KEI Industries Limited Vs Union of India & Ors. (Delhi High Court)
The Delhi High Court, in the case of KEI Industries Limited Vs Union of India & Ors., addressed the valuation of cross-charges between distinct entities under GST, specifically concerning expenses incurred by a Head Office (HO) but not cross-charged to Branch Offices (BOs). The core issue was whether Integrated Goods and Services Tax (IGST) was payable on such un-cross-charged expenses. The petitioner, KEI Industries Limited, challenged an Order-in-Original that had, without considering relevant circulars and precedents, mandated payment.
The petitioner relied on Circular No. 199/11/2023-GST issued by the CBIC, which clarifies the valuation of services between distinct persons under Rule 28 of the CGST Rules. This circular states that if the recipient (BO) is eligible for full input tax credit, the value declared in the invoice by the HO is deemed the open market value. Crucially, the circular further clarifies that if the HO has not issued a tax invoice for certain services to the BO, and the BO is eligible for full input tax credit, the value of such services may be deemed as “Nil” by the HO and considered the open market value. The petitioner also cited the Delhi High Court’s own decision in Metal One Corporation India Pvt. Ltd. & Ors. v. Union of India & Ors., which held that if a charge is declared as NIL, no tax demand is payable.
