AI Drafter 
TaxTMI 
TaxTMI 
2022 (11) TMI 743
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....ng the refund claim of un-utilized Input Tax Credit (ITC) used in making zero rated supplies of services without payment of Integrated Goods and Service Tax. BRIEF FACTUAL MATRIX Petitioner is registered with Haryana GST Authorities and is involved in providing a host of services collectively referred as BPO Services to customers located in India as well as outside India. An illustrative list of services stated to be rendered by the petitioner is as under:- (i) Maintaining vendor/customer master data, scanning and processing vendor invoices, book keeping, preparing/finalizing books of account, generating ledger reconciliations, managing customer receivables etc. (ii) Developing, licensing and maintaining software as per clients' needs. (iii) Technical IT support i.e. trouble-shooting services. (iv) Data analysis and providing solutions to clients in respect of forecasting of demand for their offerings and management of inventory, supporting various business functions like sourcing and supply chain management. It is asserted that aforesaid services are actually deliverables of the petitioner on its "own account". Such services are pro....
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....the Principal Commissioner of Central GST Gurugram exercising the powers conferred under Section 107 (2) of the CGST Act, reviewed the proceedings and passed an order dated 13.09.2019 reviewing the order in original dated 14.03.2019 and by recording that the services provided by the petitioner are in the nature of intermediary services and do not qualify as export of services in terms of Section 2 (6) of the IGST Act. Accordingly directions were issued for filing of an appeal before the Joint Commissioner (Appeals) GST Gurugram. Pursuant to such development, the department on 13.09.2019 also filed an appeal against the order in original dated 14.03.2019 contesting the entire amount of refund sanctioned to the petitioner amounting to Rs.26,34,61,625/-. In the appeal reliance was placed on circular dated 18.07.2019 which was subsequently withdrawn. The material ground taken in the appeal was that the petitioner was paid by Genpect International (GI) and as such the petitioner fell within the category of intermediary. Thereafter the order in appeal dated 27.05.2020 (Annexure P-9) was passed by the Joint Commissioner, CGST (Appeals) Gurugram holding that the amount of Rs.26,34,61,625/-....
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....aken a completely new exercise vis-a-vis the other clauses of the agreement and which apart from being irrelevant to the issue at hand was not permissible in law. Further contended that the conclusion of the appellate authority that the services rendered by the petitioner tantamount to "intermediary" services is patently wrong and perverse. As per definition of "intermediary" under Section 2 (13) of the Act a person who provides services "on his own account" is not an "intermediary". The provider of the main service stands clearly excluded from the definition of "intermediary". No evidence is on record to establish that the petitioner had not provided the main service. There was not even an allegation that there was any 3rd party which the petitioner had "arranged" and who had in turn provided the main services. It is argued that the petitioner is rendering services "on its own account" and is not facilitating any supply of services between GI and its customers. Petitioner is responsible for providing all services, for all the risk related to performance of services and pricing of the services. Mr. Tarun Gulari, learned Senior counsel has extensively referred to the MSA and the ....
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....der inasmuch as while in paragraph 18, the Appellate Authority clearly observes that the petitioner binds GI by its actions but on the other hand it stands recorded in para 19 of the same that the petitioner cannot bind the principal i.e. GI. The impugned order is stated to the proceeding on mere presumption as in para 17 thereof it has been erroneously stated that there are two supplies involved. In this regard it is argued that in the case of a sub-contract there is only one sale involved and the findings in the impugned order have no factual or legal basis to allege that there was a second contract of agency between the petitioner and GI. Still further argued that the Appellate Authority has relied on the ruling in the case of Infinera India (P.) Ltd., In re [2020] 112 taxmann.com 500 (AAAR- Karnataka Vservglobal (P.) Ltd.., (AAAR Karnataka Vservglobal (P.) Ltd., In re [2018] 19 GSTL 173 (AAR Maharashtra) and recorded a finding that there has been a material change in the definition of "intermediary" under the GST regime. It is asserted that there is a clear case of misreading inasmuch as in the ruling as of Infinera (supra), the observations are to the contrary that there is....
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....ain services" being provided by GI to its customers. Second category comprises of ancillary and supportive services (to the main services) being provided by the petitioner. It is urged that both these categories of services are clearly identifiable and distinguishable from each other. Learned counsel has invited our attention to the specific averments made in such regard in correlation to the different clauses contained under the MSA and the same read as under:- (2) Two distinct supplies: There are clearly two categories of supplies in the arrangement, the main supply and the ancillary supply. (i) The main supply between GI and its customers i.e. two principals, comprise of the below:- a. Business Processing Outsourcing and Information Technology services (Recitals of agreement). b. Managing New and existing Customer Relationships by performing all functions to obtain new Customers (Article 3.1of the agreement). c. Appointment of GI Account Representative to deal with GI Customers (Article 3.2 of the agreement). d. Negotiate Customer agreements and statement of work (Article 3.3). e. Customer Invoicing and collection (A....
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....rvices in the nature of business process outsourcing, information technology services, managing relationship with customers, negotiate customers agreement and statement of work and customer invoicing and collection to its customers. Further, it is contended that under Clause 3.2 of the MSA it is the obligation of GI to appoint dedicated account representatives for each customer who in turn would coordinate with the provider i.e. the petitioner. Such GI representative(s) would have the overall responsibility for managing and coordinating the delivery of the services to GI customers. As such it is argued that such an arrangement where one party-GI possesses ---the authority to take decisions with regard to actions taken by another party-petitioner, in the course of day-to-day management, can only be referred to as a Principal-agent relationship. The role of the petitioner as such has been described to be supportive in nature and not to act in an autonomous way. Clause 3.4 of the MSA has also been referred to whereby GI is responsible for handling all disputes with customers. It is thus contended that GI is directly responsible to its customers for any fault/lapse on the part of the p....
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.... the Reserve Bank of India]; and (v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8; Section 13:- Place of supply of services where location of supplier or location of recipient is outside India.- (1) The provisions of this section shall apply to determine the place of supply of services where the location of the supplier of services or the location of the recipient of services is outside India. (2) The place of supply of services except the services specified in sub-sections (3) to (13) shall be the location of the recipient of services: Provided that where the location of the recipient of services is not available in the ordinary course of business, the place of supply shall be the location of the supplier of services. (3) The place of supply of the following services shall be the location where the services are actually performed, namely:- (a) services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of th....
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....ion territory shall be in proportion to the value for services separately collected or determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed. (8) The place of supply of the following services shall be the location of the supplier of services, namely:-- (a) services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders; (b) intermediary services; (c) services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month. Explanation.--For the purposes of this sub-section, the expression,-- (a) "account" means an account bearing interest to the depositor, and includes a non-resident external account and a non- resident ordinary account; (b) "banking company" shall have the same meaning as assigned to it under clause (a) of section 45A of the Reserve Bank of India Act, 1934 (2 of 1934); (c) "financial institution" shall have the same meaning as assigned to it in clause (c) of sect....
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.... territory; (g) the location of the fixed land line through which the service is received by the recipient is in the taxable territory. (13) In order to prevent double taxation or non-taxation of the supply of a service, or for the uniform application of rules, the Government shall have the power to notify any description of services or circumstances in which the place of supply shall be the place of effective use and enjoyment of a service. SECTION 16. Zero rated supply. (1) "zero rated supply" means any of the following supplies of goods or services or both, namely:-- (a) export of goods or services or both; or (b) supply of goods or services or both [for authorised operations] to a Special Economic Zone developer or a Special Economic Zone unit. (2) Subject to the provisions of sub-section (5) of section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply. [(3) A registered person making zero rated supply shall be eligible to claim refund of unutilised input tax credit on supply of goods or services o....
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....Nations (Privileges and Immunities) Act, 1947 (46 of 1947), Consulate or Embassy of foreign countries or any other person or class of persons, as notified under section 55, entitled to a refund of tax paid by it on inward supplies of goods or services or both, may make an application for such refund, in such form and manner as may be prescribed, before the expiry of [two years] from the last day of the quarter in which such supply was received. (3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period: Provided that no refund of unutilised input tax credit shall be allowed in cases other than-- (i) zero rated supplies made without payment of tax; (ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council: Provided further that no refund of unutilised input tax credit shall be allowed in cases where the g....
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.... referred to while concluding the petitioner to be an "intermediary". The relevant extract of the recitals and the clauses in question read as follows:- Master Services Sub-contracting Agreement between Genpact International, Inc., and Genpact India RECITALS WHEREAS, GI is in the business of providing business process outsourcing and information technology services to its customers (each a "GI Customer," and, collectively, the "GI Customers" ) and establishing, maintaining and expanding mutually beneficial relationships with such GI Customers. WHEREAS, Provider is an Affiliates of GI and has agreed to act as non-exclusive subcontractor for GI, subject to, and in accordance with, the terms of this Agreement; WHEREAS, GI intends to appoint the Provider or any of them as its subcontractor(s) to perform certain of these business process outsourcing and information technology services on behalf of GI for the GI Customers, as may be appropriate, from time to time; WHEREAS, Provider shall have the opportunity to accept or reject any such proposed appointment by GI in its sole discretion, subject to the terms of this Agreement; ....
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....s have one or more specific senior personnel identified and appointed to serve each GI Customer (each, a "GI Account Representative") who shall be responsible for managing the relationship with each GI Customer to whom they are assigned. GI and the applicable GI Account Representatives shall also be responsible for determining which Providers and/or other GI Provider Affiliate(s) shall be assigned to perform services for each GI Customer as per GI Customer requirements (in consultation with the relevant Providers and Other GI Provider Affiliates) and for balancing to the extent feasible, the allocation of services among the Providers and other GI Provider Affiliates so that each GI Affiliate is providing Services in accordance with its capacity and capabilities. The GI Account Representatives for each Customer shall also (a) be the primary contact for the Providers in dealing with the respective GI Customer under this Agreement, (b) have overall responsibility for managing and coordinating the receipt of the Services for such GI Customer, (c) interact regularly with the Provider Account Representative (as hereinafter defined) and (d) have the authority to make decisions with respec....
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....rvices. Provider shall provide to GI the disaster recovery assistance, cooperation and services, if any, that are relevant. Each provider shall be responsible for business continuity planning or disaster recovery to the extent set forth in a Customer Statement of Work. 5.3 Reports. Each provider shall provide to GI, and directly to the GI Customer, where so agreed, the reports set forth in the Customer Statements of Work in accordance with the frequencies set forth therein. 5.4 Records Retention. Each provider shall retain applicable books and records in accordance with the records retention standards in accordance with Law, or as required by GI or the GI Customer, Whichever is the longest. ARTICLE 7 SERVICE LEVELS 7.1 General. The service levels mentioned in each Customer Statement of Work shall be used to measure Provider's performance (the "Service Levels"). For project based Customer Statement of Work all the Deliverables and the Milestones or any other such measurement shall be used to measure the Provider's progress with respect to completion of the applicable services. 7.2 and 7.3 xxxx xxxx xxxx xxxx 7.4 ....
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.... the services to its customers. It is clear therefrom that the petitioner is engaged by GI for actual performance of BPO services and information technology services to the customers of GI. Petitioner would be held responsible for all risk related to performance of services which would be akin to services provided on "its own account". Clause 3.1 provides that GI would be responsible for obtaining new customers and maintaining relationship with existing customers, to whom services are provided by the petitioner. Clause 3.3 provides that GI would be responsible for negotiation with all GI customers. Clause 3.4 provides that GI would be responsible to raise invoices as well as handling all disputes of GI customers and the petitioner would be obligated to provide all data in such regard. Afore-said clauses would clarify that the petitioner who is actually performing the services would share the details of the performance/status of the provision of services, cost incurred etc. which would enable GI to bill or address any dispute arising with the GI's customers. Clause 4.1 provides that the petitioner can access or process the personal date of GI customer to the extent necessary for....
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....tself. Scope of an "intermediary" is to mediate between two parties i.e. the principal service provider (the 3rd party) and the beneficiary (the agents principal) who receives the main service and expressly excludes any person who provides such main service "on his own account". A bare perusal of the recitals and relevant clauses of the MSA reproduced hereinabove do not in any manner indicate that petitioner is acting as an "intermediary" so as to fall within the scope and ambit of the definition of "intermediary" under Section 2 (13) of the IGST Act. Such clauses cannot also be interpreted to conclude that the petitioner has facilitated the services. The said clauses are in relation to the modalities of how the actual work would be carried out and do not in any manner establish that the petitioner was required to arrange/facilitate a 3rd party to render the main service which has actually been rendered by the petitioner. It would not be out of place to refer to an order in original dated 25.01.2018 (Annexure P-2) passed by the Assistant Commissioner, Division-East-1, GST, Gurugram, granting refund of Rs.26,34,83,928/- for the period April-June 2016 and July-September 2016 af....
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....rom the purview of 'intermediary services'. It shall be noteworthy to highlight that the agreement with parent entity, GI is on a principal to principal basis and there is no separate agreement of the company with any of the customers of the parent entity. Evidently, the scope of the services performed by the company is completely different from facilitation of service between the GI and customers of GI. In the light of the above facts, it can be concluded that the services mentioned above rendered by Genpact India is in the nature of it is a main service and not of intermediary." It has gone uncontroverted that such order has since become final as no appeal has been filed at the instance of the respondents. In the impugned order the department has chosen to deviate from the view taken in the order in original dated 25.01.2018 (Annexure P2) on the ostensible basis that there has been a change in law w.e.f. 01.07.2017 i.e.with the onset of the GST regime. We find such view to be wholly mis-conceived. In the pre-GST regime the term "intermediary services" was defined under Rule 2 (f) of the Place of Provision of Service Rules 2012. Under the 2012 Rules "intermedia....
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.... excludes a person who supplies such goods or services or both on his own account. Accordingly, in the light of such position wherein there is no change in the legal position i.e. with regard to the scope and ambit of "intermediary" services under the service tax regime vis-a-vis the GST regime and there being no change of facts as it is the MSA of 2013 (Annexure P-1) which continues to operate, the department cannot take a different view for different periods. In M/s Radhasoami Satsang Soami Bagh, Agra Versus Commissioner of Income Tax (1992) 1 SCC 659, even though it had been observed that res judicata dopes not apply to income tax proceedings, yet it was observed as follows:- 16. We are aware of the fact that strictly speaking res judicata does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a....
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....perior strength or in some cases to a bench of superior jurisdiction. The principle of consistency as such ought to apply in the present matter as well and we find merit in the stand taken on behalf of the petitioner that the view taken in the order in original dated 25.01.2018 (Annexure P-2) holding the petitioner to be not an "intermediary" under the MSA, should prevail even under the GST regime. Furthermore, we find that the finding recorded by the respondents-department to hold the petitioner to be in a principal agent relationship with the GI to be without any basis and to be clearly erroneous. The impugned order proceeds oblivious of Clause 21.6 of the MSA and which is in the following terms:- 21.6 Relationship of Parties Nothing in this Agreement shall constitute or be deemed to constitute a relationship of employer and employee, agency, joint venture or partnership between the parties hereto or constitute or be deemed to constitute one Party as agent of the other for any purpose whatsoever, and except as expressly provided herein, neither Party shall have the authority or power to bind the other, or to contract in the name of or create a liability against the....
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....ent from the record is that the petitioner is providing the services which have been sub contracted to it by GI. As a Sub-contractor it is receiving fee/charges from the main contractor i.e. GI for its services. The main contractor i.e. GI in turn is receiving commission/agents from its clients for the main services that are rendered by the petitioner pursuant to the arrangement of sub-contracting. Even as per the afore-noticed circular dated 20.09.2021 and in reference to para 3.5 it stands clarified that sub-contracting for a service is not an "intermediary" service. In the present case we find that in the written statement reference is made to a Transfer Pricing Report (Annexure P-24) as also to draw a distinction between two categories of supplies as per MSA i.e. main supply and the ancillary supply. The passing of the impugned order is sought to be justified that the main supply takes place between GI and its customers whereas it is the ancillary supply which is provided by the applicant to facilitate the provision of the main supply. We find that the written statement seeks to justify the impugned order on grounds which are not even part of the impugned order and which ....