Exported back-office support services vs "intermediary services" classification under IGST, affecting zero-rated status and ITC refund; denial quashed.

Whether exported services were "intermediary services" under the IGST Act so as to deny refund of accumulated unutilized ITC. On construing the service agreement with the foreign parent and considering prior refund sanctions under pre- and post-GST regimes and binding HC precedents, the HC held the petitioner acted on a principal-to-principal basis and did not arrange or facilitate supplies for another as an intermediary. Consequently, the supplies remained zero-rated under s.16 of the IGST Act, and denial of refund on the intermediary ground was unsustainable; the impugned order-in-original and computation sheet were quashed to that extent, and the petition was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the services rendered by the petitioner to its foreign parent company could be construed as services by an "intermediary", so as to justify rejection of refund of accumulated unutilized input tax credit (ITC) on that ground.

(ii) Whether the refund rejection order and the accompanying computation, to the extent they denied refund on the "intermediary" ground, were liable to be quashed and a direction issued to grant the claimed refund with applicable interest.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Characterisation of services as "intermediary services" vs export of services

Legal framework (as discussed by the Court): The petitioner asserted entitlement to refund on the basis that export of services is "zero-rated supplies" under Section 16 of the IGST Act, and that refund of accumulated unutilized ITC is claimable under Section 54 of the CGST Act.

Interpretation and reasoning: The Court examined the material on record, including (a) the agreement governing the petitioner's service relationship with its foreign parent company, and (b) the fact that refund claims for earlier periods had been sanctioned/granted, including a prior adjudicatory determination that the petitioner's services were not intermediary services but constituted export of services, which had been upheld. The Court also applied its own earlier decisions on comparable service arrangements. On this combined assessment, the Court concluded that the petitioner could not be construed or treated as an "intermediary", and the services could not be treated as "intermediary services".

Conclusion: The ground adopted in the impugned order-treating the petitioner as an "intermediary" providing intermediary services-was held unsustainable.

Issue (ii): Validity of refund rejection on the intermediary ground; entitlement to refund with interest

Interpretation and reasoning: Having held that the petitioner is not an intermediary and does not provide intermediary services, the Court determined that the impugned order and computation sheet could not stand insofar as they rejected the refund on that basis. The Court therefore set aside/quashed the impugned order and computation sheet to the extent of such rejection, and issued consequential directions to grant the balance refund claimed.

Conclusion: The Court allowed the petition; quashed the impugned order-in-original and computation sheet to the extent they rejected refund on the intermediary ground; and directed grant of refund of Rs. 2,24,24,605/- along with applicable interest within six weeks from receipt of the order.

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