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TMI Blog2023 (8) TMI 980X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to as 'I Squared') in terms of the Amended Support Service Agreement dated 06.06.2015 (hereafter 'the Agreement') constitutes export of services. The petitioner claims that the services rendered by it are export of services because I Squared, the service recipient, is located overseas. However, the respondent authorities have held, on varying grounds, that services provided by the petitioner do not qualify as 'export of services' as the place of supply of services is in India. Factual Context 3. The petitioner is a company incorporated under the Companies Act, 2013. It is engaged in the business of rendering investment advisory services related to the investment by non-resident group companies in the target companies in India, which are engaged in the transportation sector. The petitioner and I Squared belong to the same group of companies. The petitioner had entered into a Support Service Agreement on 30.05.2015 with I Squared. The scope of services to be provided under the said agreement were subsequently altered, therefore, the said agreement was terminated and the parties (the petitioner and I Squared) entered into the Amended Support Service Agreement on 06.06.2015 (the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated risks, preparing report etc. basis which the overseas entity make a decision whether to make a particular investment or not." 9. The petitioner claimed that although it had provided the services from its registered place of business in Delhi, the place of supply of services was required to be considered to be overseas by virtue of Sub-section (2) of Section 13 of the Integrated Goods and Services Tax Act, 2017 (hereafter 'the IGST Act') as the location of the recipient of the service was overseas. 10. Insofar as the other grounds for proposing rejection of the petitioner's claim is concerned, the Adjudicating Authority was satisfied with the petitioner's response. The same are not subject matter of controversy in the present petitions. The petitioner's claim for refund was rejected by the Adjudicating Authority by an order dated 15.08.2020 on the sole ground that the place of supply of services was in India and therefore, the services rendered could not be considered as export of services. The relevant extract of the impugned order denying the said refund is set out below: "I find that the taxpayer fails to provide the documentary evidence as to what type of Investment Adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner was an 'Intermediary' under Sub-section (13) of Section 2 of the IGST Act. Thus, the services rendered were considered to be 'Intermediary Services'. Paragraph 5.5 and paragraph 5.6 of the findings of the learned Appellate Authority are relevant and are set out below: "5.5 I also observe from the agreement that the appellant, as an agent, identifies potential opportunities, provides analytical, operational support and market information in India for his principal's output. The appellant, in his submissions to the appeal document, stated that the services, being provided to the entities outside India, inter-alia includes identifying potential opportunities for investments in India, analyzing investment returns and related risks, preparing report etc. 5.6 Therefore, in view of the above, I find that the appellant is performing these activities in India in his liaison capacity and the person, acting in liaison capacity, has to act as go-between his principal and his principal's customers which are opportunities for investments' in the instant case. Thus, these activities of the appellant are clearly in the nature of arranging or facilitating supply by the foreign enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services to any other company. It also observed that "The service agreement has substantively every term and condition to make the taxpayer act as a facilitator of their services and products for their customers." Accordingly, the Adjudicating Authority held that the petitioner was an 'Intermediary' and the place of supply of services provided by it were in India. 16. The petitioner appealed against the said decision. The Appellate Authority upheld the decision of the Adjudicating Authority and rejected the petitioner's appeal. The Adjudicating Authority also observed that Cube Highways Group of Companies was engaged in construction of highways, toll operations etc. in India. And the services provided by the petitioner were in relation to immovable property in India being the roads, tolls etc. The Appellate Authority further held that such activities required the physical presence of the recipient, and the recipient was represented by the petitioner. The Appellate Authority also held that in terms of Sub-section (3)(b) and Sub-section (4) of Section 13 of the IGST Act, the place of supply of services by the petitioner were in India. Proceedings for the Financial Year 2020-21, sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority referred to Clause 3 of the Agreement and observed as under: "6.2 From the above, I find that the appellant is engaged in providing marketing support services, regarding information of Indian market to identify potential opportunities in India, for and on behalf of I Squared Asia Advisors Pte. Ltd. As such, the appellant is engaged in rendering services which are for furtherance of business of the foreign entity as is evident from clause 3.7 of the agreement. As per para 3 read with clause 1.3 of the agreement, these services have been rendered by the appellant in the taxable territory i.e. India. I also find that the appellant is acting as a communication channel for I Squared Asia which is definitely with the prospective customers in India." 20. In addition, the Appellate Authority held that the petitioner was providing services on behalf of a foreign entity yet the place of supply of services was in the taxable territory, that is, India. 21. The Appellate Authority referred to the submissions filed by the petitioner and noted that the said services were in relation to construction, operation and maintenance of roads and tolls and concluded as under: "6.4 From the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Ltd. in India. Therefore, I find that the contentions of the appellant that the services are provided by way of reports/deliverables which are directly sent to I Squared Asia which do not require physical presence of any individual hold no ground as the term 'individual' has the same meaning as of 'the Company' or 'a Body Corporate incorporated under the laws of a country outside India. As such, I conclude that the provisions of section 13(3)(b) of the IGST Act, 2017 shall also apply in the appellant's case to determine the place of supply." 23. Thus, according to Appellate Authority, Sub-section (3)(b) and Sub-section (4) of Section 13 of the IGST Act would be applicable to the petitioner's case and the place of supply of services by the petitioner is in India. Reasons & Conclusion 24. As is apparent from the above, the petitioner was denied refund of ITC on, essentially, three grounds. First, that the petitioner is an 'Intermediary' in respect of the services provided by it to I Squared, in terms of Sub-section (13) of Section 2 of the IGST Act; therefore, in terms of Sub-section (8)(b) of Section 13 of the IGST Act, the place of supply of service is in India, as the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "2. In this Act, unless the context otherwise requires, -- *** *** *** (6) "export of services" means the supply of any service when,-- (i) the supplier of service is located in India; (ii) the recipient of service is located outside India; (iii) the place of supply of service is outside India; (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange or in Indian rupees wherever permitted by 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;" 27. Sub-section (13) of Section 2 of the IGST Act defines the term "Intermediary" and is reproduced below for ready reference: "2. In this Act, unless the context otherwise requires, -- *** *** *** (13) "intermediary" means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account;" 28. The principal questions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellate Authority had also alluded to the nature of services in the impugned orders. Thus, there was no requirement for remanding the matters for re-adjudication as the controversy involved was squarely covered by the decisions of this Court in M/s Ernst & Young Ltd. v. Additional Commissioner, CGST Appeals-II, Delhi & Anr. (supra) and M/s Ohmi Industries Asia Pvt. Ltd. v. Assistant Commissioner, CGST:2023:DHC:2440-DB. 32. Before proceeding further, it would be relevant to note that there is no real dispute that the services rendered by the petitioner are covered under the Agreement. It was contended on behalf of the Revenue that petitioner is a part of a group of companies, and some of those companies have projects in India; however, there is no material on record, which even remotely suggests that petitioner had rendered any services other than advisory services. The petitioner had claimed refund of accumulated ITC in respect of export of services to I Squared under the Agreement and there is no material indicating that those services were other than advisory services. 33. At this stage, it would be relevant to refer to Clauses 2 and 3 of the Agreement relating to appointm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cube Highways India at no point in time can represent or reflect to anyone that it has the authority to negotiate and conclude any terms on behalf of I Squared Asia or its affiliates in this regard or that it can decide on acceptation / rejection of a project/ contract on behalf of I Squared Asia or its affiliates" 34. It is apparent from Clause 2, stated hereinabove, that petitioner at all time was required to act as an independent service provider and the Agreement with I Squared was on principal to principal basis. It was expressly specified in the said Clause that the petitioner is not intended to be an agent or partner of I Squared. Similarly, the last paragraph of Clause 3 of the Agreement clearly states that the petitioner could at "no point in time can represent or reflect to anyone that it has the authority to negotiate and conclude the terms on behalf of I Squared or its affiliates". 35. The first show cause notice - relating to Financial Year 2018-19 neither contained any allegation that the petitioner was an 'Intermediary' nor raised any question regarding the nature of services rendered by the petitioner. No doubt was raised that the services rendered by the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e instant case". 39. Concededly, the said view is unsustainable. 40. The petitioner is the service provider. It is rendering the advisory services directly to I Squared and is not acting as a facilitator for providing such services. 41. 'Intermediary' as defined under Sub-section (13) of Section 2 of the IGST Act is a person who facilitates supply of services - he does not supply services himself but merely arranges the same. The Central Board of Indirect Taxes and Customs had issued a Circular dated 20.09.2021 which clearly defines the scope of 'Intermediary Services'. The relevant extracts of the said Circular are set out below: "2. Scope of Intermediary services 2.1 'Intermediary' has been defined in the sub-section (13) of section 2 of the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as "IGST" Act) as under - 'Intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account." 2.2 The concept of 'intermediary' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he expression "means" and does not expand the definition by any known expression of expansion such as "and includes". The use of the expression "arranges or facilitates" in the definition of "intermediary" suggests a subsidiary role for the intermediary. It must arrange or facilitate some other supply, which is the main supply, and does not himself provides the main supply. Thus, the role of intermediary is only supportive. 3.4 Does not include a person who supplies such goods or services or both or securities on his own account: The definition of intermediary services specifically mentions that intermediary "does not include a person who supplies such goods or services or both or securities on his own account". Use of word "such" in the definition with reference to supply of goods or services refers to the main supply of goods or services or both, or securities, between two or more persons, which are arranged or facilitated by the intermediary. It implies that in cases wherein the person supplies the main supply, either fully or partly, on principal to principal basis, the said supply cannot be covered under the scope of intermediary". xxx xxx xxx" 42. It is, thus implicit in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termediary' under Sub-section (13) of Section 2 of the IGST Act. It is not disputed that the services rendered by the petitioner were considered as export of services for the purpose of levy of service tax under the Finance Act, 1994. Concededly, the petitioner was not held to be an 'Intermediary' under Rule 2(f) of the Place of Provision of Services Rules, 2012, in respect of services rendered under the Agreement, prior to the rollout of GST with effect from 01.07.2017. 47. The petitioner's claim for refund in respect of the next two financial years, that is, Financial Years 2019-20 and 2020-21 was rejected on two other additional grounds. The Adjudicating Authority held that the place of supply of services rendered by the petitioner was its location in terms of Sub-section (3)(b) and Sub-section (4) of Section 13 of the IGST Act. 48. The impugned order dated 21.09.2021 passed by the Adjudicating Authority rejecting the petitioner's claim in respect of the Financial Year 2019-20 on the aforesaid grounds cannot be sustained as no such allegations are made in the show cause notice dated 18.08.2021 that preceded the said impugned order. In the said show cause notice, it was alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf) with the supplier of the services. There is no allegation that the petitioner has rendered any service to an individual. Plainly, the Adjudicating Authority has misunderstood the nature of services covered under Sub-section (3)(b) of Section 13 of the IGST Act. These are essentially in the nature of personal services which require the physical presence of the service recipient. A publication issued by the Central Board of Excise & Customs captioned "Taxation of Services: An Education Guide" explains the significance of the words 'physical presence of an individual', whether represented either as the service receiver or a person acting on behalf of the receiver, as under: "This implies that while a service in this category is capable of being rendered only in the presence of an individual, it will not matter if, in terms of the contractual arrangement between the provider and the receiver (formal or informal, written or oral), the service is actually rendered by the provider to a person other than the receiver, who is acting on behalf of the receiver. Illustration A modeling agency contracts with a beauty parlour for beauty treatment of say, 20 models. Here again is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Hon'ble Court in the case of M/s Ernst & Young Ltd. v. Additional Commissioner, CGST Appeals-II, Delhi & Anr in W.P.(C) 8600/2022 by calling for additional documents / information if any, required." 57. However, we are unable to accept that the present petitions are required to be remanded to the Adjudicating Authority for consideration afresh. There is no material which would even remotely suggest that the services rendered by the petitioner are not as claimed, that is, advisory services relating to investments in India. As noticed above, the concerned authorities had also accepted the same as is apparent from some of the observations made in the impugned order. Neither the Adjudicating Authority nor the Appellate Authority had any material to doubt the petitioner's claim that it had rendered advisory services for making investments in India. We do not consider it apposite to remand the present petitions for fresh adjudication. The decisions in Bharat Sanchar Nigam Ltd. v. Union of India & Ors. (supra) and in M/s GAP International Sourcing (India) Pvt. Ltd. v. Additional Commissioner CGST Appeals-II & Ors. (supra) relied upon by the Revenue in support of the aforesaid prayer a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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