2023 (5) TMI 374 - HC - GST

Refund of unutilized Input Tax Credit - export of services or not - petitioner had claimed refund of ITC on the ground that it related to remuneration for services rendered to overseas entities, in terms of an Advisory Service Agreement - case of Revenue is that services provided by it fell under the category of intermediary services and in terms of Section 13(8) of the Integrated Goods Services Tax Act, 2017 (IGST Act) read with Section 2(6) of the IGST Act, services rendered by the petitioner could not be treated as export of services. Whether the Appellate Authority was correct in holding that the services rendered by the petitioner in terms of the Advisory Services Agreement were in the nature of intermediary services? HELD THAT - There is merit in the contention that the services relating to market research and developing strategies cannot be classified as intermediary services. However, there is a serious controversy as to the exact nature of services rendered by the petitioner. In the given circumstances, it was contended by the counsels that the matter be remanded to the Adjudicating Authority to decide afresh keeping in view the decision of this Court in M/s Ernst Young Ltd. v. Additional Commissioner, CGST Appeals-II, Delhi Anr. 2023 (3) TMI 1117 - DELHI HIGH COURT . Insofar as the impugned order dated 23.03.2022 passed by the Appellate Authority is concerned, the Appellate Authority had rejected the petitioner s appeal against partial rejection of the claim for refund on the ground that the petitioner had not produced any documentary evidence to establish the actual eligible turnover for zero rated supplies. The applications filed by the petitioner for refund for the Financial Years 2018-19 and 2019-20 are restored before the Adjudicating Authority for considering afresh in light of the decision of this Court in M/s Ernst Young Ltd. v. Additional Commissioner, CGST Appeals-II, Delhi Anr. - petition disposed off.

Summary

Issues involved:
The judgment involves a petition challenging various orders related to the refund of unutilized Input Tax Credit (ITC) and the classification of services rendered under different agreements as intermediary services.

Refund of ITC for various periods:
The petitioner challenged orders denying refund of accumulated ITC for different periods, including Financial Year 2018-19 and 2019-20. The Adjudicating Authority initially allowed the refund applications, but the Appellate Authority later overturned these decisions, stating that the petitioner was not entitled to the claimed refund.

Classification of services as intermediary services:
The main issue raised was whether the services provided by the petitioner under an Advisory Services Agreement should be classified as intermediary services. The Appellate Authority determined that the petitioner acted as an agent facilitating the supply of goods to foreign entities, thus falling under intermediary services, which impacted the eligibility for export of services under relevant tax laws.

Details of the judgment:
The High Court considered the nature of services rendered by the petitioner under the Advisory Services Agreement. The petitioner argued that the services involved identifying business opportunities and developing strategies globally, which should not be classified as intermediary services as they were provided on a principal-to-principal basis without involving third parties in the supply chain.

The Court noted that while services related to market research and strategy development may not qualify as intermediary services, there was a dispute regarding the exact nature of the petitioner's services. Considering this, the Court decided to remand the matter back to the Adjudicating Authority for a fresh decision in line with a previous court decision on a similar issue.

Regarding the rejection of a refund claim for a specific period due to alleged errors in turnover computation, the Court found that the Appellate Authority dismissed the claim for lack of documentary evidence supporting the actual eligible turnover for zero-rated supplies. Consequently, the Court set aside the impugned orders and directed the Adjudicating Authority to reconsider the refund applications for the Financial Years 2018-19 and 2019-20 based on the decision in the referenced court case.

In conclusion, the petition was disposed of with the restoration of the refund applications for further consideration by the Adjudicating Authority in light of the Court's directions and relevant legal precedents.