Export of services and non-intermediary supply upheld; refund denial set aside for want of notice and inconsistent stand.

Services supplied to an overseas group entity qualified as export of services because the recipient was outside India, invoices were raised directly on the foreign entity, consideration was received in convertible foreign exchange, and the work involved original research, development and support on the supplier's own account. The arrangement was not mere facilitation between two parties, so intermediary treatment did not apply. Refund rejection was also unsustainable because part of the claim was denied without notice, and the revenue could not adopt an inconsistent stand after the earlier factual position had attained finality. The refund orders were quashed and refund for the relevant period was allowed.

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Issues: (i) whether the services rendered to the overseas group entity satisfied the statutory conditions of export of services and could be treated as intermediary services; (ii) whether rejection of refund claims could be sustained when refund was denied despite absence of notice and the earlier factual position had already attained finality.

Issue (i): whether the services rendered to the overseas group entity satisfied the statutory conditions of export of services and could be treated as intermediary services.

Analysis: The service recipient was located outside India, the invoices were raised directly on the foreign entity, consideration was received in convertible foreign exchange, and the petitioner was performing original research, development and support functions on its own account. The activities were not shown to be mere arranging or facilitation of supply between two parties. On those facts, the statutory ingredients of export of services were fulfilled and the character of intermediary services was not attracted.

Conclusion: The services constituted export of services and were not intermediary services.

Issue (ii): whether rejection of refund claims could be sustained when refund was denied despite absence of notice and the earlier factual position had already attained finality.

Analysis: A part of the refund claims was rejected without issuance of show cause notice, which offended the requirement of fair hearing. In addition, the earlier departmental determination had accepted the petitioner's services as export services, and the revenue could not take an inconsistent stand on the same factual matrix in the absence of any material change. The impugned orders were therefore unsustainable.

Conclusion: The rejection of refund was not sustainable.

Final Conclusion: The refund orders were quashed and the petitioner was held entitled to refund for the relevant period.

Ratio Decidendi: Where the statutory conditions of export of services are satisfied and the recipient is abroad, the supply is not intermediary in nature, and refund cannot be denied by taking an inconsistent stand or without affording the mandatory opportunity of hearing.

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