2023 (8) TMI 980 - HC - GST

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

M/s. Cube Highways And Transportation Assets Advisor Private Limited Versus Assistant Commissioner CGST Division & Ors.

Delhi HC allowed the petition for ITC refund on export of advisory services. The petitioner provided investment advisory services to a Singapore-based ... Refund of ITC denied - intermediary services - Export of services or not - services rendered by the petitioner to I Squared Asia Advisors Pte. Ltd., a company having its principal place of the business in Singapore - place of supply of service - whether in the context of services rendered by the petitioner to I Squared under the Agreement, the petitioner is an ‘Intermediary’ and its services are covered under Sub-section (8)(b) of Section 13 and / or under Sub-section (4) of Section 13 and / or under Sub-section (3)(b) of Section 13 of the IGST Act? HELD THAT:- 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’. 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 intermediary facilitating or arranging the said supply. Where a party renders advisory or consultancy services on its own account and does not merely arrange it from another supplier or facilitate such supply, there are only two entities, namely, service provider and the service recipient. In such a case, rendering of consultancy services cannot be considered as ‘Intermediary Services’ or services as an ‘Intermediary’. The reasons recorded in the impugned order dated 21.09.2021 rejecting the petitioner’s claim for refund for the Financial Year 2019-20 are cryptic. The Adjudicating Authority had noted the scope of services as specified under Clause 3 of the Agreement. The order also indicates that the Adjudicating Authority had made further enquiries by visiting the website, www.cubehighways.com. The Adjudicating Authority observed that the group of companies, which included the petitioner, was engaged in construction of highways, toll operations etc. in India and held that the petitioner renders services in relation to those projects in India. The Adjudicating Authority, thus, concluded that Sub-section (3)(b), Sub-section (4) and Sub-section (7)(b) of Section 13 of the IGST Act were attracted - 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. 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 his behalf) with the supplier of the services. There is no allegation that the petitioner has rendered any service to an individual. Plainly, the Adjudicating Authority has misunderstood the nature of services covered under Sub-section (3)(b) of Section 13 of the IGST Act. These are essentially in the nature of personal services which require the physical presence of the service recipient. It also cannot be accepted that the services rendered by the petitioner can be covered under Sub-section (4) of Section 13 of the IGST Act. As is apparent from the plain language of Sub-section (4) of Section 13 of the IGST Act, the supply of services contemplated under the said Clause are those that are supplied directly in relation to an immovable property. Such services include services supplied by experts and estate 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. 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.