TMI Blog2023 (8) TMI 980X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided by the petitioner were to customers of I Squared and therefore the petitioner was an Intermediary . Plainly, the said reasoning is fundamentally flawed. Merely because I Squared may have, on the basis of advisory services given by the petitioner, made the investments in entities in India, cannot be construed to mean that the petitioner had rendered the advisory services as an Intermediary . The Appellate Authority had accepted that the services provided by the petitioner included identifying potential opportunities for investments in India, analyzing investment returns and related risks, preparing reports etc. However, the Adjudicating Authority concluded that the petitioner was performing these activities in India in his liaison capacity and the person acting in liaison capacity, has to act as a go-between his principal and his principal s customers which are opportunities for investments in the instant case'' - Concededly, the said view is unsustainable. It is, thus implicit in the concept of an Intermediary that there are three parties, namely, the supplier of principal service; the recipient of the principal service and an intermediary facilitating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agents, supply of accommodation by a hotel, inn, guest house, club or campsite - The petitioner had also provided invoices which indicated that it was charging market services and advisory fee . It cannot be accepted 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. The impugned orders are set aside. The Adjudicating Authority is directed to process the petitioner s claim for refund as expeditiously as possible and preferably with in a period of eight weeks from today - petition allowed. - HON BLE MR JUSTICE VIBHU BAKHRU AND HON BLE MR JUSTICE AMIT MAHAJAN Advocates who appeared in this case: For the Petitioner : Mr. Tarun Gulati, Sr. Adv. with Mr. Kishore Kunal, Mr. Parth, Mr. Shakaib Khan Mr. Shubham Bajaj, Advs. For the Respondents : Mr. R. Ramachandran, Sr. SC. JUDGMENT VIBHU BAKHRU, J. 1. The petitioner has filed the present petitions impugning the orders passed by the Appellate Authority (resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. The petitioner filed an application on 13.07.2020 seeking refund of unutilized ITC on export of services amounting to ₹26,52,799/- relating to the tax period April 2018 to March 2019 under Section 54 of the Central Goods and Services Tax Act, 2017 (hereafter the CGST Act ). 7. The Adjudicating Authority issued a show cause notice dated 18.07.2020 proposing to reject the petitioner s claim for refund for the following reasons: i. Place of provision appear to be in India; ii. Refund claims in respect of remittances received on or before 13.07.2018 is time barred; iii. difference in the value of supply as reflected in GSTR-1, GSTR-3B vis a vis RFD-01 and remittances received during 2018-19; and iv. refund claimed in respect of capital goods and construction activities, repair and maintenance, rent-a-cab etc. not admissible under Section 17(5) of the CGST Act. 8. The petitioner responded to the said show cause notice contesting the reasons for proposing rejection of its claim. Insofar as the place of supply of services is concerned, the petitioner responded as under: In this respect, we would like to reiterate that the Company is engaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 13 of the IGST Act. Hence, place of supply of such services will be within India in view of Section 13(8) of the IGST Act. My views are also supported with the order dated 26.07.2018 pronounced by the Maharashtra Authority of Advance Ruling in the case of Sabre Travel Network India Pvt. Ltd. Hence, I find that (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 within India, (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange and (v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with explanation I in Section 8 of IGST Act. Hence, as per Section 2(6) of the IGST Act, the supply of service will not be treated as export of service . 11. Aggrieved by the said order, the petitioner filed an appeal under Section 107 of the CGST Act before the Appellate Authority which was rejected by an order dated 29.03.2022. The Appellate Authority noted the scope of services as specified under Article 3 of the Agreement and observed that the petitioner was engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed an application dated 22.07.2021 seeking refund of ITC amounting to ₹60,64,843/- in respect of the financial year 2019-20 under Section 54 of the CGST Act. The petitioner received a show cause notice dated 18.08.2021 proposing to reject the petitioner s claim for refund inter alia on the ground that the place of supply of services was in India. The Adjudicating Authority referred to the invoices raised by the petitioner that reflected the place of supply as Delhi and drew support from the same. In addition, the show cause notice also mentioned that on scrutiny of documents, it appeared that the petitioner was acting as an Intermediary in terms of Sub-section (13) of Section 2 of the IGST Act. 14. The petitioner replied to the show cause notice on 02.09.2021 reiterating its stand as in the previous year. 15. The Adjudicating Authority rejected the petitioner s claim for refund by an order dated 21.09.2021, inter alia, on the ground that the services rendered were covered in Sub-section (3)(b) and Sub-section (4) of Section 13 of the IGST Act. According to the Adjudicating Authority, the place of supply of service was the location where services were actually perf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to immovable property in India, therefore its activities were not covered under Sub-section (6) of Section 2 of the IGST Act. The petitioner responded to the show cause notice on 30.05.2022 and its response was the same as in previous years. 18. The petitioner s claim for refund was rejected by the Adjudicating Authority by an order dated 03.06.2022, inter alia, on the ground that the services rendered by the petitioner were covered under Sub-section (3)(b) and Sub-section (4) of Section 13 of the IGST Act. According to the Adjudicating Authority, in case of services supplied to an individual, which require physical presence of the recipient or a person acting on his behalf for supply of service, the place of supply of service would be the location where services were actually performed. The Adjudicating Authority observed that the petitioner was rendering services in relation to immovable property viz. roads, tolls, etc. , which were covered under Sub-section (4) of Section 13 of the IGST Act. The Adjudicating Authority also reasoned that since the immovable property was situated in India, the services rendered in relation to those properties also required physical p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty is located or intended to be located which is, in the appellant s case, in the taxable territory i.e. India. It is relevant to mention here that section 13(1) of the IGST Act, 2017 specifically states that the provisions of this section (i.e. section 13) 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 . As such the appellant s submissions, that the place of supply of their services supplied to | Squared Asia cannot be determined under section 13(4) of IGST Act, hold no ground. 22. The Appellate Authority also found that the place of supply was in India in terms of Section 13(3)(b) of the IGST Act. The Appellate Authority referred to the said provision and concluded as under: 7.2 I find that the appellant has provided marketing support services in India specifically for and on behalf of M/s I Squared Asia Pte. Ltd. for furtherance of their business of M/s I Squared Asia Pte. Ltd. in India. I find that for a service for which the place of supply has to be interpreted under section 13(3)(b) of the IGST Act, 2017, it should first be supplied to an indiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 13. (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: *** *** *** (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, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30. Mr. Ramachandran, learned counsel for the respondents submitted that the petitioner and I Squared are group companies of I Squared Capital, which is a subsidiary of Abu Dhabi Investment Authority, International Finance Corporation and a consortium of Japanese investors. The said group has nineteen projects in India with a long-term concession to build toll highways on BOT (Build, Operate and Transfer) basis. The said concessions span over twenty to thirty years. He also submitted that the petitioner had agreed to supply services in India and it was not clear from the invoices as to the nature of services provided. He stated that the Adjudicating Authority was required to call for more information and documents to ascertain the true nature of services before arriving at any conclusion and therefore, the matters ought to be remanded back to the Adjudicating Authority to consider afresh. He stated that orders have been passed in other cases remanding the matters for re-adjudication in the light of the earlier decision rendered by this Court in M/s Ernst Young Ltd. v. Additional Commissioner, CGST Appeals-II, Delhi Anr.:2023:DHC:2116-DB. He also referred to such orders p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incipal-to-principal basis and is not intended to be an agent or partner of the I Squared Asia. 3. Scope of Services Cube Highways India shall provide services to I Squared Asia related to transportation sector in India. The scope of services would be as follows: 3.1 Providing update on market information, market trends business and legal regulations. 3.2 Providing assistance in identifying potential opportunities in India consistent with the parameters and guidance provided by I Squared Asia from time to time and under communication of the same to I Squared Asia. 3.3 Providing I Squared Asia with advices and suggestions with respect to the financial feasibility and viability of any proposed project. 3.4 Providing analytical support and support for completing due diligence. 3.5 Acting as a communication channel for I Squared Asia as may be requested by I Squared Asia on a time to time basis. 3.6 Providing management advisory, management consulting and operational support services. 3.7 Providing such other services in furtherance of the foregoing, as I Squared Asia may reasonably request. The Parties agree and acknowledge that at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia. It was explained that the petitioner provides updates on market information, market trends and businesses, legal and regulatory information / environment in India. 36. The Adjudicating Authority concluded that the petitioner was rendering Intermediary Services . It reasoned that ..The service recipient has made the expenditure at large volume but, on the basis of advisory provided by the taxpayer, where the service recipient has invested the amount for their trade promotion. Thus, it is nothing but the services provided by the taxpayer to the customers of service recipient and, thus, squarely covers under the ambit of Intermediary services . . 37. It is not easy to discern the import of the aforesaid reasoning of the Adjudicating Authority. However, it does appear that the Adjudicating Authority had proceeded on the basis that since the service recipient had invested amounts on the basis of advisory services rendered by the petitioner, the services provided by the petitioner were to customers of I Squared and therefore the petitioner was an Intermediary . Plainly, the said reasoning is fundamentally flawed. Merely because I Squared may have, on the basis of advis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between two or more persons, but does not include a person who provides the main service or supplies the goods on his own account. 3. Primary Requirements for Intermediary services The concept of intermediary services, as defined above, requires some basic prerequisites, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice provider and the service recipient. In such a case, rendering of consultancy services cannot be considered as Intermediary Services or services as an Intermediary . 43. It is also relevant to note that Rule 2(f) of the Place of Provision of Services Rules, 2012 also defined Intermediary in similar terms as Sub-section (13) of Section 2 of the IGST Act. The said Sub-section is set out below: (f) intermediary means 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 or supplies the goods on his account; 44. Undisputedly, this question is also squarely covered by an earlier decisions of this Court in M/s Ernst Young Ltd. v. Additional Commissioner, CGST Appeals-II, Delhi Anr (supra) and in Ohmi Industries Asia Pvt. Ltd. v. Assistant Commissioner, CGST (supra). 45. It is also relevant to refer an Order-in-Original dated 26.07.2018 passed by the Adjudicating Authority (Order-in-Original No. 15-17/MN-DIV/2018-19/R). In that case, the Adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 13 of the IGST Act. 49. The reasons recorded in the impugned order dated 21.09.2021 rejecting the petitioner s claim for refund for the Financial Year 2019-20 are cryptic. The Adjudicating Authority had noted the scope of services as specified under Clause 3 of the Agreement. The order also indicates that the Adjudicating Authority had made further enquiries by visiting the website, www.cubehighways.com. The Adjudicating Authority observed that the group of companies, which included the petitioner, was engaged in construction of highways, toll operations etc. in India and held that the petitioner renders services in relation to those projects in India. The Adjudicating Authority, thus, concluded that Sub-section (3)(b), Sub-section (4) and Sub-section (7)(b) of Section 13 of the IGST Act were attracted. 50. Sub-section (7)(b) of Section 13 of the IGST Act has no application whatsoever. Sub-section (7) of Section 13 of the IGST Act reads as under: (7) Where the services referred to in sub-section (3) or sub-section (4) or sub-section (5) are supplied in more than one State or Union territory, the place of supply of such services shall be taken as being in each of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch as can be rendered only to an individual, thereby qualifying to be covered under this rule. 53. We are, also, unable to accept that the services rendered by the petitioner can be covered under Sub-section (4) of Section 13 of the IGST Act. As is apparent from the plain language of Sub-section (4) of Section 13 of the IGST Act, the supply of services contemplated under the said Clause are those that are supplied directly in relation to an immovable property. Such services include services supplied by experts and estate agents, supply of accommodation by a hotel, inn, guest house, club or campsite. It includes grant of rights to use immovable property, carrying out construction work and further include services as that of architects or interior decorators. In the present case, the petitioner is rendering advisory services to I Squared. The petitioner had repeatedly filed submissions before the concerned authorities (Adjudicating Authority as well as Appellate Authority) explaining that it is rendering advisory services to overseas group companies with respect to investment avenues in transportation sector after performing its own analysis and due diligence . It had also expl ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
