Export services foreign exchange proof for unutilised ITC refund-eBRCs accepted; denial based on missing BRC/FIRC and discrepancies quashed.

Refund of unutilised ITC on export of services was denied on the ground that foreign exchange realisation was not proved because BRCs/FIRCs were not filed with the refund applications and because discrepancies in beneficiary location, remittance narration ("intercompany receipt"), and bank account numbers allegedly negated "export of services"/zero-rated supply and suggested intermediary services. The HC held that realisation of export proceeds was established through eBRCs/FIRAs and corroborative material, and that non-filing of certain documents with the application, administrative location entries, remittance narration, and account-number variations were immaterial and could not justify rejection or revisiting a properly sanctioned refund; the impugned orders/SCNs were thus illegal and without jurisdiction and were quashed, allowing the refund.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether rejection/setting aside of refund of unutilised ITC for exported services on the ground of non-submission of BRC/FIRC, and allied discrepancies in remittance documentation, was legally sustainable despite other documentary proof of receipt of export proceeds being available on record.

(ii) Whether the services supplied by the taxpayer to its overseas related entity under the governing agreements constituted "intermediary services" so as to disentitle the taxpayer from treating the supply as export/zero-rated supply and from claiming refund.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Proof of receipt of export proceeds and validity of rejecting refund for non-submission of BRC/FIRC and document inconsistencies

Legal framework (as discussed/applied by the Court): The Court examined the statutory requirement of realisation of consideration in convertible foreign exchange for export of services under the IGST framework, and the refund procedure under the CGST framework (including the requirement to furnish supporting proof under the relevant rules). The Court also relied on and applied the departmental circular dated 18.11.2019 to the extent it clarifies that realisation of consideration is a condition for export of services and that BRC/FIRC details are ordinarily required as part of refund processing for export of services.

Interpretation and reasoning: The Court held that the appellate and adjudicating authorities proceeded on a hyper-technical approach by treating non-submission of FIRC/BRC "along with the refund claim" as decisive, without appreciating the material actually available. The Court found, on the record, that (a) issuance of FIRC had been discontinued by the central bank as evidenced by a circular placed before the Court; (b) the taxpayer had produced Foreign Inward Remittance Advices establishing receipt of export proceeds, which had been considered and accepted at the stage of original refund sanction; (c) eBRCs were subsequently furnished; and (d) a CA certificate correlating the remittances to the export invoices was produced. On this basis, the Court concluded that receipt of export proceeds stood established and could not be rejected merely because one category of document was not filed at the initial stage.

The Court further held that the other reasons relied upon for rejecting the refund were not material to the core requirement of realisation of consideration: (i) the beneficiary location being shown as a different place in the remittance advice was explained as an administrative convenience and did not negate receipt of foreign exchange by the taxpayer; (ii) the description of remittance purpose as "against intercompany receipt" was held irrelevant for deciding eligibility when receipt was otherwise evidenced; and (iii) the difference in the bank account number shown in invoices versus remittance advices was not a valid ground because both accounts belonged to the taxpayer. The Court held that these factors could not be used to deny refund when sufficient corroborative evidence of realisation was on record.

Conclusion: The Court held that setting aside the sanctioned refund and initiating recovery on the above grounds was illegal, arbitrary, contrary to the record, and without jurisdiction/authority of law. The impugned orders and show cause notices founded on these reasons were therefore quashed.

Issue (ii): Whether the supplied services were "intermediary services"

Legal framework (as discussed/applied by the Court): The Court examined the statutory definition of "intermediary" under the IGST framework and applied the clarificatory circular dated 21.09.2021 describing the essential attributes of intermediary services, including: minimum of three parties, existence of two distinct supplies (main supply and facilitation), and exclusion of a person supplying services on its own account.

Interpretation and reasoning: The Court analysed the contractual terms placed on record and found that the taxpayer was engaged in software development/support and project management activities for its overseas entity on a principal-to-principal basis. The Court held that the arrangement did not involve a third party, did not disclose a principal-agent relationship, and did not show that the taxpayer was arranging or facilitating a "main supply" between two other persons. Instead, the taxpayer itself performed the substantive service on its own account. Applying the criteria set out in the circular dated 21.09.2021, the Court concluded that none of the necessary conditions for classifying the service as intermediary service were met.

Conclusion: The Court held that the authorities erred in treating the taxpayer's services as intermediary services and in rejecting the refund on that basis. This finding independently supported quashing of the refund reversal and consequential recovery proceedings.

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