Toyota Kirloskar Motor Pvt. Ltd. Vs Union of India (Karnataka High Court)
The Karnataka High Court partly allowed a writ petition challenging a GST show cause notice issued for the period April 2018 to March 2021, which proposed demands aggregating to over ₹4,500 crore across six audit observations. The petitioner confined its challenge primarily to Audit Observation No. OBS 1090810, relating to the determination of the place of supply for inter-State supply of goods, while seeking liberty to respond to the remaining five audit issues before the authorities.
Under OBS 1090810, the tax department alleged that the petitioner had wrongly paid IGST on supplies made to dealers located outside Karnataka and was instead liable to pay CGST and KGST. This conclusion was based on clauses in the sample dealership agreement and tax invoices, read with provisions of the Sale of Goods Act, 1930, which according to the department showed that delivery and transfer of title occurred in Karnataka when goods were handed over to a common carrier at the factory gate.
The Court examined Section 10(1)(a) of the IGST Act, which provides that where a supply involves movement of goods, the place of supply is the location where the movement of goods terminates for delivery to the recipient. Interpreting this provision, the Court held that movement of goods does not terminate when goods are handed over to a common carrier, but only when they reach the destination where the recipient is enabled to take delivery. In the present case, it was undisputed that the goods were delivered to recipients outside Karnataka, making the supplies inter-State in nature and subject to IGST.
