Delhi HC grants ITC refund for export of investment advisory services, rejects intermediary classification under IGST Section 13

Delhi HC allowed the petition for ITC refund on export of advisory services. The petitioner provided investment advisory services to a Singapore-based company regarding opportunities in India. The Adjudicating Authority wrongly classified these as intermediary services under IGST Act Section 13, reasoning that since the recipient invested based on petitioner's advice, the services were rendered to the recipient's customers. HC held this reasoning fundamentally flawed, clarifying that intermediary services require three parties - supplier, recipient, and intermediary facilitating supply. Here, petitioner rendered advisory services directly to the Singapore company on its own account, not as an intermediary. The Authority also incorrectly applied other provisions of Section 13. HC set aside the refund rejection orders and directed processing the refund claim within eight weeks.

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Issues Involved:
1. Whether the services rendered by the petitioner constitute export of services.
2. Whether the petitioner qualifies as an 'Intermediary'.
3. Whether the place of supply of services is in India under various subsections of Section 13 of the IGST Act.
4. Whether the orders passed by the Adjudicating Authority and the Appellate Authority have traveled beyond the show cause notices.

Summary:

Issue 1: Whether the services rendered by the petitioner constitute export of services.

The petitioner, engaged in investment advisory services, claimed that their services to I Squared Asia Advisors Pte. Ltd. (I Squared) in Singapore constitute export of services. The Adjudicating Authority rejected the claim, stating that the place of supply is in India, thus not qualifying as export of services under Section 2(6) of the IGST Act. The Appellate Authority upheld this decision, interpreting the services as intermediary services and thus placing the supply within India.

Issue 2: Whether the petitioner qualifies as an 'Intermediary'.

The petitioner argued they provided advisory services directly to I Squared on a principal-to-principal basis, not as an intermediary. The Adjudicating Authority and Appellate Authority concluded otherwise, interpreting the services as intermediary services under Section 2(13) of the IGST Act. However, the court found this reasoning flawed, noting that advisory services provided directly to I Squared do not constitute intermediary services, as there is no facilitation between two other parties.

Issue 3: Whether the place of supply of services is in India under various subsections of Section 13 of the IGST Act.

The authorities also held that the place of supply was in India under Sub-sections (3)(b) and (4) of Section 13 of the IGST Act, reasoning that the services required physical presence or were related to immovable property in India. The court disagreed, clarifying that the services rendered were advisory and did not require physical presence or relate directly to immovable property, thus not falling under these subsections.

Issue 4: Whether the orders passed by the Adjudicating Authority and the Appellate Authority have traveled beyond the show cause notices.

The court noted that the initial show cause notices did not allege the petitioner was an intermediary or that the place of supply was in India under Sub-sections (3)(b) or (4) of Section 13. The court found that the authorities' conclusions had indeed traveled beyond the show cause notices, rendering the orders unsustainable.

Conclusion:

The court set aside the impugned orders, directing the Adjudicating Authority to process the petitioner's claim for refund expeditiously. The court emphasized that the petitioner provided advisory services directly to I Squared and did not act as an intermediary, thus the services should be considered as export of services with the place of supply outside India.

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