Overseas service contracts: whether work is "intermediary services" u/s2(13) or "export of services" u/s2(6); GST notice partly quashed

The dominant issue was whether services rendered to an overseas recipient constituted "intermediary services" under s.2(13) IGST Act, attracting GST in India, or "export of services" under s.2(6) IGST Act. Relying on its earlier decision in a materially identical fact situation, the HC held that the service provider acted as an independent service provider and not as an intermediary; consequently, the services qualified as export, and GST demand premised on "intermediary" characterization could not be sustained, leading to quashing of the impugned show cause notice to the extent of the specified audit objection. For the remaining audit objections, the petitioner was permitted to file replies with documents and the department was directed to proceed in accordance with law.

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1. ISSUES PRESENTED AND CONSIDERED

1) Whether the impugned show cause notice could be quashed to the limited extent of the audit objection alleging non-payment of GST on "intermediary services" (business support services to a foreign service recipient), on the footing that the petitioner was not an "intermediary" and that the supply constituted "export of services".

2) What consequential directions were required regarding adjudication of the remaining audit objections/observations covered by the same show cause notice, including the petitioner's opportunity to file replies and obtain a personal hearing.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Quashability of the show cause notice insofar as it alleged "intermediary services" liability (audit objection no. 15)

Legal framework (as discussed by the Court): The Court proceeded on the basis of the statutory concepts of "intermediary" under Section 2(13) of the IGST Act and "export of services" under Section 2(6) of the IGST Act, as applied in earlier decisions of the same Court dealing with substantially identical contractual and factual settings relating to business support services rendered to overseas recipients.

Interpretation and reasoning: The Court examined the restricted challenge to audit objection no. 15 and held that the controversy was "directly and squarely covered" by prior judgments of this Court, where under identical circumstances it had been concluded that the service provider was not an intermediary, there was no supply of intermediary services, and the activity amounted to export of services. On that basis, the Court accepted the petitioner's contention that the impugned demand premise (intermediary characterization for business support services to a foreign customer) could not be sustained.

Conclusions: The Court quashed the show cause notice only insofar as it related to audit objection/observation no. 15 alleging non-payment of GST on intermediary services (business support services to foreign customers), holding that the issue was covered by binding/consistent precedents of the Court treating such services as export of services and not intermediary services.

Issue 2: Directions for continuation of proceedings on remaining audit objections/observations within the show cause notice

Legal framework (as discussed by the Court): The Court addressed procedural fairness in adjudication: filing of replies with documents, consideration by the authority, and provision of "sufficient and reasonable opportunity" including personal hearing before proceeding in accordance with law.

Interpretation and reasoning: Since the petitioner expressly restricted the writ challenge to audit objection no. 15 and sought to respond on the remaining objections, the Court confined its interference to the covered issue and preserved the statutory process for the balance. The Court considered it appropriate to reserve liberty to the petitioner to file replies with documents on the remaining objections and directed the authorities to consider them and proceed lawfully after granting adequate opportunity and personal hearing.

Conclusions: The petition was partly allowed. Liberty was reserved to file replies (with documents) on the remaining 15 audit objections/observations, and the respondents were directed to consider such reply, afford reasonable opportunity including personal hearing, and proceed further in accordance with law. The Court fixed an eight-week period for filing the reply.

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