative or programmatic expenses in India should have been remitted back from RI, USA. This flow of funds would have correctly been identified as consideration for services provided by RISAO to RI, USA.
6.2.However,the investigationappearstorevealthatto circumvent the tax and other financial regulatory implications of this structure, specifically the liability arising from the import of services, the collected funds was never repatriated. Instead, they were retained and routed across south Asia for various purposes aimed at propagating the objectives of RI, USA, through the operational arm of RISAO. This appears to constitute a clear circumvention of the Reverse Charge Mechanism (RCM) provisions. Therefore, for the purpose of quantifying the value that escaped GST on import of services, the entire value of collections declared by RISAO in its GSTR-3B returns from April 2018 to March 2024 is considered as the taxable value of the "import of service" from RI, USA. As the recipient of these services, RISAO appears to be liable to pay Integrated Goods and Services Tax (IGST)on this value under the Reverse Charge Mechanism.
6.3.BasedontheGSTR-3BreturnsfurnishedbyRISAO, theyear-wise quantificationofthe taxable valueand the corresponding IGST liability, calculated at 18%, is detailed in the table below:
Consequently,itappearsthatRISAOhassuppressedthe value of imported services amounting to ₹ 533,97,13,121/-fortheperiodfromApril2018toMarch 2024, thereby evading IGST of ₹ 96,11,48,362/-, which is liable to be demanded and recovered along with applicable interest and penalty under the relevant provisions of the CGST and IGST Acts, 2017.
Period
Amount Declared in GSTR 3B (Taxable Value)
GST to be paid under RCM
2018-19
67,47,76,164
12,14,59,710
2019-20
75,03,85,693
13,50,69,425
2020-21
82,04,54,551
14,76,81,819
2021-22
90,67,79,431
16,32,20,298
2022-23
1,05,94,92,736
19,07,08,692
2023-24
1,12,78,24,546
20,30,08,418
TOTAL
5,33,97,13,121
96,11,48,362
Detailed month wise worksheet is attached as Annexure B.
6. Fromtheabove,itisunclearastoinwhatmannertheDepartmentseeks to attribute the dues to M/s. Rotary International, USA when admittedly, it has acknowledged that for all the collections made by the Petitioner, GST
