9911796707
TMI Blog2022 (11) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... x 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 provided by petitioner from India remotely through telecommunication/internet li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 In the appeal reliance was placed on circular dated 18.07.2019 which was subsequently withdrawn.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/- was erroneously refunded to the petitioner. View taken was that the services pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 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 various clauses contained therein to impress upon this Court that the petitioner is rendering s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner 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 no difference in the definition of "intermediary" under the GST and pre-GST regime. It is argued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 (Article 3.4 of the agreement)(ii) The Ancillary supply provided by applicant to facilitate the provision of main supply between the two principals which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollection 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 petitioner in providing services to the customers of GI. The principal i.e.GI is responsible for the lawful acts of its agent i.e. the petitioner. Therefore the petitioner cannot be said to provide "service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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 the supplier of services in order to provide the services: Provided 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934); (d) "non-banking financial company" means,-- (i) a financial institution which is a company; (ii) a non-banking institution which is a company and which has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner, or lending in any manner; or (iii) such other non-banking institution or clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 or both, without payment of integrated tax, under bond or Letter of Undertaking, in accordance with the provisions of Section 54 of the Central Goods and Services Tax Act or the rules made thereunder, subject to such conditions, safeguards and procedure as may be prescribed: Provided that the registered person making zero rated supply of goods shall, in case of non-realisation of sale proceeds, be liable to deposit the refund so received under this sub-section alongwith the applicable interest under Section 50 of the Central Goods and Services Tax Act within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nput 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 goods exported out of India are subjected to export duty: Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies." (4) to (14) xxxxx xxxxx xxxx xxxx Section 2 (6) of the IGST Act lays down the conditions which need to be fulfilled for qualification of a service as "export of services". A conjoint reading of Section 13 (2) and Section 13 (8) clarifies the manner for determining the place of supply of services where location of supplier or location of recipient is outside India. Generally, "place of supply" of servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms 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; WHEREAS, each provider agrees that, in the event it shall have agreed to accept any such appointment by GI, to perform its obligations in a manner and at a level that satisfies in all respects GI's obligations to the relevant GI Customers, as set forth in the agreements and statements of work (each, a "Customer Statement of Work") entered into from time to time between GI and the GI Customers (collectively, the "GI Customer Agreements"). WHEREAS the provider acknowledges that upon such acceptance to perform services for GI, Customer Statement of Work terms on performance standards, indemnities, liabilities and other operating terms, excepting pricing under each Customer Statement of Work will be applicable by reference to all services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 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 respect to actions to be taken by GI in the ordinary course of day-to-day management of GI's receipt of the Services. 3.3 xxxx xxxx xxxx 3.4 Customer Invoicing and Collection. GI shall be responsible for processing all invoices rendered to GI Customers, in the form required by each GI Customer, as set forth in the relevant Customer Agreement, and for handling all disputes with GI customers. Notwithstanding the foregoing, it shall be the responsibility of each Provider to furnish GI with all financial data and other support as may be necessary in order for GI to render invoices to GI Customers with respect to Services provided by the Provider. Article 4 PERSONAL DATA PROCESSING 4.1 Personal Data. In performance of this Agreement, each Provider may have access to, or otherwise Process, GI Custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oject 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 Measurement and Monitoring Tools. Provider shall implement its measurement and monitoring tools and procedures to measure and monitor its performance against the Service Levels in any given Customer Statement of Work. Upon GI's reasonable request, Provider shall provide GI with information and access to such measurement and monitoring tools and procedures for purposes of verification. Article 10 Fees and Payment Terms 10.1 Service Charges (a) The charges for Services provided to GI by a Provider during a particular calendar year with respect to each GI customer (the "Provider Service Fee") shall be invoiced to and paid for by GI to the Provider at an amount equal to the excess of (i) over the sum of (ii), (iii) and (iv) below: (i) the amount invoiced to the GI Customer for such Services (as denominated in US Dollars), in accordance with such Customer Statements of Work and Customer Agreements including amount invoiced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I 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 performance of the services. Clause 4.2 provides for data protection and whereby the petitioner would be responsible for maintaining confidentiality of information pertaining to GI customers. Clause 5.2 obligates the petitioner to provide disaster recovery assistance to GI. Clause 5.3 states that petitioner would provide the report set-forth in the Customer Statement of Work to GI and its customers. Clause 5.4 obligates the petitioner to retain records and books in accordance with records retention standards in accordance with law or as required by GI. Clause 7 provides that the service levels mentioned in the Customer Statement of Work, would be used as criteria to measure the performance of the petitioner. Clause 10 of the MSA lays down the manner in which the petitioner would raise invoices on GI for the services rendered. Clause 16 provides that if the petitioner fails to perform any of the obligations under the MSA or under the Customer Statement of Work, GI may then terminate the contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 after making a detailed analysis of the MSA and holding that the petitioner cannot be treated as as "intermediary". The relevant findings recorded by the department are as follows:- The company is involved in provision of various types of IT enabled professional services such as business consulting, back office management, IT helpdesk services, call center services etc. ('BPO services') to overseas entity, Genpact International Inc. As per the terms of Master Services Sub-contracting agreement ('MSA'), the Company provides BPO services of nature mentioned above directly to the customers of Genpact International Inc. ('GI') located outside India. The arrangement requires the Company to complete the assigned processes/scope of work and submit the deliverables directly to the third parties, either on-line or on-call or through e-mail using dedicated electronic networks and voice circuits. Service provided by the Company cannot be classified as services of an 'Intermediary'. The terms 'intermediary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 2 (f) of the Place of Provision of Service Rules 2012. Under the 2012 Rules "intermediary services" were defined to mean a broker/an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the 'main' service) or a supply of goods, between two or more persons, but does not include a person who provides the main service on his account. A perusal of the definition of "intermediary" under the service tax regime vis-a-vis the GST regime would show that the definition has remained similar. Even as per circular dated 20.09.2021 issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs (GST Policy Wing), the scope of "intermediary" services has been dealt in para 2 thereof. In para 2.2 it stands clarified that the concept of "intermediary" was borrowed in GST from the Service Tax Regime. The circular after making a reference to the definition of "intermediary" both under Rule 2 (f) of the Place of Provision of Service Rules 2012 and under Section 2 (13) of the IGST Act clearly states that there is broadly no change in the scope of "intermediar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not be at all appropriate to allow the position to be changed in a subsequent year. 17. On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter - and if there was no change it was in support of the assessee - we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-tax in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under Sections 11 and 12 of the Income Tax Act of 1961". In Bharat Sanchar Nigam Ltd. Vs. Union of India (2006) 3 SCC 1, the Hon'ble Supreme Court had reiterated that where facts and law in a subsequent assessment year are the same, no authority whether quasi-judicial or judicial can generally be permitted to take a different view. Paragraph 20 of the judgment would be relevant to the issue at hand and is reproduced hereunder:- "20. The dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he name of or create a liability against the other, in any way or for any purpose." During the course of arguments, Mr. Sharan Sethi, learned Senior Standing Counsel for the respondents would concede that there is no separate agreement entered between the petitioner and GI's customers. In no manner as such can the petitioner be equated to be an agent or broker. It would also be useful at this stage to advert to the stand taken by the respondents-department in the written statement that had been filed in the previous round of litigation i.e. CWP No.10302 of 2020 that had been filed by the petitioner. In para 8 of the written statement that stands placed on record and appended as Annexure P-11 it had been stated as follows:- "It is further mentioned that the service is primarily in the nature of various types of backend services which are in the nature of call centre services, back office management, IT helpdesk services etc. ('BPO services') to the overseas entity. The petitioner provides these services to third parties on behalf of its client located outside India. The arrangement requires the company to complete the assigned processes/scope of work and submit the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned order and which is clearly impermissible in law. A reference in this regard may be made to the judgment of the Apex Court in Mohinder Singh Gill and another Vs. The Chief Election Commissioner, New Delhi and others (1978) 1 SCC 405, wherein it had been held that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of an affidavit or otherwise. It was further observed that an order which was otherwise bad in the beginning may, by the time it comes to Court on account of a challenge, get validated by additional grounds later brought out. For the reasons recorded above, we are of the considered view that the impugned order dated 15.02.2021 (Annexure P-18) holding the petitioner to be an "intermediary" under Section 2 (13) of the IGST Act, cannot sustain. The same as such is quashed and consequently the order in original dated 14.03.2019 (Annexure P-3) granting refund of Rs.26,34,61,625/- in favour of the petitioner is restored. It is further directed that the benefit of this order shall enure to the petitioner for grant of subsequent refunds as well ..... X X X X Extracts X X X X X X X X Extracts X X X X
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