TaxTMI 
TaxTMI 
2026 (1) TMI 633
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..... Sushanth Reddy, learned counsel for respondent No. 3 in W.P.Nos.28201 and 5621 of 2024. Mr. B. Mukherjee, learned counsel represents Mr. N. Bhujanga Rao, learned Deputy Solicitor General of India, for respondent No. 1. 2. All these writ petitions relate to the same petitioner. The rejection of refund by the Refund Sanctioning Authority dated 09.07.2024 is under challenge in W.P. No. 28201 of 2024. The orders in appeal dated 12.12.2023 by which the refund sanction orders dated 09.11.2022 and 26.10.2022 have been set aside are under challenge in W.P. Nos. 5621 and 5622 of 2024. 3. Heard the learned counsel for the parties. 4. Petitioner is an India entity engaged primarily in the business of providing taxable services under the category "Information Technology Software Services" which, according to it, are exported mainly to its associated enterprises located at USA. Such supplies of services qualifies as export of services as the place of supply is the location of the service recipient outside India as per Section 13 of the Integrated Goods and Services Tax Act, 2017 (for short, "the IGST Act"). According to the petitioner, such supplies are in the nature of "zero rated s....
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....liance is placed upon the Circular No. 159/15/2021-GST, dated 20.09.2021. 7. According to the petitioner, the appellate authority has undertaken a completely novel ground vis-à-vis clause (C) of the agreement, which was not permissible in law. The conclusion of the appellate authority that the services rendered by the petitioner tantamount to "intermediary" services is patently wrong and perverse. There is no evidence to establish that the petitioner had not provided the main service. There is not even an allegation that there was any third party which the petitioner had arranged, who, in turn, provided the main services. The petitioner is rendering services "on its own account' and is not facilitating any supply of services. The petitioner is responsible for providing all services for all the risk related to performance of services and pricing of the services. Petitioner's turnover is the entire charge for the service which is the main service itself, whereas in the case of an intermediary, the turnover is a mere commission or a facilitation fee which is not the fact in the present case. The services delivered by the petitioner are on its own account from India through t....
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....iled by the respondents in all these writ petitions. In substance, it is the stand of the respondents that the assertion of the petitioner that it fulfills all conditions for an export of services under Section 2(6) of the IGST Act is not established with evidence. The petitioner has failed to discharge its burden of proof. The petitioner has specifically failed to establish that the place of supply of service is outside India. This condition cannot be verified without a complete understanding of the actual nature of service rendered. It requires a review of all relevant contractual documents including specific statements of work or purchase order of the project, which the petitioner failed to produce by withholding these crucial documents, the petitioner has prevented the tax authorities from validating its claim. 12. Learned counsel for the Revenue contends that in the nature of supplies undertaken, three parties are evident, (1) the petitioner; (2) its overseas group company M/s. eTouch System Corporation, USA (that is the client) and (3) the ultimate customers of US entity. The petitioner is clearly facilitating the provision of IT services from In....
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....y be deemed fit. In W.P. No. 28201 of 2024, however, wherein the rejection of refund sanction order is under challenge, the respondents have prayed for dismissal of the writ petition on similar grounds. 16. We have considered the submissions of the learned counsel for the parties and taken note of the materials placed on record. We have also taken note of the decisions relied upon by the petitioner especially in the case of Boks Business Services Private Limited vs. Commissioner of Central Goods and Services Tax Delhi South and another W.P.(C). No. 1255 of 2023, dated 22.08.2023 and M/s. Cube Highways and Transportation Assets Advisor Private Limited vs. Assistant Commissioner, CGST Division and others W.P.(C) No. 14427 of 2022, dated 17.08.2023. 17. In order to appreciate the issue at hand, we deem it proper to extract the findings of both the Assessing Officer and the Appellate Authority in W.P. Nos. 5621 and 5622 of 2024 and the rejection order in W.P. No. 28201 of 2024. Findings of the Assessing Officer in W.P. No.5621 of 2024 at paras 7 to 9 at pages 98 and 99. "7. All the submissions made by the taxpayer in relation to the issues raised in the Show Cause Not....
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.... 54 (8), notwithstanding anything contained in sub-section (5), the refundable amount shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to refund of tax paid on export of goods or services or both or on inputs or input services used in making such exports. Accordingly, the provisions of unjust enrichment are not applicable to present refund application in terms of the provisions of section 54(8) of the CGST Act mentioned above. e) the refund is not barred under the provisions of 2nd and 3rd proviso to section 54(3) of the CGST Act, 2017 inasmuch as the goods exported out of India are not subjected to export duty, and the supplier of goods or services or both has not availed the drawback in respect of central tax or claimed refund of the integrated tax paid on such supplies. 9. Accordingly, in pursuance of the provisions of the Acts and rules made thereunder the respective Acts, I pass the following order. ORDER I hereby sanction the refund of the amount of Rs. 8,927,106/-, in cash to M/s. VIRTUSA SYSTEMS (INDIA) PRIVATE LIMITED, in terms of Section 54(5) of the Acts and Rule 92(1) of the Rules." ....
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....ment clause 3.1.3 and 3.1.4 has been deleted but not the Clause (C) of the Background. Clause 3.1.3 and 3.1.4 were payment clauses and ensured minimum margin of 15 percent in case of third party earnings. Thus even after amendment to the agreement, clause (C) of the background is in place. 17. From the above discussions and findings it is evident that respondent is providing intermediary services to M/s. eTouch System Corp, USA. Therefore place of provision of services as per section 13(8)(b) of the IGST Act 2017 is in India and services do not qualify as export of services in terms of section 2(6) of the IGST Act 2017. 18. In view of the above findings and discussion, I pass the following order; Order I allow the appeal filed by the department by setting aside the order of original authority." Findings of the Assessing Officer in W.P. No. 5622 of 2024 at paras 5, 6 to 9 at page 110. "5. On scrutiny of pertinent documents submitted by the applicant along with FORM GST RFD-01 certain discrepancies were observed which were communicated to the taxpayer vide SCN No.ZE3610220178124 dated 18-10-2022. The same are mentioned as following:- ....
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.... exchange; or in Indian rupees wherever permitted by RBI, [inserted vide IGST (Amendment) Act, 2018, w.e.f. 1-2-2019 and (v) the supplier of service and the recipient of service are not merely establishments of a distinct person. If place of supply is out of India (Notification No. 9/2017-IT (Rate) both dated 28-6-2017 as inserted w.e.f. 27-7-2018.) After verification of the documents uploaded it appears that taxpayer has fulfilled all the above conditions which makes the supplies made by him to his overseas recipient to qualify as export. 7. All the submissions made by the taxpayer in relation to the issues raised in the show cause notice are considered before passing this order. The applicant's replies are found to be just in all the issues raised in SCN. 8. In light of above details and the documents submitted by them electronically, and the other details available in the common portal, I find that:- a) the refund claim for the same period has not been filed in the same category including any claim filed under "Any Other" Category. b) the refund claim has been filed within limitation of time, as provided under Acts. ....
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....(3) to (13) of Section 13 of Integrated Goods & Services Tax Act, 2017, concluded that the place of provision of service is Outside of India and the supply of service is export, which is not correct. 14. Respondent has produced amendment to the agreement by which additional location of Hyderabad has been added to the agreement. Thus agreement submitted is valid agreement for the services provided from the Hyderabad office as well. As per the agreement copy respondent is providing Information Technology and Information technology enabled services to the M/s. eTouch System Corp. USA and clients of M/s. eTouch System Corp, USA. Therefore I will proceed to examine the nature and place of provision of services on the basis of agreement provided. 15. As per clause (C) of BACKGROUND portion of the agreement respondent on request of the third parties can enter in contract with third parties being customer of M/s. eTouch System Corp, USA. Therefore respondent is working as intermediary of M/s. eTouch System Corp, USA as well while providing services to them. 16. On being pointed out the same respondent submitted that above clause has been amended and submitted the....
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....tems Corp, USA as well while providing services to them. On being pointed out the same, respondent submitted that above clause has been amended and submitted the amendment to the agreement effective from April, 2018. As seen from the amendment to the agreement clause 3.1.3 and 3.1.4 has been deleted but not the Clause(C) of the Background. Clause 3.1.3 and 3.1.4 were payment clauses and ensured minimum margin of 15 percent in case of third party earnings. Thus, ever after amendment to the agreement, clause (C) of the background is in place. From the above discussion and finding it is evident that respondent is providing intermediary services to M/s e Touch System Corp, USA. Therefore, place of provision of services as per Section 13(8)(b) of the IGST Act, 2017 is in India and services do not qualify as export of services in terms of Section 2(6) of IGST Act, 2017." On verification of the agreement and invoices submitted in the present refund claim it is observed that the services were provided basing on the same agreement entered with M/s eTouch System Corp., USA, Hence, the services as mentioned in the invoices issued by M/s. Virtusa Systems (India) Pvt.....
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....ided that when such services are provided from a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services: Provided further that nothing contained in this clause shall apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs or for any other treatment or process and are exported after such repairs or treatment or process without being put to any other use in India, other than that which is required for such repairs or treatment or process; (b) services supplied to an individual, represented either as the recipient of services or a person acting on behalf of the recipient, which require the physical presence of the recipient or the person acting on his behalf, with the supplier for the supply of services. (4) The place of supply of services supplied directly in relation to an immovable property, including services supplied in this regard by experts and estate agents, supply of accommodation by a hotel, inn, guest house, club or campsite, by whatever name called, grant of rights to use immovable property, services f....
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.... services The concept of intermediary services, as defined above, requires some basic pre-requisites, which are discussed below: 3.1 Minimum of Three Parties: By definition, an intermediary is someone who arranges or facilitates the supplies of goods or services or securities between two or more persons. It is thus a natural corollary that the arrangement requires a minimum of three parties, two of them transacting in the supply of goods or services or securities (the main supply) and one arranging or facilitating (the ancillary supply) the said main supply. An activity between only two parties can, therefore, NOT be considered as an intermediary service. An intermediary essentially "arranges or facilitates" another supply (the "main supply") between two or more other persons and, does not himself provide the main supply. 3.2 Two distinct supplies: As discussed above, there are two distinct supplies in case of provision of intermediary services; (1) Main supply, between the two principals, which can be a supply of goods or services or securities; (2) Ancillary supply, which is the service of facilitating or arranging the main supply betw....
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....e a service of, say, Annual Maintenance of tools and machinery to 'B', 'A' subcontracts a part or whole of it to 'C'. Accordingly, 'C' provides the service of annual maintenance to 'A' as part of such sub-contract, by providing annual maintenance of tools and machinery to the customer of 'A', i.e. to 'B' on behalf of 'A'. Though 'C' is dealing with the customer of 'A', but 'C' is providing main supply of Annual Maintenance Service to 'A' on his own account, i.e. on principal to principal basis. In this case, 'A' is providing supply of Annual Maintenance Service to 'B', whereas 'C' is supplying the same service to 'A'. Thus, supply of service by 'C' in this case will not be considered as an intermediary. 3.6 The specific provision of place of supply of 'intermediary services' under section 13 of the IGST Act shall be invoked only when either the location of supplier of intermediary services or location of the recipient of intermediary services is outside India." 20. A mere perusal of the findings rendered by the appellate authority and the refund rejection order in W.P. No. 28201 of 2024, it is apparent that the authorities have failed to record any finding as to existen....