2023 (8) TMI 980 - HC - GST

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 ... Export of services - place of supply under Section 13 of the IGST Act - intermediary - definition of export of services under Section 2(6) of the IGST Act - refund of unutilised Input Tax Credit under Section 54 of the CGST Act - place of supply rules: services supplied in relation to immovable property - place of supply rules: services requiring physical presence of recipient - remand for re-adjudicationIntermediary - export of services - place of supply under Section 13 of the IGST Act - Whether the petitioner was an 'intermediary' and therefore the place of supply of the services rendered to I Squared was in India, disqualifying the services as export of services. - HELD THAT: - The Court found that the Adjudicating Authority's conclusion that the petitioner was an intermediary was unsustainable. The definition of 'intermediary' requires arranging or facilitating a main supply between two or more persons and presupposes a minimum of three parties and a subsidiary role; it excludes a person who supplies the main service on his own account. The Agreement and the factual material show that the petitioner rendered advisory/consultancy services directly to I Squared on a principal to principal basis and did not merely arrange or facilitate a separate main supply. Earlier authorities and the CBIC Circular were relied upon to demonstrate that advisory services provided on one's own account cannot be treated as intermediary services. Consequently, the place of supply could not be fixed in India on the basis that the petitioner was an intermediary and the services could not be excluded from being export of services on that ground. [Paras 40, 41, 42, 43, 44]The petitioner is not an 'intermediary' in respect of the advisory services rendered to I Squared; the authorities' finding to the contrary is set aside.Place of supply rules: services requiring physical presence of recipient - place of supply rules: services supplied in relation to immovable property - place of supply under Section 13 of the IGST Act - Whether the place of supply of the petitioner's services is in India by virtue of the provisions treating (a) services requiring physical presence of the recipient and (b) services supplied directly in relation to immovable property as having place of supply in India. - HELD THAT: - The Court examined the applicability of Section 13(3)(b) and Section 13(4) (as characterised in the impugned orders). Section 13(3)(b) concerns services supplied to an individual that require the physical presence of the recipient (or a person acting on his behalf) with the supplier; such provisions relate to personal services and cannot be stretched to cover advisory services supplied to a corporate recipient abroad. The Court also held that Section 13(4) applies to services supplied directly in relation to immovable property (e.g., experts, estate agents, construction, accommodation), and the petitioner's advisory services (market analysis, due diligence, project feasibility and related reports) are not services supplied directly in relation to immovable property merely because the subject matter of I Squared's investments is infrastructure in India. The Adjudicating Authority's invocation of these clauses was therefore misplaced. [Paras 51, 52, 53, 54, 55]Sections 13(3)(b) and 13(4) of the IGST Act are not attracted to the petitioner's advisory services; the finding that the place of supply is in India on these bases is unsustainable.Refund of unutilised Input Tax Credit under Section 54 of the CGST Act - remand for re-adjudication - Whether the matters should be remanded for fresh adjudication and whether the impugned orders rejecting refund claims should be set aside. - HELD THAT: - The Revenue sought remand for re-adjudication on the basis that additional inquiry was necessary. The Court found no material to suggest that the petitioner did not render advisory services as claimed; the Agreement and the petitioner's submissions had been on record and the authorities themselves referred to that nature of services. Precedents cited by Revenue involving remand were distinguishable because they concerned limitation issues or genuine disputes as to the nature of services. Given that the impugned orders were founded on incorrect characterisation of the petitioner as an intermediary and misapplication of place of supply rules, and there was no need for further factual inquiry, remand was refused. The impugned orders were set aside and the Adjudicating Authority was directed to process the refund claims expeditiously. [Paras 29, 56, 57, 58]No remand; impugned orders are set aside and the Adjudicating Authority is directed to process the petitioner's refund claims expeditiously (preferably within eight weeks).Procedural fairness - grounds in show cause notice - place of supply under Section 13 of the IGST Act - Whether the Adjudicating Authority and Appellate Authority travelled beyond the grounds raised in the show cause notices and whether those orders are sustainable. - HELD THAT: - The Court observed that the impugned order for Financial Year 2019 20 relied on place of supply grounds (Sections 13(3)(b) and 13(4)) that were not raised in the preceding show cause notice, which had alleged only that the petitioner was an intermediary. The Adjudicating Authority therefore passed an order on grounds not foreshadowed in the notice, a course the Court found impermissible. Independently, those additional grounds were examined and found unsustainable on merits. [Paras 48, 49]The order that proceeded on place of supply grounds not raised in the show cause notice is unsustainable; those findings are set aside.Final Conclusion: The writ petitions are allowed. The findings that the petitioner was an 'intermediary' and that the place of supply of the advisory services was in India under the cited provisions are set aside; the additional place of supply conclusions are also held inapplicable. No remand is ordered; the Adjudicating Authority is directed to process the petitioner's refund claims for the specified tax periods expeditiously (preferably within eight weeks). 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.