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TMI Blog2023 (8) TMI 980X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner, the services provided by the petitioner were to customers of I Squared and therefore the petitioner was an Intermediary . Plainly, the said reasoning is fundamentally flawed. Merely because I Squared may have, on the basis of advisory services given by the petitioner, made the investments in entities in India, cannot be construed to mean that the petitioner had rendered the advisory services as an Intermediary . The Appellate Authority had accepted that the services provided by the petitioner included identifying potential opportunities for investments in India, analyzing investment returns and related risks, preparing reports etc. However, the Adjudicating Authority concluded that the petitioner was performing these activities in India in his liaison capacity and the person acting in liaison capacity, has to act as a go-between his principal and his principal s customers which are opportunities for investments in the instant case'' - Concededly, the said view is unsustainable. It is, thus implicit in the concept of an Intermediary that there are three parties, namely, the supplier of principal service; the recipient of the principal service and an intermed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state agents, supply of accommodation by a hotel, inn, guest house, club or campsite - The petitioner had also provided invoices which indicated that it was charging market services and advisory fee . It cannot be accepted that the present petitions are required to be remanded to the Adjudicating Authority for consideration afresh. There is no material which would even remotely suggest that the services rendered by the petitioner are not as claimed, that is, advisory services relating to investments in India. The impugned orders are set aside. The Adjudicating Authority is directed to process the petitioner s claim for refund as expeditiously as possible and preferably with in a period of eight weeks from today - petition allowed. - HON BLE MR JUSTICE VIBHU BAKHRU AND HON BLE MR JUSTICE AMIT MAHAJAN Advocates who appeared in this case: For the Petitioner : Mr. Tarun Gulati, Sr. Adv. with Mr. Kishore Kunal, Mr. Parth, Mr. Shakaib Khan Mr. Shubham Bajaj, Advs. For the Respondents : Mr. R. Ramachandran, Sr. SC. JUDGMENT VIBHU BAKHRU, J. 1. The petitioner has filed the present petitions impugning the orders passed by the Appellate Authority (respondent no. 2) rejecting the appeals pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tilized ITC on export of services amounting to ₹26,52,799/- relating to the tax period April 2018 to March 2019 under Section 54 of the Central Goods and Services Tax Act, 2017 (hereafter the CGST Act ). 7. The Adjudicating Authority issued a show cause notice dated 18.07.2020 proposing to reject the petitioner s claim for refund for the following reasons: i. Place of provision appear to be in India; ii. Refund claims in respect of remittances received on or before 13.07.2018 is time barred; iii. difference in the value of supply as reflected in GSTR-1, GSTR-3B vis a vis RFD-01 and remittances received during 2018-19; and iv. refund claimed in respect of capital goods and construction activities, repair and maintenance, rent-a-cab etc. not admissible under Section 17(5) of the CGST Act. 8. The petitioner responded to the said show cause notice contesting the reasons for proposing rejection of its claim. Insofar as the place of supply of services is concerned, the petitioner responded as under: In this respect, we would like to reiterate that the Company is engaged in the provision of Management Consultancy services in the nature of Investment Advisory and Marketing Survey and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re also supported with the order dated 26.07.2018 pronounced by the Maharashtra Authority of Advance Ruling in the case of Sabre Travel Network India Pvt. Ltd. Hence, I find that (i) the supplier of service is located in India, (ii) the recipient of service is located outside India, (iii) the place of supply of service is within India, (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange and (v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with explanation I in Section 8 of IGST Act. Hence, as per Section 2(6) of the IGST Act, the supply of service will not be treated as export of service . 11. Aggrieved by the said order, the petitioner filed an appeal under Section 107 of the CGST Act before the Appellate Authority which was rejected by an order dated 29.03.2022. The Appellate Authority noted the scope of services as specified under Article 3 of the Agreement and observed that the petitioner was engaged in providing support services on behalf of I Squared regarding information of the Indian market for identifying potential opportunities/customers. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause notice dated 18.08.2021 proposing to reject the petitioner s claim for refund inter alia on the ground that the place of supply of services was in India. The Adjudicating Authority referred to the invoices raised by the petitioner that reflected the place of supply as Delhi and drew support from the same. In addition, the show cause notice also mentioned that on scrutiny of documents, it appeared that the petitioner was acting as an Intermediary in terms of Sub-section (13) of Section 2 of the IGST Act. 14. The petitioner replied to the show cause notice on 02.09.2021 reiterating its stand as in the previous year. 15. The Adjudicating Authority rejected the petitioner s claim for refund by an order dated 21.09.2021, inter alia, on the ground that the services rendered were covered in Sub-section (3)(b) and Sub-section (4) of Section 13 of the IGST Act. According to the Adjudicating Authority, the place of supply of service was the location where services were actually performed as services supplied to an individual, which required physical presence of the recipient or a person acting on his behalf for supply of service in India. The Adjudicating Authority also reasoned t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same as in previous years. 18. The petitioner s claim for refund was rejected by the Adjudicating Authority by an order dated 03.06.2022, inter alia, on the ground that the services rendered by the petitioner were covered under Sub-section (3)(b) and Sub-section (4) of Section 13 of the IGST Act. According to the Adjudicating Authority, in case of services supplied to an individual, which require physical presence of the recipient or a person acting on his behalf for supply of service, the place of supply of service would be the location where services were actually performed. The Adjudicating Authority observed that the petitioner was rendering services in relation to immovable property viz. roads, tolls, etc. , which were covered under Sub-section (4) of Section 13 of the IGST Act. The Adjudicating Authority also reasoned that since the immovable property was situated in India, the services rendered in relation to those properties also required physical presence of the recipient. This was also corroborated by the invoices disclosing the place of services as New Delhi . Accordingly, the Adjudicating Authority held that the place of services rendered by the petitioner were in Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 13) shall apply to determine the place of supply of services where the location of the supplier of services or the location of the recipient of services is outside India . As such the appellant s submissions, that the place of supply of their services supplied to | Squared Asia cannot be determined under section 13(4) of IGST Act, hold no ground. 22. The Appellate Authority also found that the place of supply was in India in terms of Section 13(3)(b) of the IGST Act. The Appellate Authority referred to the said provision and concluded as under: 7.2 I find that the appellant has provided marketing support services in India specifically for and on behalf of M/s I Squared Asia Pte. Ltd. for furtherance of their business of M/s I Squared Asia Pte. Ltd. in India. I find that for a service for which the place of supply has to be interpreted under section 13(3)(b) of the IGST Act, 2017, it should first be supplied to an individual . I find that the term individual has the meaning of the person which is defined in section 2(84) of the CGST Act, 2017 and also includes a Hindu Undivided Family, a Company, a Firm, a Limited Liability Partnership, an Association of Persons or Body of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13) shall be the location of the recipient of services: Provided that where the location of the recipient of services is not available in the ordinary course of business, the place of supply shall be the location of the supplier of services. (3) The place of supply of the following services shall be the location where the services are actually performed, namely: *** *** *** (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 co-ordination 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. *** *** *** (8) The place of sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to thirty years. He also submitted that the petitioner had agreed to supply services in India and it was not clear from the invoices as to the nature of services provided. He stated that the Adjudicating Authority was required to call for more information and documents to ascertain the true nature of services before arriving at any conclusion and therefore, the matters ought to be remanded back to the Adjudicating Authority to consider afresh. He stated that orders have been passed in other cases remanding the matters for re-adjudication in the light of the earlier decision rendered by this Court in M/s Ernst Young Ltd. v. Additional Commissioner, CGST Appeals-II, Delhi Anr.:2023:DHC:2116-DB. He also referred to such orders passed in Bharat Sanchar Nigam Ltd. v. Union of India Ors.:2023:DHC:2482-DB and in M/s GAP International Sourcing (India) Pvt. Ltd. v. Additional Commissioner CGST Appeals-II Ors.:W.P.(C) No. 11399/2022 dated 01.05.2023. 31. Mr. Gulati, learned senior counsel appearing for the petitioner contested the aforesaid submissions. He contended that there was no dispute as to the nature of services rendered by the petitioner. He submitted that petitioner had filed res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to time and under communication of the same to I Squared Asia. 3.3 Providing I Squared Asia with advices and suggestions with respect to the financial feasibility and viability of any proposed project. 3.4 Providing analytical support and support for completing due diligence. 3.5 Acting as a communication channel for I Squared Asia as may be requested by I Squared Asia on a time to time basis. 3.6 Providing management advisory, management consulting and operational support services. 3.7 Providing such other services in furtherance of the foregoing, as I Squared Asia may reasonably request. The Parties agree and acknowledge that at all times during the Term of this Agreement, Cube Highways India staff shall remain employees of Cube Highways India, both legally and economically. The employees of Cube Highways India shall never be considered as employees of I Squared Asia. As stated above in the scope of services, the role of Cube Highways India shall always remain that of service provider and I Squared Asia shall solely take its decisions. At its own discretion, I Squared Asia may communicate the same to Cube Highways India for further communication. I Squared Asia shall have sole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus, squarely covers under the ambit of Intermediary services . . 37. It is not easy to discern the import of the aforesaid reasoning of the Adjudicating Authority. However, it does appear that the Adjudicating Authority had proceeded on the basis that since the service recipient had invested amounts on the basis of advisory services rendered by the petitioner, the services provided by the petitioner were to customers of I Squared and therefore the petitioner was an Intermediary . Plainly, the said reasoning is fundamentally flawed. Merely because I Squared may have, on the basis of advisory services given by the petitioner, made the investments in entities in India, cannot be construed to mean that the petitioner had rendered the advisory services as an Intermediary . 38. As noted above, the Appellate Authority had accepted that the services provided by the petitioner included identifying potential opportunities for investments in India, analyzing investment returns and related risks, preparing reports etc. However, the Adjudicating Authority concluded that the petitioner was performing these activities in India in his liaison capacity and the person acting in liaison capacity, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nging or facilitating (the ancillary supply) the said main supply. An activity between only two parties can, therefore, NOT be considered as an intermediary service. An intermediary essentially arranges or facilitates another supply (the main supply ) between two or more other persons and, does not himself provide the main supply. 3.2 Two distinct supplies: As discussed above, there are two distinct supplies in case of provision of intermediary services: (1) Main supply, between the two principals, which can be a supply of services or securities: (2) Ancillary supply, which is the service of facilitating or arranging the main supply between the two principals. This ancillary supply is supply of intermediary service and is clearly identifiable and distinguished from the main supply. A person involved in supply of main supply on principal to principal basis to another person cannot be considered as supplier of intermediary service. 3.3 Intermediary service provider to have the character of an agent, broker or any other similar person: The definition of intermediary itself provides that intermediary service providers-means a broker, an agent or any other person, by whatever name calle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also squarely covered by an earlier decisions of this Court in M/s Ernst Young Ltd. v. Additional Commissioner, CGST Appeals-II, Delhi Anr (supra) and in Ohmi Industries Asia Pvt. Ltd. v. Assistant Commissioner, CGST (supra). 45. It is also relevant to refer an Order-in-Original dated 26.07.2018 passed by the Adjudicating Authority (Order-in-Original No. 15-17/MN-DIV/2018-19/R). In that case, the Adjudicating Authority had observed that the basic nature of services provided by the petitioner to I Squared is Management and Business Consultant Services . The Adjudicating Authority had, thus, accepted that the input services as claimed by the petitioner such as business auxiliary services, consulting engineers, courier expenses, management consultant, online information and database access services etc. qualified as input services and the petitioner was, thus, entitled to refund of accumulated service tax in respect of those input services. The Adjudicating Authority had thus sanctioned refund of ₹17,75,393/- for tax period prior to July, 2017. 46. As noticed above, the definition of Intermediary under Rule 2(f) of the Place of Provision of Service Rules, 2012 is similar to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re attracted. 50. Sub-section (7)(b) of Section 13 of the IGST Act has no application whatsoever. Sub-section (7) of Section 13 of the IGST Act reads as under: (7) Where the services referred to in sub-section (3) or sub-section (4) or sub-section (5) are supplied in more than one State or Union territory, the place of supply of such services shall be taken as being in each of the respective States or Union territories and the value of such supplies specific to each State or Union territory shall be in proportion to the value for services separately collected or determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed. 51. Concededly, the petitioner has not rendered any services in more than one state or union territory as envisaged in Sub-section (7) of Section 13 of the IGST Act. Mr. Ramachandran has also made no attempt to support this conclusion. 52. Sub-section (3)(b) of Section 13 of the IGST Act is equally inapplicable. First of all, it relates to services which are supplied to an individual and which require physical presence of the recipient (or a person acting on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The petitioner had repeatedly filed submissions before the concerned authorities (Adjudicating Authority as well as Appellate Authority) explaining that it is rendering advisory services to overseas group companies with respect to investment avenues in transportation sector after performing its own analysis and due diligence . It had also explained that its overseas group company [I Squared] is not bound by its advices and takes its own decision at its discretion as expressly stated in the Agreement. 54. The petitioner had also provided invoices which indicated that it was charging market services and advisory fee . 55. In view of the above, the orders impugned in the present petitions are liable to be set aside. 56. Mr. Ramachandran had filed written submissions, inter alia, praying that the matter be remanded for re-adjudication in the light of the decision in M/s Ernst Young Ltd. v. Additional Commissioner, CGST Appeals-II, Delhi Anr (supra) by, inter alia, praying as under: In view of the foregoing facts and circumstances, it is respectfully prayed that this Hon ble Court be pleased to remand the matter for re-adjudication in the light of the decision of this Hon ble Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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