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TMI Blog2022 (11) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 54 of the CGST Act prescribes the manner in relation to claiming refund by tax payers, mainly covering the eligibility and prescribed timelines for filing the refund claim application. A tax payer engaged in export of services without payment of GST is eligible to claim refund of unutilized input tax credit. A bare perusal of the recitals and relevant clauses of the MSA do not in any manner indicate that petitioner is acting as an intermediary so as to fall within the scope and ambit of the definition of intermediary under Section 2 (13) of the IGST Act. Such clauses cannot also be interpreted to conclude that the petitioner has facilitated the services. The said clauses are in relation to the modalities of how the actual work would be carried out and do not in any manner establish that the petitioner was required to arrange/facilitate a 3rd party to render the main service which has actually been rendered by the petitioner. The impugned order dated 15.02.2021 (Annexure P-18) holding the petitioner to be an intermediary under Section 2 (13) of the IGST Act, cannot sustain - Petition allowed. - CWP-6048-2021 (O&M) - - - Dated:- 11-11-2022 - HON'BLE MR. JUSTI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n entity located outside India. It is asserted that as per terms of the MSA various services are to be provided by the petitioner on a principal to principal basis. Further the petitioner is engaged by GI for actual performance of BPO services to the clients of GI located outside India. The arrangement requires the petitioner to complete the assigned processes/scope of work directly to the 3rd parties located outside India. Copy of the MSA entered between the petitioner and GI stands annexed as Annexure P-1 alongwith the petition. For the period from July 2017 to March 2018, petitioner filed an application with Haryana GST authorities on 18.10.2018 claiming refund of un-utilized ITC amounting to Rs.27,26,27,276/- on account of zero rated supplies of services without payment of Integrated Goods and Service Tax (IGST) under Letter of Undertaking. The refund claim was filed under Section 16 of the Act read with Section 54 of the Central Goods and Services Act 2017 and Rule 89 of the Central Goods and Services Rules 2017. The Deputy Commissioner Division East-II CGST Gurugram vide Order-in-Original dated 14.03.2019 (Annexure P-3) sanctioned an amount of Rs.26,34,61,625/- towards ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10302 of 2020 before this Court. The writ petition was disposed of vide order dated 29.01.2021 (Annexure P-15). The order in appeal dated 27.05.2020 was set aside and the matter remanded back to the appellate authority for a decision afresh. Thereafter the order dated 15.02.2021 (Annexure P-18) has been passed by the Appellate Authority, disallowing the appeal filed by the petitioner and allowing the appeal filed by the department against order in original dated 14.03.2019. The appellate authority held that the services performed by the petitioner fall within the category of intermediary services and do now qualify as export of services under Section 2 (6) of the Act. Consequently, the refund amounting to Rs.26,34,61,625/previously sanctioned in favour of the petitioner was rejected. Furthermore, refund to the extent of Rs.82,15,102/- which was a subject matter of appeal filed by the petitioner was also denied. It be noted that apart from the refund in question, two other refund applications for the period starting from April 2018 to September 2018 and October 2018 to March 2019 have been rejected vide orders dated 09.12.2020 and 02.02.2021 (Annexures P-13 and P-14), res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uated to an agent or broker. Further contention is that the petitioner is not facilitating supply of services between GI and its customers but is actually providing the services on its own account to the end customers as sub-contracted by GI in terms of the MSA. Since the actual service is being performed by the petitioner under the subcontract and it does not arrange or facilitate the service, it cannot be regarded as an intermediary . It has also been pointed out that the petitioner's turn over is the entire charge for the service which is the main service itself whereas in the case of an intermediary the turn over is a mere commission or a facilitation fee which is not the fact in the present case. Learned Senior counsel further submits that the appellate authority in the impugned order has relied on various clauses of the MSA such as Clause 3.1, 3.4, 4.1, 4.2, 5.2, 5.4, 7, 7.1, 7.4, 10.1 and 16.1 to arrive at the conclusion that the petitioner is an intermediary but without giving any analysis of the clauses and yet concluding that the petitioner acts as an intermediary . The Appellate Authority has not assigned any independent reasons to arrive at such a conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner have been held to be export of services under the erstwhile Service Tax regime and the refund claims were sanctioned on a regular basis by the tax authorities. In support of such contention reliance has been placed on Order in Original dated 25.01.2018 (Annexure P-2) wherein the nature of services rendered by the petitioner were elaborately gone into and discussed and it was held that the BPO services performed by the petitioner are in the nature of main service and not intermediary services . As a sequel it is submitted that the definition of intermediary services under the service tax regime and GST regime being broadly similar and as such there being neither any change in the facts nor any change in the statutory provisions a different view could not have been taken by the authorities pertaining to a different period for the same assessee. Contention is that the principle of consistency would apply to tax proceedings as well. We may also take note that on a previous date of hearing i.e.27.10.2021, learned Senior counsel had referred to a circular dated 20.09.2021 issued by the Principal Commissioner (GST), Government of India, Ministry of Finance, Depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tomers, attending industry meetings/conventions, handling public relations and advertising matters etc. (Article 3.1 of the Agreement). b. Supply of services to GI Inc, for negotiating Customer Agreements and statement of work. c. Supply of financial data and other support in order for Gl Inc, to render invoices to GI Inc, customers (Article 3.4 of the agreement); d. Personal data processing:- In performance of this agreement, each Provider (Applicant) may have access to, or otherwise Process, Gl_ Customer Personal Data on GI Customer's behalf Gl Customer personal data will be accessed and otherwise processed by each provider (Applicant) only to the extent strictly necessary to perform this agreement, or upon Gl 's written instructions and in strict compliance thereof.(Article 4.1 of the Agreement); e. Data Protection: Each provider (Applicant) agrees to keep the Gl Customer Personal Data confidential, and agrees to not disclose any GI Customer Personal Data to third parties without having first received express written approval from the GI Customer and Gl (Article 4.2 of the agreement); f. Data Recovery Services: Provider (Applicant) shall provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefrom and which further crystallizes that the petitioner is only performing supporting functions/services for GI. On the strength of such submissions learned counsel vehemently contends that the petitioner fulfils all the ingredients to be termed as an intermediary . Insofar as the issue of the petitioner having been allowed refunds for the previous periods under the pre-GST regime, it is contended that the principle of res-judicata does not apply in matters pertaining to tax for different assessment years. Each assessment year is a separate unit and a decision/view in one year is not to be carried forward and held good for a subsequent year. It is submitted that in tax matters each years assessment is final only for that year and does not govern later years. On the basis of such submissions counsel submits that there is no merit in the writ petition and the same ought to be dismissed. We have heard counsel for the parties at length and have perused the pleadings on record. The primary issue that arises for consideration is as to whether the petitioner would be covered under the expression intermediary as defined under the provisions of the IGST Act and consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto India for repairs or for any other treatment or process and are exported after such repairs or treatment or process without being put to any use in India, other than that which is required for such repairs or treatment or process;] (b) services supplied to an individual, represented either as the recipient of services or a person acting on behalf of the recipient, which require the physical presence of the recipient or the person acting on his behalf, with the supplier for the supply of services. (4) The place of supply of services supplied directly in relation to an immovable property, including services supplied in this regard by experts and estate agents, supply of accommodation by a hotel, inn, guest house, club or campsite, by whatever name called, grant of rights to use immovable property, services for carrying out or coordination of construction work, including that of architects or interior decorators, shall be the place where the immovable property is located or intended to be located. (5) The place of supply of services supplied by way of admission to, or organisation of a cultural, artistic, sporting, scientific, educational or entertainment event, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia may, with the previous approval of the Central Government and by notification in the Official Gazette, specify. (9) The place of supply of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of such goods. (10) The place of supply in respect of passenger transportation services shall be the place where the passenger embarks on the conveyance for a continuous journey. (11) The place of supply of services provided on board a conveyance during the course of a passenger transport operation, including services intended to be wholly or substantially consumed while on board, shall be the first scheduled point of departure of that conveyance for the journey. (12) The place of supply of online information and database access or retrieval services shall be the location of the recipient of services. Explanation . For the purposes of this sub-section, person receiving such services shall be deemed to be located in the taxable territory, if any two of the following non-contradictory conditions are satisfied, namely: (a) the location of address presented by the recipient of services through internet i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act within thirty days after the expiry of the time limited prescribed under the Foreign Exchange Management Act, 1999 (42 of 1999) for receipt of foreign exchange remittances, in such manner as may be prescribed. (4) The Government may, on the recommendation of the Council, and subject to such conditions, safeguards and procedures, by notification, specify___ (i) a class of persons who may make zero rated supply on payment of integrated tax and claim refund of the tax so paid; (ii) a class of goods or services which may be exported on payment of integrated tax and the supplier of such goods or services may claim the refund of tax so paid.] CENTRAL GOODS AND SERVICES TAX ACT, 2017 Section 2. Definitions.- In this Act, unless the context otherwise requires,-- (1) to (4) xxxx xxxx xxxx xxxx (5) agent means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another; (6) to (121) xxx xxx xxx xxx SECTION 54. Refund of tax. (1) Any person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er or location of recipient is outside India. Generally, place of supply of services is the location of the recipient, except in case of certain specified services. For intermediary services, the place of supply is the location of the supplier. Section 16 (1) (a) inter alia provides that the export of services amount to zero rated supply . Section 16 (2) provides that credit of input tax may be availed for making zero rated supplies. Section 54 of the CGST Act prescribes the manner in relation to claiming refund by tax payers, mainly covering the eligibility and prescribed timelines for filing the refund claim application. A tax payer engaged in export of services without payment of GST is eligible to claim refund of unutilized input tax credit. By way of passing the impugned order dated 15.02.2021 (Annexure P-18) findings have been recorded that petitioner provides services on behalf of GI and as such there is a principal agent relationship. Further the petitioner is arranging and facilitating the supply of services between GI and its customers and while doing so petitioner is acting as an intermediary . It has further been held that petitioner is not providing services o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies and other operating terms, excepting pricing under each Customer Statement of Work will be applicable by reference to all services to be performed by the Provider under this Agreement. WHEREAS, GI will have continuing responsibility for obtaining new GI Customers and managing and expanding its relationships with existing GI Customers, for the benefit of the Provider and other similarly situated Affiliates of GI (the Other GI Provider Affiliates ) who also provide services to GI in satisfaction of GI's obligations to the GI Customers under the GI Customer Agreements; NOW, THEREFORE, in consideration of the foregoing and the mutual promises herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows: ARTICLE 3 GI'S OBLIGATIONS AND SERVICES In addition to any other obligations set forth below in this Agreement, GI shall be obligated to provide the following services: 3.1 Managing New and Existing Customer Relationships, GI shall be responsible for performing all functions necessary to obtain new GI Customers for whom Services shall be performed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Provider. Article 4 PERSONAL DATA PROCESSING 4.1 Personal Data. In performance of this Agreement, each Provider may have access to, or otherwise Process, GI Customer Personal Data on a GI Customer's behalf. GI Customer Personal Data will be accessed and otherwise Processed by each Provider only to the extent strictly necessary to perform this Agreement, or upon GI's written instructions and in strict compliance thereof. 4.2 Data Protection (a) Notwithstanding anything in Article 11 (Confidentiality) to the contrary, each Provider agrees to keep the GI Customer Personal Data Confidential, and agrees to not disclose any GI Customer Personal Data to third parties without having first received express written approval from the GI Customer and GI and, if required by applicable Law, the applicable Data Subject. All Provider personnel with Process GI Customer Personal Data only on a need-to-know basis in connection with the performance of this Agreement. Article 5 Services 5.1 The Customer Agreement and Customer Statements of Work are by reference incorporated into the terms of this Agreement and Standard Operating Procedures. (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qual to the excess of (i) over the sum of (ii), (iii) and (iv) below: (i) the amount invoiced to the GI Customer for such Services (as denominated in US Dollars), in accordance with such Customer Statements of Work and Customer Agreements including amount invoiced for special projects/migration. (ii) (a) GI's fully-loaded costs in providing its Services with respect to such GI Customer, calculated in U.S. Dollars, as described in Article 3 hereof and (b) GI's pass through costs including attributable to special projects/migration ((a) and (b) together referred to as GI Costs ) (iii) Arms' length net margin to be retained by GI pursuant to an economic analysis in accordance with internationally accepted principles as agreed between the Parties from time to time. (iv) Any adjustments made by GI for compensating the Support Region ((ii), (iii) and (iv) together referred to as GI Service Fee ). ARTICLE 16 TERMINATION 16.1 Termination for Cause. If a Provider fails to perform any of its material obligations under this Agreement or a Customer Statement of Work and does not cure such failure within the cure period mentioned in such Custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner. Clause 10 of the MSA lays down the manner in which the petitioner would raise invoices on GI for the services rendered. Clause 16 provides that if the petitioner fails to perform any of the obligations under the MSA or under the Customer Statement of Work, GI may then terminate the contract. The MSA bears out the arrangement between GI and the petitioner and the same may be summarized as below:- i) GI has service agreement for providing BPO services with respective GI customers at global level. GI issues invoices and receives remittence from the GI customers. ii) GI under the MSA sub-contracted the execution of the BPO services to the petitioner. iii) Petitioner executes the delivery of BPO services to the customers of GI under the MSA. iv) Petitioner issues invoices to GI and receives payment from GI in convertible foreign exchange as its service fee. The MSA dated 01.01.2013 (Annexure P-1) entered between the petitioner and GI is clearly for the purpose of sub-contracting services to the petitioner by GI. These are the very services which GI was contractually supposed to provide to its own customers. As per definition of intermediary under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te the assigned processes/scope of work and submit the deliverables directly to the third parties, either on-line or on-call or through e-mail using dedicated electronic networks and voice circuits. Service provided by the Company cannot be classified as services of an 'Intermediary'. The terms 'intermediary' is defined under Rule 2 (f) of the Place of Provision of Service Rules, 2012 ('POPS Rules') as: 'intermediary' means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the 'main service') between two or more persons, but does not include a person who provides the main service on his account . On a perusal of the above definition, it is evident that the following two conditions must be fulfilled collectively for a service provider to qualify as an 'intermediary': Involved in arrangement or facilitation in provision of the service provided by the principal; No role in actual performance of service intended to be received by the receiver. In view of the above definition, it is clear that the scope of intermediary is to med ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arified that the concept of intermediary was borrowed in GST from the Service Tax Regime. The circular after making a reference to the definition of intermediary both under Rule 2 (f) of the Place of Provision of Service Rules 2012 and under Section 2 (13) of the IGST Act clearly states that there is broadly no change in the scope of intermediary services in the GST regime vis-a-vis the service tax regime except addition of supply of securities in the definition of intermediary in the GST law. We also find that in the impugned order dated 15.02.2021 (Annexure P-18) there has been a clear misreading of the ruling in the case of Infinera (supra) while observing that there has been a material change in the definition of intermediary under the GST regime. To the contrary a bare perusal of the ruling in the case of Infinera (Supra) which stands reproduced by the Appellate Authority in the impugned order itself would show that the definition of the term intermediary had been noticed both under the pre-GST regime as also under the GST regime and it had been observed as under:- From the above definitions, in essence, there does not seem to be any difference between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am Ltd. Vs. Union of India (2006) 3 SCC 1, the Hon'ble Supreme Court had reiterated that where facts and law in a subsequent assessment year are the same, no authority whether quasi-judicial or judicial can generally be permitted to take a different view. Paragraph 20 of the judgment would be relevant to the issue at hand and is reproduced hereunder:- 20. The decisions cited have uniformly held that res judicata does not apply in matters pertaining to tax for different assessment years because res judicata applies to debar Courts from entertaining issues on the same cause of action whereas the cause of action for each assessment year is distinct. The Courts will generally adopt an earlier pronouncement of the law or a conclusion of fact unless there is a new ground urged or a material change in the factual position. The reason why Courts have held parties to the opinion expressed in a decision in one assessment year to the same opinion in a subsequent year is not because of any principle of res judicata but because of the theory of precedent or the precedential value of the earlier pronouncement. Where facts and law in a subsequent assessment year are the same, no aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of various types of backend services which are in the nature of call centre services, back office management, IT helpdesk services etc. ('BPO services') to the overseas entity. The petitioner provides these services to third parties on behalf of its client located outside India. The arrangement requires the company to complete the assigned processes/scope of work and submit the deliverables directly to the third parties, either on-line or on-call or through email using dedicated electronic networks and voice circuits. Still further in para 9 of the written statement it was clearly averred to the following effect:- the test of agency must be satisfied between the principal and the agent i.e. the intermediary which is not the case in the present case The findings as regards the petitioner to be an agent is in contradistinction to the clear stand taken by the department in the previous round of litigation. It is undisputed that the petitioner has an agreement only with the GI. Pursuant to the sub-contracting arrangement as per MSA (Annexure P-1), the petitioner provides the main service directly to the overseas clients of GI but does not get any rem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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