Columbia Sportswear India Sourcing Pvt. Ltd. Vs Union of India (Karnataka High Court)

FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT

In W.P.No.12116/2024, petitioner seeks for the following reliefs:-

“(A) Issue a writ of certiorari or any other writ or direction or order to quash impugned Order-in-Original No.34/2022-23 dated 01.07.2022 bearing DIN: 202207570000006655 enclosed as Annexure A for the reasons stated in the grounds.

(B) Issue a writ of certiorari or any other writ or direction or order to quash impugned Order-in-Original No.104/2022-23ND3 dated 28.03.2023 bearing DIN:2023035700000000AB77 enclosed as Annexure B for the reasons stated in the grounds.

(C) Writ of declaration or any other appropriate writ or direction to declare that the provisions of Section 8 of Integrated Goods and Services Tax Act, 2017, enclosed as Annexure C, as unconstitutional for the reasons stated in the grounds.

(D) Writ of declaration or any other appropriate writ or direction to declare that the provisions of Section 13 (8) (b) of Integrated Goods and Services Tax Act, 2017, enclosed as Annexure D, as unconstitutional for the reasons stated in the grounds.

(E) Issue a writ of certiorari or any other writ or direction or order to quash Circular. No. 159/15/2021 dated 20.09.2021 to extent of Para 3.6 as unconstitutional, enclosed as Annexure E for the reasons stated in the grounds.

(F) Issue a writ of certiorari or any other writ or direction or order to quash Circular No.135/05/2020-GST dated 31 March 2020 to extent of Para 5 as unconstitutional, enclosed as Annexure F for the reasons stated in the grounds.

(G) Issue a writ of declaration or any other appropriate writ or direction to declare that the provisions of 36(4) of Central Goods and Services Tax Rules, 2017, enclosed as Annexure G, as unconstitutional for the reasons stated in the grounds.

(H) Issue a writ of declaration or any other appropriate writ or direction to declare that the provisions of the provisions of sub rule (4) of rule 89 of CGST Rules, 2017 enclosed as Annexure H as being unreasonable and discriminatory and therefore to be struck down as violative of Article 14 and/or 19;

(I) This Hon’ble Court may issue a writ of declaration or any other appropriate writ or direction declaring.

(J) Grant such other consequential reliefs as this Honourable High Court may think fit including refund of amounts paid, if any and the cost of this writ petition.”

In W.P.No.3486/2020, petitioner seeks for the following reliefs:-

“(A) Writ of declaration or any other appropriate writ or direction to declare that the provisions of Section 174 of Central Goods and Service Tax Act 2017 (Annexure-A) as ultra vires the Constitutional 101^st Amendment Act, 2016, being legislatively incompetent and violative of Article 14/19/265 of the Constitution.

(B) Writ or direction in the nature of a writ of certiorari or any other writ or direction to quash the impugned Order-in-Original No. BLR-EXCUS-004-RLR-034-19-20 dated 25.11.2019 (Annexure-B0 passed by Respondent No.1 as being violative of Article 14/19 of the Constitution.

(C) Direct the Respondent by an appropriate writ or Order in the nature of Mandamus or otherwise, not to proceed with the recovery of the amounts proposed in the impugned Order-in-Original No. BLR-EXCUS-004-RLR-034-19-20 dated 25.11.2019 (Annexure-B) passed by the Respondent No.1.

(D) Grant such other consequential reliefs as this Honourable High Court may think fit including refund of amounts paid, if any and the cost of this writ petition.”

In W.P.No.3376/2023, petitioner seeks for the following reliefs:

“(A) Issue a writ of certiorari or any other writ or direction or order to quash impugned Order-in-Appeal dated 04.11.2022 bearing OIA No. 226-230/2022-23/JC-All/GST and having DIN 20221157000000333A25 enclosed as Annexure A for the reasons stated in the grounds.

(B) Issue a writ of certiorari or any other writ or direction or order to quash impugned show cause notice dated 19.12.2021 bearing SCN No. 52/2020-21(GST), enclosed as Annexure B1 issued Respondent No.3for the reasons stated in the grounds.

(C) Issue a writ of certiorari or any other writ or direction or order to quash impugned show cause notice dated 12.01.2022 bearing SCN No. 53/2021-22(GST) having DIN 2022015700000000A042, enclosed as Annexure B2 Issued Respondent No.3 for the reasons stated in the grounds.

(D) Issue a writ of certiorari or any other writ or direction or order to quash impugned show cause notice dated 17.01.2022 bearing SCN No. 55/2021-22(GST) and having DIN 20220157YW000000F26E, enclosed as Annexure B3 issued Respondent. No. 3 for the reasons stated in the grounds.

(E) Issue a writ of certiorari or any other writ or direction or order to quash impugned show cause notice dated 21.01.2022 bearing SCN No. 56/2021-22(GST) and having DIN 20220157000000924749, enclosed as Annexure B4, issued Respondent No.3 for the reasons stated in the grounds.

(F) Issue a writ of certiorari or any other writ or direction or order to quash impugned show cause notice dated 02.02.2022 bearing SCN No. 59/2021-22(GST) and having DIN 2022025700000000EA5A, enclosed as 3 Annexure B5 issued Respondent No.3for the reasons stated in the grounds.

(G) Writ of declaration or any other appropriate writ or direction to declare that the provisions of Section 8 of Integrated Goods and Services Tax Act, 2017, enclosed as Annexure C, as unconstitutional for the reasons stated in the grounds.

(H) Writ of declaration or any other appropriate writ or direction to declare that the provisions of Section 13 (8) (b) of Integrated Goods and Services Tax Act, 2017, enclosed as Annexure D, as unconstitutional for the reasons stated in the grounds.

(I) Issue a writ of certiorari or any other writ or direction or order to quash Circular. No. 159/15/2021 dated 20.09.2021 to extent of Para 3.6 as unconstitutional, enclosed as Annexure E issued Respondent No.2 for the reasons stated in the grounds.

(J) Issue a writ of certiorari or any other writ or direction or order to quash Circular No.135/05/2020-GST dated 31 March 2020 to extent of Para 5 as unconstitutional, enclosed as Annexure F issued Respondent No. 2 for the reasons stated in the grounds.

(K) Issue a writ of declaration or any other appropriate writ or direction to declare that the provisions of 36(4) of Central Goods and Services Tax Rules, 2017, enclosed as Annexure G, as unconstitutional for the reasons stated in the grounds.

(L) Grant such other consequential reliefs as this Honourable High Court may think fit including refund of amounts paid, if any and the cost of this writ petition.”

In W.P.No.3420/2023, petitioner seeks for the following reliefs:-

“(A) Issue a writ of certiorari or any other writ or direction or order to quash impugned Order-in-Appeal dated 12.08.2022 bearing OIA 143/2022-23/JC-AII/GST, and having DIN 2022085700000071287B enclosed as Annexure A for the reasons stated in the grounds.

(B) Issue a writ of certiorari or any other writ or direction or order to quash impugned show cause notice. dated 21.04.2021 bearing SCN No. 14/2020-21, issued by Respondent No.3, enclosed as Annexure B for the reasons stated in the grounds.

(C) Writ of declaration or any other appropriate writ or direction to declare that the provisions of Section 8 of Integrated Goods and Services Tax Act, 2017, enclosed as Annexure C, as unconstitutional for the reasons stated in the grounds.

(D) Writ of declaration or any other appropriate writ or direction to declare that the provisions of Section 13 (8) (b) of Integrated Goods and Services Tax Act, 2017, enclosed as Annexure D, as unconstitutional for the reasons stated in the grounds.

(E) Issue a writ of certiorari or any other writ or direction or order to quash Circular. No. 159/15/2021 dated 20.09.2021 to extent of Para 3.6 as unconstitutional, enclosed as Annexure E issued by Respondent No.2 for the reasons stated in the grounds.

(F) Issue a writ of certiorari or any other writ or direction or order to quash Circular No.135/05/2020-GST dated 31 March 2020 to extent of Para 5 as unconstitutional, enclosed as Annexure F issued by Respondent no.2 for the reasons stated in the grounds.

(G) Issue a writ of declaration or any other appropriate writ or direction to declare that the provisions of 36(4) of Central Goods and Services Tax Rules, 2017, enclosed as Annexure G, as unconstitutional for the reasons stated in the grounds.

(H) Grant such other consequential reliefs as this Honourable High Court may think fit including refund of amounts paid, if any and the cost of this writ petition.”

2. Brief facts leading to the present petitions are as under:-

The petitioner in all the four petitions is M/s.Columbia Sportswear India Sourcing Private Limited, a company incorporated under the Companies Act. The petitioner is engaged in export of services to their clients outside India and have been filing service tax / GST returns for the same. The petitioner has entered into “Buying Support Services Agreements” with Columbia Sportswear Company, a corporation organized and existing under laws of United States of America, which is the service recipient for the services supplied by the petitioner – company. Since the petitioner in all the four petitions is one and the same and common questions of law arise for consideration in all the four petitions, they are taken up together and disposed of by this common order.

2.1 The petitioner in W.P.No.12116/2024, W.P.No.3376/2023 and W.P.No.3420/2023 is aggrieved by the impugned orders passed by the respondents rejecting the refund claim of Input Tax Credit (ITC) sought for by the petitioner for the relevant periods. The petitioner in W.P.No.3486/2020 is aggrieved by the impugned order passed by the respondents confirming demand of service tax, interest, penalty etc., upon the petitioner.

2.3 A perusal of the material on record will indicate that it is the specific contention of the petitioner that it is not an ‘intermediary’ within the meaning of Section 2(13) of the Integrated Goods and Services Tax Act, 2017 (for short ‘the IGST Act’) and that the Customers Support Services provided by the petitioner qualify as export of services under Section 2(6) of the IGST Act and that consequently, the petitioner would be entitled to refund of ITC together with interest under Sections 54 and 56 of the CGST Act, 2017 and the demand made by the respondents deserves to be quashed under the erstwhile service tax provisions where the provisions are but the precursor to the GST regime and worded substantially the same.

3. The respondents-Revenue have filed their statement of objections and have sought for dismissal of the petitions.

4. Heard Sri.V.Raghuraman, learned Senior counsel along with Sri.C.R.Raghavendra and Sri.J.S.Bhanumurthy, learned counsel appearing for the petitioner as well as learned counsel appearing for the respondents-Revenue and perused the material on record. They have not argued on the validity of the provisions or the circulars and therefore, these matters will be left open for consideration in an appropriate case.

5. Before adverting to the rival contentions, it would be necessary to refer to one of the subject Agreements i.e., Buying Support Services Agreement dated 01.07.2017 entered into between the petitioner and M/s.Columbia Sportswear Company, USA; as stated earlier, several such similar / identical agreements have been entered into between the petitioner and the said company, which are the subject matter of the present petitions. The said Agreement is as under:-

“BUYING SUPPORT SERVICES AGREEMENT

THIS AGREEMENT, is effective as of July 1, 2017 (the Effective Date), by and between Columbia Sportswear India Sourcing Private Limited (“Provider”), a corporation organized and existing under the laws of India with its principal offices at Corniche Al-Lateef, 3^rd Floor, No 25, Cunningham Road, Bangalore, 560 052, Karnataka, India, and Columbia Sportswear Company (“Recipient”), a corporation organized and existing under the laws of the United States of America with its principal offices at 14375 NW Science Park Drive, Portland, Oregon, 97229. USA.

RECITALS

WHEREAS, Recipient sells and markets outside India Columbia Sportswear, Mountain Hardwear, Montrail, and Sorel brand products (the “Products”);

WHEREAS, Recipient purchases Products from unrelated manufacturers (“Manufactured Product”), and desires to obtain support services from Provider in connection with the sourcing and purchasing decision and reporting on obligations of parties concerned thereto;

WHEREAS, Provider has the expertise to provide such support services; and is willing to undertake such support services in exchange for appropriate compensation.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants and conditions contained herein and intending to be legally bound, the parties hereby agree as follows.

SERVICE PROVIDER APPOINTMENT

 1.0 Appointment of Service Provider. Subject to the terms and conditions of this Agreement, Recipient hereby appoints Provider on a non-exclusive basis to perform such support services in connection with purchase of Manufactured Product as Recipient may from time to time request. Provider accepts this appointment by the Recipient.

DUTIES OF THE PARTIES

 2.0 Responsibilities of Service Provider. Provider would assist the Recipient in identifying possible sources for procurement. In doing this, Provider shall ensure that the Products are in accordance with the requirements of Recipient with respect to type, quality, delivery deadlines, financing and insurance. Provider shall assist Recipient in getting the vendor to arrange delivery of the Products, to such ports as the parties may from time to time determine. Provider shall not have the authority to represent and bind Recipient directly vis-à-vis manufacturers in the event of a purchase order being issued by the Recipient.

The Recipient would take all decisions in relation to purchases of Manufactured Products and would place purchase orders directly on manufacturers. The Recipient would communicate the designs and quality specifications to the Provider for communication to the suppliers.

2.1 Related Services. Provider shall also provide Recipient with the following support services:

• • Coordinate and act as the channel of communication between the Recipient and the suppliers.
  • Survey the potential markets to identify the best available supplier of goods.
  • Advise Recipient as to accessories and fabrics suitable for manufacturing garments.
  • Identify potential factories for the manufacture of Products. Visit factories to assess the operation’s ability to deliver quality goods in a timely manner subject to quality parameters of Recipient communicated to manufacturer.
  • Coordinate with suppliers to obtain production schedules, by factory, which allows Recipient to place production orders directly on manufacturers with its choice of factories and take advantage of quantity price breaks.
  • Coordinate with suppliers to update the Recipient’s Management Information Systems based on direct despatches of manufactured products by the suppliers concerned, to the Recipient.
  • Provide services in relation to monitoring of the factories which are producing garments for Recipient to ensure compliance with timelines and quality standards prescribed by the Recipient. Provider shall also provide Recipient with production progress reports. In the event that the manufactured goods do not conform to the quality or specifications, Recipient will be notified immediately.
  • Coordinate to facilitate and get manufacturer to expedite the production and shipment of garments to Recipient, including translating all specification to the language of the manufacturer, ensuring the factory has adequate capability to supply.
  • Track the shipment status based on shipment reports by manufacturer till receipt by Recipient, keeping Recipient appraised of the shipment status.
  • Assist in legal review for the importation of goods to Recipient’s destination of choice.
  • Provide any other services agreed to in writing. 

• Coordinate and act as the channel of communication between the Recipient and the suppliers.
• Survey the potential markets to identify the best available supplier of goods.
• Advise Recipient as to accessories and fabrics suitable for manufacturing garments.
• Identify potential factories for the manufacture of Products. Visit factories to assess the operation’s ability to deliver quality goods in a timely manner subject to quality parameters of Recipient communicated to manufacturer.
• Coordinate with suppliers to obtain production schedules, by factory, which allows Recipient to place production orders directly on manufacturers with its choice of factories and take advantage of quantity price breaks.
• Coordinate with suppliers to update the Recipient’s Management Information Systems based on direct despatches of manufactured products by the suppliers concerned, to the Recipient.
• Provide services in relation to monitoring of the factories which are producing garments for Recipient to ensure compliance with timelines and quality standards prescribed by the Recipient. Provider shall also provide Recipient with production progress reports. In the event that the manufactured goods do not conform to the quality or specifications, Recipient will be notified immediately.
• Coordinate to facilitate and get manufacturer to expedite the production and shipment of garments to Recipient, including translating all specification to the language of the manufacturer, ensuring the factory has adequate capability to supply.
• Track the shipment status based on shipment reports by manufacturer till receipt by Recipient, keeping Recipient appraised of the shipment status.
• Assist in legal review for the importation of goods to Recipient’s destination of choice.
• Provide any other services agreed to in writing. 

COMPENSATION

3.1 Service Fee. For services rendered, Recipient shall pay a fee to Provider corresponding to the Operating Cost of the Service Provider plus markup on Operating Cost as defined in Exhibit A. The parties may revise the mark-up prospectively by signing a new copy of Exhibit A.

“Operating Cost’ means the Provider’s ordinary and necessary costs, as calculated in accordance with Indian Generally Accepted Accounting Principles, incurred in the performance of the Services under this Agreement including, without limitation, employee salaries, travel expenses, professional fees, rent, depreciation and foreign exchange losses, but excluding interest, penalties, income taxes, goodwill, and other non-operating expenses.

3.2 Reports and Payment by Recipient. Provider shall provide to Recipient a monthly Invoice, which shall identify the compensation for that month in total that is due to Provider for its provision of such services, on the basis specified in paragraph 3.1, which rates shall be reviewed from time to time by the parties.

3.3 Currency. All financial obligations originating from the terms and conditions of this Agreement shall be denominated in US Dollars.

TERM AND TERMINATION

4.0 Term. The term of this Agreement shall commence on the effective date and remain in effect, unless terminated by either party (with or without cause) by either party on ninety (90) days prior written notice.

LIABILITY

5.0 Mutual Indemnification. The parties agree to indemnify and hold each other harmless from and against any and all claims, damages and liabilities whatsoever, asserted by any person or entity, resulting directly or indirectly from any breach of Provider or Recipient or any of their respective employees or agents, of this Agreement or of any warranty, representation, covenant or obligation contained in this Agreement. Such indemnification shall include the payment of all reasonable attorneys’ fees and other costs incurred by the indemnified party in defending any such claims.

The indemnified party shall inform the indemnifying party in writing of any claim, demand or suit and shall fully cooperate in the defense thereof. The indemnified party will not agree to the settlement of any such claim, demand or suit prior to the final judgment thereon without the consent of the indemnifying party, whose consent will not be unreasonably withheld.

NOTICES

6.0 All notices and statements hereunder required to be given to Provider will be sent to Pill notices and states first mentioned herein, to the attention of Finance Manager and all notices to Recipient will be sent to Recipient at its address first mentioned herein, to the attention of CFO. Either party may change its address for notice by written notice of the changed address to the other party. All notices shall be sent by telex, cable, telegram or in writing and if in writing shall be sent by registered or certified mail, return receipt requested. The day of receipt of a telex, cable, telegram or a writing sent by mail will be deemed the date of the giving thereof.

FORCE MAJEURE

7.0 If the performance of any part of this Agreement by either party, or of any obligation under this Agreement, is prevented, restricted, interfered with or delayed by reason of any cause beyond the reasonable control of the party liable to perform, unless conclusive evidence to the contrary is provided, the party so affected shall, on giving written notice to the other party, be excused from such performance to the extent of such prevention, restriction, interference or delay, provided that the affected party shall use its reasonable best efforts to avoid or remove such causes of non performance and shall continue performance with the utmost dispatch whenever such causes are removed. When such circumstances arise, the parties shall discuss what, if any, modification of the terms of this Agreement may be required in order to arrive at an equitable solution.

ASSIGNMENT

8.0 Either party may assign any right, or delegate any obligation hereunder after receiving written consent from the other party.

WAIVER

9.0 The waiver of any one default will not waive subsequent defaults of the same or different kind.

PARAGRAPH HEADINGS AND LANGUAGE

INTERPRETATION

10.0 The paragraph headings contained herein are for reference only and shall not be considered as substantive parts of this Agreement. The use of the singular or plural form shall include the other form and the use of the masculine, feminine or neuter gender shall include the other genders.

RELATIONSHIP OF THE PARTIES

11.0 Recipient’s relationship with Provider during the term of this Agreement will be that of an independent contractor. Provider will not have, and will not represent that it has any power, right or authority to bind Recipient or to assume or create any obligation or responsibility, express or implied, on behalf of Recipient or in Recipient’s name. Nothing stated in this Agreement will be construed as constituting Recipient and Provider as partners or as creating the relationships of employer/employee, franchisor/franchisee, or principal/agent between the parties.

EXECUTION OF AGREEMENT AND CONTROLLING LAW

12.0 This Agreement shall be governed by and construed in accordance with the laws of the State of Oregon. In the event that any of the provisions of this Agreement shall be held by a court or other tribunal of competent jurisdiction to be unenforceable, such provisions shall be enforced to the maximum extent permissible and the remaining portions of this Agreement shall remain in full force.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement, to be effective as of the date first written above by their duly authorized officers.”

6. It is seen from the Agreement that the service provider has purchasing responsibilities which would help the foreign service recipient to identify who is the best person from whom products can be brought. The work involves surveying of market to identify the best supplier of goods, identifying best factories, visiting of factories, services relating to monitoring of factories selected by the foreign recipient, ensuring timely shipment of goods, tracking shipments, documentation support for which a consideration is paid as service fee. The service provider has to act in his own name and cannot represent and bind the recipient directly or indirectly.

Further, it is provided that the relationship would be one of independent contractor and that they are not principal and agent or employer and employee.

7. Under identical circumstances, while dealing with similar issues pertaining to ‘intermediary’ and ‘intermediary services’, this Court in the case of M/s.Amazon Development Centre India Pvt. Ltd., vs. Additional Commissioner of Central Tax & Another – W.P.No.13007/2024 dated 17.09.2024 held as under:-

“2. The brief facts giving rise to the present petition are as follows:-

The petitioner provide Information Technology (IT) and Information Technology Enabled Services (ITES) including customer support services to Amazon Group companies in India and outside India. It is contended that various Amazon Group Companies (Amazon Consumer Entities) incorporated in different countries around the world operate e-commerce market places in their respective regions and either sell goods directly to end customers or list the products of third party selling partners for sale to end customers. Some of these Amazon consumer entities engage other Amazon group companies viz., Amazon Export Sales LLC, Seattle, USA, Amazon CS Ireland Ltd., Ireland, AMZN wvcs LLC., Seattle, USA (Foreign Affiliates) located outside India to provide support services including customer support services. It is further contended that vide separate/independent customer services agreements, the said foreign affiliates have in turn sub-contracted the provision of support services to the petitioner and that in terms of these customer services agreements, the petitioner provides customer support services to the foreign affiliates by addressing queries (pre-sale and post-sale) of the end customers or selling partners operating on the e-commerce website of the Amazon consumer entities, through phone, chat, e-mail and other modes of instant messaging.

2.1 Petitioner contends that since the conditions of export of service under Section 2(6) of the Integrated Goods and Services Tax Act, 2017 (for short ‘the IGST Act’) were satisfied and the provision of customer support service was an export of service to a overseas recipient, petitioner filed a refund claim / application dated 27.09.2021 for refund of unutilized Input Tax Credit (ITC) under Section 54 of the Central Goods and Services Tax Act, 2017 (for short ‘the CGST Act’) r/w Rule 89(4) of the CGST Rules for the period October 2019 to March 2020 claiming refund in a sum of Rs.30,83,19,614/-. In pursuance of the same, 2^nd respondent issued a show cause notice dated 01.11.2021 proposing to reject the entire refund claim of the petitioner. The petitioner filed a detailed reply dated 16.11.2021 before the 2nd respondent refuting and denying the various allegations made in the show cause notice and reiterating its claim for refund. By order at Annexure-K dated 25.11.2021, the 2nd respondent partially allowed the claim of the petitioner and sanctioned refund of Rs.28,30,90,158/- and rejected the refund claim to an extent of Rs.2,52,29,456/-.

2.3 Aggrieved by the aforesaid order dated 25.11.2021, petitioner filed an appeal in GST.A.No.108/2022-23 before 1st respondent – appellate authority to the extent of rejection of its refund claim in a sum of Rs.2,52,29,456/-.; so also, the Department / Revenue (Deputy Commissioner – ND4 Division) also filed an appeal in GST.A.No.116/2022-23 challenging the aforesaid order to the extent of allowing the refund claim of the petitioner in a sum of Rs.1,09,42,824/-. In addition thereto, the 2^nd respondent also issued a show cause notice dated 01.09.2022 to the petitioner proposing to recover the aforesaid alleged erroneous refund of Rs.1,09,42,824/- from the petitioner, to which the petitioner submitted replies / letters etc.,

2.4 By the impugned order at Annexure-A dated 04.01.2024, the 1^st respondent – appellate authority dismissed the appeal filed by the petitioner and partially allowed the appeal of the Department to the extent of sanctioning refund in a sum of Rs.1,09,42,824/-, thereby resulting in the rejection of the refund claim of the petitioner in a total sum of Rs.3,61,72,280/- (Rs.2,52,29,456/- + Rs.1,09,42,824/-). Aggrieved by the impugned orders and show cause notice, petitioner is before this Court by way of the present petition.

3. xxxxxxxxxxxx

4. Learned Senior counsel for the petitioner would reiterate the various contentions urged in the petition and refer to the material on record in order to contend that the impugned orders and show cause notice are illegal, arbitrary, without jurisdiction or authority of law and contrary to facts as well as the provisions of the IGST Act and CGST Act and Rules and also the CBIC Circular No.159/15/2021-GST dated 20.09.2021 and as such, the impugned orders and show cause notice deserve to be quashed and the entire refund claim deserves to be upheld and granted in favour of the petitioner. In support of his contentions, learned Senior counsel placed reliance upon the following judgments:-

1. Genpact India (P) Ltd.v. Union of India – 2023 G.S.T.L.3(P&H);

2. Genpact India (P) Ltc., vs. Prl.Commissioner (GST) – 2023 SCC OnLine P & H 7161;

3. Blackberry India Pvt.Ltd v. Pr. Commissioner, Central Excise & CGST-Delhi South – 2022 VIL-921-CESTAT-DEL-ST affirmed in 2023-VIL-441-DEL-ST;

4. Chevron Philips Chemicals Ltd.V.Pr. Commissioner, Central Tax & Central excise, Navi Mumbai – 2022 (12) TMI 1489-CESTAT Mumbai affirmed in 2024 (2) TMI 21- SC ORDER;

5. Commissioner of Central Tax.v. M/s Singtel Global India Pvt.Ltd., – 2023- VIL-606-DEL-ST;

6. SNQS International Socks Pvt.Ltd. v. Commissioner of G.S.T. & CE – 2023-VIL-1219-CESTAT-CHE-ST affirmed in 2024 (3) TMI 1045-SC ORDER;

7. Vodafone Idea Ltd.v. Union of India – 2022 (66) G.S.T.L. 63(Bom);

8. M/s. Cube Highways and Transportation Assets Advisor Private Limited. Assistant Commissioner CGST Division & Ors., – 2023-VIL-547 DEL;

9. Boks Business Services Pvt Ltd., v. Commissioner of Central Goods and Services Tax Delhi South and Anr. – 2023-VIL-579-DEL;

10. Xilinx India Technology Services Pvt. Ltd., v. The Special Commissioner Zone VII & Anr., -2023-VIL-190-DEL;

11. M/s.Ernst and Young Limited vs.Additional Commissioner, CGST, Appeals-II, Delhi and Anr- 2023-VIL-190-DEL;

12. Ohmi Industries Asia Pvt.Ltd., v. Asst. Commissioner of GST – 2023-VIL-224-DEL;

13. Commissioner of GST, Gurgaon II vs. Orange Business Solutions Pvt.Ltd., – 2019(27) G.S.T.L. 523 (Tri-Chan.)

14. Evalueserve.com Pvt. Ltd. Vs. CST, Gurgaon – 2019(365) E.L.T. 546 (Tri- Chan);

15. Macquarie Global Services Pvt.Ltd v. CCE & ST, Gurgaon, 2021-TIOL-790-CESTAT-CHD.

9. It would also be profitable to extract the aforesaid CBIC Circular No.159/15/2021-GST dated 20.09.2021, which is as under:

“Circular No. 159/15/2021-GST
 F.No. CBIC-20001/8/2021-GST

Government of India
 Ministry of Finance
 Department of Revenue
 Central Board of Indirect Taxes and Customs
 New Delhi, dated the 20th September, 2021

Subject: Clarification on doubts related to scope of “Intermediary”–reg.

Representations have been received citing ambiguity caused in interpretation of the scope of “Intermediary services” in the GST Law. The matter has been examined. In view of the difficulties being faced by the trade and industry and to ensure uniformity in the implementation of the provisions of the law across field formations, the Board, in exercise of its powers conferred by section 168 (1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act)”, hereby clarifies the issues in succeeding paragraphs.

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’ was borrowed in GST from the Service Tax Regime. The definition of ‘intermediary’ in the Service Tax law as given in Rule 2(f) of Place of Provision of Services Rules, 2012 issued vide notification No. 28/2012-ST, dated 20-6-2012 was as follows:

“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 Circular No. 159/15/2021-GST 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;”

2.3 From the perusal of the definition of “intermediary” under IGST Act as well as under Service Tax law, it is evident that there is broadly no change in the scope of intermediary services in the GST regime vis-à-vis the Service Tax regime, except addition of supply of securities in the definition of intermediary in the GST Law.

3. Primary Requirements for intermediary 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 between the two principals. This ancillary supply is supply of intermediary service and is clearly identifiable and distinguished from the main supply. A person involved in supply of main supply on principal to principal basis to another person cannot be considered as supplier of intermediary service.

3.3 Intermediary service provider to have the character of an agent, broker or any other similar person: The definition of “intermediary” itself provides that intermediary service provider means a broker, an agent or any other person, by whatever name called….”. This part of the definition is not inclusive but uses the 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”.

3.5 Sub-contracting for a service is not an intermediary service: An important exclusion from intermediary is sub-contracting. The supplier of main service may decide to outsource the supply of the main service, either fully or partly, to one or more sub-contractors. Such sub-contractor provides the main supply, either fully or a part thereof, and does not merely arrange or facilitate the main supply between the principal supplier and his customers, and therefore, clearly is not an intermediary. For instance, ‘A’ and ‘B’ have entered into a contract as per which ‘A’ needs to provide 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.

4. Applying the abovementioned guiding principles, the issue of intermediary services is clarified through the following illustrations: 

Illustration 1

‘A’ is a manufacturer and supplier of a machine. ‘C’ helps ‘A’ in selling the machine by identifying client ‘B’ who wants to purchase this machine and helps in finalizing the contract of supply of machine by ‘A’ to ‘B’. ‘C’ charges ‘A’ for his services of locating ‘B’ and helping in finalizing the sale of machine between ‘A’ and ‘B’, for which ‘C’ invoices ‘A’ and is paid by ‘A’ for the same. While ‘A’ and ‘B’ are involved in the main supply of the machinery, ‘C’, is facilitating the supply of machine between ‘A’ and ‘B’. In this arrangement, ‘C’ is providing the ancillary supply of arranging or facilitating the ‘main supply’ of machinery between ‘A’ and ‘B’ and therefore, ‘C’ is an intermediary and is providing intermediary service to ‘A’.

Illustration 2

‘A’ is a software company which develops software for the clients as per their requirement. ‘A’ has a contract with ‘B’ for providing some customized software for its business operations.

‘A’ outsources the task of design and development of a particular module of the software to ‘C’, for which “C’ may have to interact with ‘B’, to know their specific requirements. In this case, ‘C’ is providing main supply of service of design and development of software to ‘A’, and thus, ‘C’ is not an intermediary in this case.

Illustration 3

An insurance company ‘P’, located outside India, requires to process insurance claims of its clients in respect of the insurance service being provided by ‘P’ to the clients. For processing insurance claims, ‘P’ decides to outsource this work to some other firm. For this purpose, he approaches ‘Q’, located in India, for arranging insurance claims processing service from other service providers in India. ‘Q’ contacts ‘R’, who is in business of providing such insurance claims processing service, and arranges supply of insurance claims processing service by ‘R’ to ‘P’. ‘Q’ charges P a commission or service charge of 1% of the contract value of insurance claims processing service provided by ‘R’ to ‘P’. In such a case, main supply of insurance claims processing service is between ‘P’ and ‘R’, while ‘Q’ is merely arranging or facilitating the supply of services between ‘P’ and ‘R’, and not himself providing the main supply of services. Accordingly, in this case, ‘Q’ acts as an intermediary as per definition of sub-section (13) of section 2 of the IGST Act.

Illustration 4

‘A’ is a manufacturer and supplier of computers based in USA and supplies its goods all over the world. As a part of this supply, ‘A’ is also required to provide customer care service to its customers to address their queries and complains related to the said supply of computers. ‘A’ decides to outsource the task of providing customer care services to a BPO firm, ‘B’. ‘B’ provides customer care service to

A. by interacting with the customers of ‘A’ and addressing / processing their queries / complains. ’B’ charges ‘A’ for this service.

B. is involved in supply of main service ‘customer care service’ to ‘A’, and therefore, ”B’ is not an intermediary.

5. The illustrations given in para 4 above are only indicative and not exhaustive. The illustrations are also generic in nature and should not be interpreted to mean that the service categories mentioned therein are inherently either intermediary services or otherwise. Whether or not, a specific service would fall under intermediary services within the meaning of sub-section (13) of section 2 of the IGST Act, would depend upon the facts of the specific case. While examining the facts of the case and the terms of contract, the basic characteristics of intermediary services, as discussed in para 3 above, should be kept in consideration.

6. It is requested that suitable trade notices may be issued to publicize the contents of this Circular.

7. Difficulty, if any, in the implementation of this Circular may be brought to the notice of the Board. Hindi version will follow.

10. A perusal of the aforesaid Circular will indicate that in order to qualify as intermediary services, the following pre-requisites have to be satisfied:

(i) There must be a minimum of three parties;

(ii) There must be two distinct supplies, one being the main supply and other being an ancillary supply of “arranging” or “facilitating” the main supply;

(iii) The intermediary service provider must have the character of an agent, broker or any other similar person;

(iv) Intermediary does not include a person who supplies such goods or services on his own account;

(v) Sub-contracting for a service is not an intermediary service.

11. The aforesaid Circular also includes various illustrations, which are as under:

4. Applying the abovementioned guiding principles, the issue of intermediary services is clarified through the following illustrations:

illustration 1

‘A’ is a manufacturer and supplier of a machine. ‘C’ helps ‘A’ in selling the machine by identifying client ‘B’ who wants to purchase this machine and helps in finalizing the contract of supply of machine by ‘A’ to ‘B’. ‘C’ charges ‘A’ for his services of locating ‘B’ and helping in finalizing the sale of machine between ‘A’ and ‘B’, for which ‘C’ invoices ‘A’ and is paid by ‘A ’ for the same. While ‘A’ and ‘B’ are involved in the main supply of the machinery, ‘C’, is facilitating the supply of machine between ‘A’ and ‘B’. In this arrangement, ‘C’ is providing the ancillary supply of arranging or facilitating the ‘main supply’ of machinery between ‘A’ and ‘B’ and therefore, ‘C’ is an intermediary and is providing intermediary service to ‘A’.

illustration 2

‘A’ is a software company which develops software for the clients as per their requirement. ‘A’ has a contract with ‘B’ for providing some customized software for its business operations. ‘A’ out sources the task of design and development of a particular module of the software to ‘C’, for which “C’ may have to interact with ‘B’, to know their specific requirements. In this case, ‘C’ is providing main supply of service of design and development of software to ‘A’, and thus, ‘C’ is not an intermediary in this case.

illustration 3

An insurance company ‘P’, located outside India, requires to process insurance claims of its clients in respect of the insurance service being provided by ‘P’ to the clients. For processing insurance claims, ‘P’ decides to outsource this work to some other firm. For this purpose, he approaches ‘Q’, located in India, for arranging insurance claims processing service from other service providers in India. ‘Q’ contacts ‘R’, who is in business of providing such insurance claims processing service, and arranges supply of insurance claims processing service by ‘R’ to ‘P’. ‘Q’ charges P a commission or service charge of 1% of the contract value of insurance claims processing service provided by ‘R’ to ‘P’. In such a case, main supply of insurance claims processing service is between ‘P ’ and ‘R’, while ‘Q’ is merely arranging or facilitating the supply of services between ‘P’ and ‘R’, and not himself providing the main supply of services. Accordingly, in this case, ‘Q’ acts as an intermediary as per definition of sub-section (13) of section 2 of the IGST Act.

illustration 4

‘A’ is a manufacturer and supplier of computers based in USA and supplies its goods all over the world. As a part of this supply, ‘A’ is also required to provide customer care service to its customers to address their queries and complains related to the said supply of computers. ‘A’ decides to outsource the task of providing customer care services to a BPO firm, ‘B’. ‘B ’ provides customer care service to ‘A’ by interacting with the customers of ‘A’ and addressing / processing their queries / complains. ’B’ charges ‘A’ for this service. ‘B’ is involved in supply of main service ‘customer care service’ to ‘A’, and therefore, ”B’ is not an intermediary.

12. A perusal of the aforesaid customer services agreements read with the aforesaid Circular is sufficient to come to the conclusion that in the absence of the requirements stipulated in the Circular, the petitioner cannot be construed or treated or considered as an “intermediary” and consequently, the impugned orders and show cause notice deserve to be set aside.

13. A perusal of the customer services agreements clearly indicates that the same expressly restricts the petitioner from acting as an agent and precludes it from entering or negotiating contracts for sale of products; the services provided by the petitioner is on principal-to-principal basis on the petitioner’s own account and the petitioner is not acting in the capacity of an agent or broker coupled with the fact that the agreements specifically provide and stipulate that agency was not being created under the Agreements, thereby leading to the unmistakable / sole conclusion that the necessary ingredients constituting the petitioner as an “intermediary” was clearly not fulfilled in the facts and circumstances of the instant case; in other words, in the absence of any agency relationship between the petitioner and the foreign affiliates or the Amazon consumer entities, the very first / basic / pre-requisite/ pre-condition for the petitioner to be constituted or treated or construed as an “intermediary” and for being an agent acting on behalf of the foreign affiliates would neither be fulfilled nor satisfied and the customer support services provided by the petitioner clearly do not constitute intermediary services and consequently, the said contention of the respondents – revenue cannot be accepted.

14. In the case of Genpact India’s (1) case supra, the Hon’ble Division Bench of the Punjab and Haryana High Court held as under:

3. The 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.

4. It is asserted that aforesaid services are actually deliverables of the petitioner on its “own account”. Such services are provided by the petitioner from India remotely through telecommunication/internet links using its own infrastructure and work force of approximately 50 thousand employees.

5. The petitioner entered into a Master Services Sub-Contracting Agreement dated January 1, 2013 (hereinafter referred to as MSA) with Genpact International Incorporated (GI) an entity located outside India. It is asserted that as per terms of the MSA various services are to be provided by the petitioner on a principal to principal basis. Further the petitioner is engaged by GI for actual performance of BPO services to the clients of GI located outside India. The arrangement requires the petitioner to complete the assigned processes/scope of work directly to the third parties located outside India. Copy of the MSA entered between the petitioner and GI stands annexed as annexure P1 along with the petition.

20. We have heard counsel for the parties at length and have perused the pleadings on record.

21. The primary issue that arises for consideration is as to whether the petitioner would be covered under the expression “intermediary” as defined under the provisions of the IGST Act and consequently the BPO services rendered by the petitioner under the MSA (annexure P1) be treated as “intermediary services” ?

22. For adjudication of such issue it would be necessary to advert to certain relevant statutory provisions :

Integrated Goods and Services tax Act, 2017

S.2. Definitions.—In this Act, unless the context otherwise requires :— (1) to (5). ..

(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 ;.. ..

S.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 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 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 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 for carrying out or coordination of construction work, including that of architects or interior decorators, shall be the place where the immovable property is located or intended to be located.

(5) The place of supply of services supplied by way of admission to, or organisation of a cultural, artistic, sporting, scientific, educational or entertainment event, or a celebration, conference, fair, exhibition or similar events, and of services ancillary to such admission or organisation, shall be the place where the event is actually held.

(6) Where any services referred to in sub-section (3) or sub-section (4) or sub-section (5) is supplied at more than one location, including a location in the taxable territory, its place of supply shall be the location in the taxable territory.

(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 the respective States or Union territories and the value of such supplies specific to each State or Union 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 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 class of such institutions, as the Reserve Bank of India may, with the previous approval of the Central Government and by notification in the Official Gazette, specify.

(9) The place of supply of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of such goods.

(10) The place of supply in respect of passenger transportation services shall be the place where the passenger embarks on the conveyance for a continuous journey.

(11) The place of supply of services provided on board a conveyance during the course of a passenger transport operation, including services intended to be wholly or substantially consumed while on board, shall be the First Scheduled point of departure of that conveyance for the journey.

(12) The place of supply of online information and database access or retrieval services shall be the location of the recipient of services.

Explanation.–For the purposes of this sub-section, person receiving such services shall be deemed to be located in the taxable territory, if any two of the following non-contradictory conditions are satisfied, namely :—

(a) the location of address presented by the recipient of services through internet is in the taxable territory ;

(b) the credit card or debit card or store value card or charge card or smart card or any other card by which the recipient of services settles payment has been issued in the taxable territory ;

(c) the billing address of the recipient of services is in the taxable territory;

(d) the internet protocol address of the device used by the recipient of services is in the taxable territory ;

(e) the bank of the recipient of services in which the account used for payment is maintained is in the taxable territory ;

(f) the country code of the subscriber identity module card used by the recipient of services is of taxable 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.. .. .

S.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.

(c) 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 along with the applicable interest under section 50 of the Central Goods and Services tax Act within thirty days after the expiry of the time limited prescribed under the Foreign Exchange Management Act, 1999 (42 of 1999) for receipt of foreign exchange remittances, in such manner as may be prescribed.

(4) The Government may, on the recommendation of the council, and subject to such conditions, safeguards and procedures, by notification, specify—

(i) a class of persons who may make zero rated supply on payment of integrated tax and claim refund of the tax so paid ;

(ii) a class of goods or services which may be exported on payment of integrated tax and the supplier of such goods or services may claim the refund of tax so paid.”

Central Goods and Services tax Act, 2017

“S. 2. Definitions.—In this Act, unless the context otherwise requires,—

(1) to (4). ..

(5) ‘agent’ means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another ;

(6) to (121). ..

S.54. Refund of tax.—(1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed :

Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49, may claim such refund in [such form and] manner as may be prescribed.

(2) A specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation notified under the United 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 f orm 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 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). . .”

23.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 services is the location of the recipient, except in case of certain specified services. For “intermediary” services, the place of supply is the location of the supplier. section 16(1)(a) inter alia provides that the export of services amount to “zero rated supply”. Section 16(2) provides that credit of input tax may be availed for making zero rated supplies. Section 54 of the CGST Act prescribes the manner in relation to claiming refund by taxpayers, mainly covering the eligibility and prescribed time-lines for filing the refund claim application. A tax payer engaged in export of services without payment of GST is eligible to claim refund of unutilized input-tax credit.

25. We have examined the MSA (annexure P1) in depth and which was imperative to take a view as regards the findings recorded in the impugned order dated February 15, 2021 (annexure P18). In para 16 of the impugned order the recitals of the MSA dated January 7, 2013 (annexure P1) as also certain clauses have been referred to while concluding the petitioner to be an “intermediary”.

29. As per definition of “intermediary” under section 2(13) of the IGST Act the following three conditions must be satisfied for a person to qualify as an “intermediary” ;—

First, the relationship between the parties must be that of a principal-agency relationship. Second, the person must be involved in arrangement or facilitation of provisions of the service provided to the principal by a third party. Third, the person must not actually perform the main service intended to be received by the service recipient itself. 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”.

30. 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 third party to render the main service which has actually been rendered by the petitioner.

37. 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 September 20, 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 Services Rules, 2012 and under section 2(13) of the IGST Act clearly states that there is broadly no change in the scope of “intermediary” services in the GST regime vis-a-vis the service tax regime except addition of supply of securities in the definition of “intermediary” in the GST law.

46. Pursuant to the sub-contracting arrangement as per MSA (annexure P1), the petitioner provides the main service directly to the overseas clients of GI but does not get any remuneration from such clients. Pursuant to the arrangement, it is GI which gets paid by its customers to whom the services are being provided directly by the petitioner. Nothing has been brought on record to show that the petitioner has a direct contract with the customers of GI. Still further there is nothing on record to show that the petitioner is liaisoning or acting as an “intermediary” between GI and its customers. All that is evident 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 sub­contracting. Even as per the afore-noticed circular dated September 20, 2021 and in reference to para 3.5 it stands clarified that sub-contracting for a service is not an “intermediary” service.

15. The aforesaid judgment of the Punjab and Haryana High Court has attained finality as is clear from the subsequent judgment in Genpact(2) supra, wherein the decision of the revenue / Department not to challenge the judgment in Genpact (1) before the Apex Court has been recorded as hereunder:-

‘CM-6621-CWP-2022: Application is allowed and rejoinder to reply filed by the respondents is taken on record.

2. CWP-14151-2021

3. The petitioner is seeking writ of certiorari for quashing and setting aside Demand cum Show cause Notice No. 47/GST/ GGM/2020-21, dated 30-3-2021 (“impugned notice”) (Annexure P-29) issued by Principal Commissioner of GST & CX, Gurugram-respondent No. 1 under Sections 73 of the Finance Act, 1994 (“Act, 1994”) read with Section 174 of Central Goods & Services Tax Act, 2017 (“CGST Act”) requiring the petitioner to explain why the extended period of limitation in terms of proviso to Section 73(1) of the Finance Act, 1994 should not be invoked for recovery of refund of Rs. 2,64,92,41,846/- granted to the petitioner.

4. The impugned notice further requires the petitioner to explain why service tax of Rs. 16,73,74,91,090/- should not be demanded and recovered from the petitioner.

5. On 30-7-2021, when notice of motion was issued, reference was made to CWP-6048-2021 titled as Genpact India (P) Ltd. v. Union of India, (2022) 1 Centax 226 (P & H) : (2023) 68 GSTL 3 (P & H) : (2022) 144 tax-mann.com 201/(2023) 95 GST 46 (Punj. & Har.), decided on 11-11­2022 in which notice had already been issued and was pending for consideration. In that writ petition, the petitioner had challenged order dated 15-2-2021 whereby refund claim of un-utilized Input Tax Credit (ITC) used in making zero rated supplies of services under GST regime had been rejected. The main ground of the petitioner in that writ petition was that refunds had been granted to the petitioner consistently for all financial years starting from 2005-2006 under the service tax regime and, therefore, on the principle of consistency, refunds under the GST regime should also be granted.

6. Learned Counsel for the petitioner had argued that impugned notice has been issued as a counterblast after filing of CWP-6048-2021, for recovery of Rs. 26,34,61,625/- and the said amount should not be demanded from the petitioner.

7. Learned Counsel for the petitioner has stated that the judgment dated 11-11-2022 passed in CWP-6048-2021 fully covers the case of the petitioner as in that case, this Court, vide detailed judgment, held that the petitioner was not “intermediary” and, therefore, the refund claim of unutilized Input Tax Credit (ITC) used in making zero rated supplies of services without payment of IGST was allowed.

8. Learned Counsel for the petitioner has further stated that the respondents have implemented the judgment dated 11-11-2022 passed in CWP-6048-2021 by detailed order and also decided to file SLP in the Hon’ble Supreme Court. Finally refund for an amount of Rs. 21,98,06,002/- for the period April, 2019 to June, 2019 has been sanctioned by the Deputy Director Division East-II, Central Tax GST Gurugram. It is further stated therein that as per the letter dated 8-5-2023 issued by CBIC, the respondents have decided not to file SLP against the judgment dated 11-11-2022 passed in CWP-6048-2021.

9. Hence, this Court is of the view that since the respondents have taken conscious decision not to file SLP against the judgment dated 11-11­2022 passed in CWP-6048-2021, the ratio of Genpact India (P.) Ltd.’s case (supra) is directly applicable in this case.

10. Writ petition is allowed and notice dated 30-3-2021 (Annexure P-29) is set aside.

16. A similar view has been taken by the Delhi High Court in Singtel’s case supra, as under:-

4. The aforesaid decisions arose in the background of SGIPL, which is a company based in India, being engaged in providing global telecommunication and ancillary support services, and it is claimed that part of its services is also exported. It entered into an agreement dated July 14, 2011 with SingTel, which is a licensed telecommunications service provider in Singapore. The aforesaid agreement envisaged SGIPL providing necessary infrastructure in India so as to enable SingTel to facilitate seamless global telecommunication services to its customers based in Singapore and other foreign territories.

5. The plea of the appellant in each of the matters as also canvassed before this court, has been that SGIPL merely procures services from other service providers in India viz., Airtel, Vodafone, Tata, Reliance, etc., and supplies the same to Singtel without any alteration ; and that SGIPL does not provide the aforesaid services of telecommunications “on their own account” and thus fall within the definition of “intermediary services” on a conjoint reading of rule 6A(1)(d) of the Service Tax Rules* read with rule 9(C) of the POPS Rules.

6. Per contra, SGIPL contends that the place of provision of services would be considered as per the location of the recipient of services by virtue of rule 3 of the ST Rules, which is outside India, and that it is not an “intermediary”.

7. In a nutshell, the learned Customs, Excise and Service Tax Appellate Tribunal vide the impugned common order dated December 7, 2022 interpreted the terms and conditions of the agreement dated July 14, 2011 executed between SGIPL and SingTel and in light of relevant statutory rules as well as the decision of this court in the case of Verizon Communications India Ltd. v. Assistant Commissioner of ST, Delhi-III (2018) 8 GSTL 32 (Delhi) besides the decision of the Customs, Excise and Service Tax Appellate Tribunal itself in Black Rock Service India Private Ltd. v. Commissioner of CGST [2023] 111 GSTR 106 (CESTAT-Chand)**, held that there was no scope for doubt that services provided by SGIPL do not qualify as “intermediary services” and the services are provided by it out of its own account to SingTel. Accordingly, SGIPL has been held entitled to claim refund totalling Rs. 13,32,91,031 for the period July, 2015 to June, 2017 towards Cenvat credit.

15. It is pertinent to mention here that vide a communication dated March 16, 2012 by the Department of Revenue (Tax Research Unit), the term “Intermediary” services has been explained as follows :

“3.7.7 What are ‘intermediary services’?

An ‘intermediary’ is a person who arranges or facilitates a supply of goods, or a provision of service, or both, between two persons, without material alteration or further processing. Thus, an ‘intermediary’ is involved with two supplies at any one time :

(i) the supply between the principal and the third party ; and

(ii) the supply of his own service (agency service) to his principal, for which a fee or commission is usually charged.

For the purpose of this rule, an ‘intermediary’ in respect of goods (commission agent i.e a buying or selling agent) is excluded by definition.

In order to determine whether a person is acting as an intermediary or not, the following factors need to be considered :

Nature and value : An ‘intermediary’ cannot alter the nature or value of the service, the supply of which he facilitates on behalf of his principal, although the principal may authorize the ‘intermediary’ to

negotiate a different price. Also, the principal must know the exact value at which the service is supplied (or obtained) on his behalf, and any discounts that the ‘intermediary’ obtains must be passed back to the principal.

Separation of value : The value of an intermediary’s service is invariably identifiable from the main supply of service that he is arranging. It can be based on an agreed percentage of the sale or purchase price. Generally, the amount charged by an agent from his principal is referred to as ‘commission’.

Identity and title : The service provided by the intermediary on behalf of the principal are clearly identifiable. In accordance with the above guiding principles, services provided by the following persons will qualify as ‘intermediary services’:

(i) Travel agent (any mode of travel)

(ii) Tour operator

(iii) Stockbroker

(iv) Commission agent [an agent for buying or selling of goods is excluded

(v) Recovery agent

Even in other cases, wherever a provider of any service acts as an agent for another person, as identified by the guiding principles outlined above, this rule will apply.”

18. On a careful perusal of the terms and conditions of the aforesaid agreement dated July 14, 2011 between SingTel and SGIPL, we find no legal infirmity or irrational approach adopted by the learned Customs, Excise and Service Tax Appellate Tribunal when it comes to conclude that SGIPL is not providing “intermediary services”. The plea that SGIPL is not providing any services on its own account is misplaced. It is manifest that there is no contract between SingTel and service providers in India like Airtel, Vodafone, Reliance etc., and the agreement between SGIPL and SingTel is on principal-to-principal basis. Indeed, SGIPL has entered into separate contracts with the telecom operators in India but on its own account and not as in the nature of a broker or agent for SingTel. The above- referred communication dated March 16, 2012 also supports such a disposition. The agreement envisages that SGIPL has to provide, at its own expenses, all necessary infrastructure in order to provide the services to SingTel and its customers. It further envisages that SGIPL shall raise invoices upon SingTel in US dollars for the services rendered on a monthly basis and on such transfer prices as may be agreed upon from time to time. Clause 19 of the agreement specifically stipulates that the relationship of the parties to the agreement shall always and only be that of independent contractors and nothing in the agreement shall create or be deemed to create a partnership or the relationship of principal and agent or employer and employee between the parties. Incidentally, the appellant has not even alleged that the aforesaid agreement is a camouflage, fraudulent or designed to get over the service tax dragnet.

19. In the end, in so far as the decision in Verizon Communications India Ltd. (supra), the factual narration reads that Verizon India had entered into a master supply agreement with Verizon US for rendering connectivity services for the purpose of data transfer to the end-user based in USA. The issue that came to be was addressed by the Co­ordinate Bench was whether the telecommunication services provided by Verizon India for the period in question amounted to “export of services” within the meaning of rule 6A of the ST Rules. This was answered in the affirmative. It was held that since the recipient of the service Verizon US was outside India, Verizon India rightly treated it as an “export of service” and accordingly it was exempted from the liability of paying service tax. It was pointed out that the “recipient” of services is determined by the contract between the parties and this would depend on who has the contractual right to receive the services and who is responsible for the payment for the services provided to the service recipient ; there was no privity of contract between Verizon India and the customers of Verizon US ; while such customers may be “users” of the services provided by Verizon India but were not its recipients ; even though Verizon India may have been using the services of a local telecom operator but that would not mean that the services to Verizon US were being rendered in India ; and the place of provision of such service to Verizon US remains outside India. It is pertinent to mention that a reference was made to the decision of the apex court in the case of All India Federation of Tax Practitioners v. Union of India [2007] 293 ITR 406 (SC) ; (2007) 7 STR 625 (SC), wherein the nature of service tax was explained and it was observed that (page 411 in 293 ITR) :

“6. At this stage, we may refer to the concept of ‘Value Added Tax’ (VAT), which is a general tax that applies, in principle, to all commercial activities involving production of goods and provision of services. VAT is a consumption tax as it is borne by the consumer.

7. In the light of what is stated above, it is clear that service tax is a VAT which in turn is destination based consumption tax in the sense that it is on commercial activities and is not a charge on the business but on the consumer and it would, logically, be leviable only on services provided within the country. Service tax is a value added tax”.

20. Without further do and applying the same analogy to these matters, we find that the submissions advanced by the learned Standing counsel for the appellant overlooks the fact that the recipient of services is based outside India. At the cost of repetition it may be stated that SGIPL apart from facilitating main service of telecommunication services also provides services of customer care and customer support services to the end consumers based in Singapore and foreign territories registered with SingTel Singapore in matters relating to telecommunication, access, data entry and data retrieval. SingTel has no contract with telecom service providers in India and the end consumers are based in Singapore and other foreign territories covered by SingTel and are independently entitled to demand service from SingTel and pay for the services accordingly to it too.

21. Before parting with the instant appeals, our attention has been drawn to the earlier round of litigation between the parties with regard to refund applications moved by SGIPL under section 11B of the CE Act as made applicable to the service tax vide section 83 of the Finance Act and which had led to a decision by a Co-ordinate Bench of this court in SingTel Global (India) Pvt. Ltd. v. Union of India [2023] 111 GSTR 156 (Delhi) ; (2023) 2 Centax 203 (Delhi)* whereby for the same period, i. e., July, 2015 to June, 2017 after the appeal was allowed by the Commissioner (Appeals) vide order dated July 5, 2019 (subject matter of ST Appeal No. 56682 of 19),. the Assistant Commissioner while processing the claim of SGIPL for refund of input tax for the aforesaid rather questioned the decision of the Commissioner (Appeals) in allowing the claim of the SGIPL for unutilized Cenvat credit inter alia observing that the decision in Verizon Communications India Ltd. (supra) was flawed and there was already an appeal pending against the view expressed therein before the apex court. Suffice it to note that the said action on the part of the Assistant Commissioner in trying to overreach the orders passed by the superior authority was deprecated by our court and inter alia a passing reference was made that the view that SGIPL is a provider of “intermediary services” was not correct and there was no option but for the Revenue to await the outcome of the appeals preferred by them before the learned Customs, Excise and Service Tax Appellate Tribunal. It was simultaneously observed that by that time even the learned Customs, Excise and Service Tax Appellate Tribunal had also dismissed the appeals, presumably vide the impugned order dated December 7, 2022.

17. The Delhi High Court has taken an identical view in Xilinx India’s case supra, as under:-

2. The petitioner is a company incorporated under the Companies Act, 2013. It has its registered office in Hyderabad, Telangana and branch office in New Delhi. The petitioner is a subsidiary of Xilinx Inc., USA, a company registered in the United States of America. The petitioner is an Export Oriented Unit (hereafter ‘EOU’) registered with the Software Technology Parks of India (hereafter ‘STPI’) and is primarily engaged in exporting information technology software services to entities located overseas.

3. The petitioner entered into an Inter company Service Agreement (hereafter ‘the Agreement’) dated 10.06.2016 with its holding company (Xilinx USA) for export of information technology services. In terms of the Agreement, it was agreed that the petitioner would be remunerated on costs plus 15% mark-up basis.

7. The petitioner responded to the said show cause notice clearly explaining that it was an independent company incorporated in India and its supplies to its holding companies were required to be considered as export of services. The petitioner also referred to Circular dated 20.09.2021 (Circular No. 161/17/2021-GST) issued by Central Board of Indirect Taxes & Customs (hereafter ‘CBIC’). The said circular expressly clarifies that supply of services by a subsidiary/sister concern/group concern of a foreign company, which is incorporated in India under the Companies Act, 2013 by the establishments of the said foreign company located outside India would not be barred by condition (v) of Section 2(6) of the IGST Act.

8. The petitioner also set out the relevant paragraphs of the said circular in its response to the Show-cause notice. However, the respondents, without alluding or referring to the said circular, simply rejected the petitioner’s application for refund on the same ground as stated in the show cause notice. The respondents, after referring to the provisions of Section 2(6) of the IGST Act also mentioned that the petitioner was an intermediary in terms of Section 13 of the IGST Act read with Circular dated 18.07.2019.

9. The petitioner is a separate entity and it is settled law that identity of an incorporated company is separate from that of its shareholders. This fundamental proposition was reiterated by the Constitution Bench of the Supreme Court in Bacha F. Guzdar v. Commissioner of Income-Tax, AIR 1955 SC 74.

10. The services rendered by a subsidiary of a foreign company to its holding are not covered under Section 2(6)(v) of the IGST Act and the same is beyond any pale of controversy in view of the Circular dated 20.09.2022 issued by the CBIC. The said circular, in unambiguous terms, clarifies as under:

“5.1. In view of the above, it is clarified that a company incorporated in India and a body corporate incorporated by or under the laws of a country outside India, which is also referred to as foreign company under Companies Act, are separate persons under CGST Act, and thus are separate legal entities. Accordingly, these two separate persons would not be considered as “merely establishments of a distinct person in accordance with Explanation I in section 8”.

5.2. Therefore, supply of services by a subsidiary/sister concern/group concern, etc. of a foreign company, which is incorporated in India under the Companies Act, 2013 (and thus qualifies as a ‘company’ in India as per Companies Act), to the establishments of the said foreign company located outside India (incorporated outside India), would not be barred by the condition (v) of the sub-section (6) of the section 2 of the IGST Act, 2017 for being considered as export of services, as it would not be treated as supply between merely establishments of distinct persons under Explanation I of section 8 of IGST Act 20 I7. Similarly, the supply from a company incorporated in India to its related establishments outside India, which are incorporated under the laws outside India, would not be treated as supply to merely establishments of distinct person under Explanation 1 of section 8 of IGST Act, 2017. Such supplies, therefore, would quality as ‘export of services’, subject to fulfilment of other conditions as provided under sub-section (6) of section 2 of IGST Act.”

11. It is clear from the above that the impugned order has been passed without application of mind and in disregard of the provisions of law. The relevant circular was brought to the notice of the respondents by the petitioner. But respondent no. 1 completely ignored the same and proceeded to pass the order mechanically.

12. Although, it is mentioned that the petitioner is an intermediary but there is no ground whatsoever for holding the said view. The terms of the Agreement are unambiguous. The petitioner has provided services on principal-to-principal basis. The services provided by the petitioner are on its own count and not facilitated by provision of services from any third-party services provider. As stated above, the petitioner is a registered EOU for the services as exported by it.

13. We, accordingly, allow the present petition and direct the respondents to forthwith process the petitioner’s claim for refund along with interest.

14. We also express our displeasure in respect to the cavalier manner in which respondent no. 1 has passed the impugned order without considering the settled law and the Circular dated 20.09.2021 issued by the department despite the same being brought to its notice. Such orders, apart from unnecessarily increasing the burden of tax litigation, have a debilitating effect on the confidence of taxpayers in the tax department.

18. Section 2(13) of the IGST Act defines ‘intermediary’ as under:-

2. Definitions:-

(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;

19. The aforesaid definition makes it clear that the same requires two distinct services i.e., one between the principal and third person and the second between agents / intermediary and principal; it follows therefrom that where a person himself performs the main supply as a sub-contract, he cannot be construed or treated as an ‘intermediary ’ between two parties; this aspect has been clarified at paragraph – 3.5 of the aforesaid Circular which states that the supplier of main service sub-contracts the same to sub­contractors, such sub-contractors providing such main service on their own account cannot be deemed to be arranging or facilitating the main supply between the supplier and customers, as a result of which, such sub-contractors would not qualify as an ‘intermediary’; in the instant case, the main supply of customer support services to be provided by the foreign affiliates is entirely sub-contracted to the petitioner who provides customer support services and accordingly, there is only one main supply which is being supplied and the necessary ingredients of two existence of two distinct supplies is neither satisfied nor fulfilled; as stated supra, that apart from the fact that there is no privity of contract between the petitioner and Amazon consumer entities / selling partners, operating and selling goods to end customers of the Amazon consumer entities, there is also no privity of contract between the petitioner and end customers and as such, the contentions urged on behalf of the respondents cannot be accepted on this ground also.

20. In Black Berry India’s case supra, the Hon’ble Division Bench of the Delhi High Court held as under:-

12. The principal controversy required to be addressed by the learned CESTAT was whether Blackberry India is an intermediary within the definition of rule 2(f) of the Place of Provision of Services Rules, 2012. Thus, in terms of rule 9 of the Place of Provision of Services Rules, 2012, even though the service recipient (Blackberry Singapore) was located outside India, the place of provision of services would be where the service provider is located-India.

13. The second question to be considered by the learned CESTAT was whether the services rendered by Blackberry India were covered within the scope of export of services under rule 3 of the Export of Services Rules, 2005.

14. The learned CESTAT accepted the contention that Blackberry India was neither an agent nor was involved in the arrangement or facilitation of supply of services in question. Accordingly, the learned CESTAT held that Blackberry India was not an intermediary within the meaning of rule 2(f) of the Place of Provision of Services Rules, 2012.

15. In so far as, the period prior to July 1, 2012 is concerned, the learned CESTAT did not accept the finding of the adjudicating authority that services covered under section 65(105)(zzb) of the Act were excluded from the scope of Export of Taxable Services under rule 3(1) of the Export of Services Rules, 2005.

16. The Revenue has preferred the present appeal projecting the following question for consideration of this court:

“(a) Whether the services provided by the respondent to RIM Singapore constitute intermediary service ?

(b) Whether the respondent is eligible for refund of service tax on services provided by it to RIM Singapore ?”

17. It is relevant to note that the Revenue does not dispute that the services rendered by the Blackberry India were covered under the Agreement entered into between Blackberry India and Blackberry Singapore.

18. In terms of the engagement under the agreement, Blackberry India had agreed to provide services in a timely and professional manner. Further, it had also agreed to acquire facilities, equipment and staff to effectively do so. The services to be provided by Blackberry India to Blackberry Singapore under the agreement, as set out in Schedule A to the agreement, are described as “promotional and marketing; technical marketing assistance; and other related services”.

19. The learned CESTAT had examined the agreement and had concluded as under (pages 201 and 202 in 124 GSTR):

“30. It would, therefore, transpire from the agreement that:

(i) The appellant is engaged in providing marketing, administrative and support service to Blackberry Singapore, as an independent contractor;

(ii) The appellant is not an agent or broker of Blackberry Singapore. There is no relationship of principal and agent between Blackberry Singapore and the appellant. The arrangement between the appellant and Blackberry Singapore is on a principal-to-principal basis. Further, the appellant does not have any authority to represent or bind Blackberry Singapore, which further supports the fact that the appellant is not an agent of Blackberry Singapore and, therefore, is not an intermediary;

(iii) The appellant is not engaged in facilitating any supply between Blackberry Singapore and its customers. The agreement is only between the appellant and Blackberry Singapore wherein the appellant is providing the aforesaid services to Blackberry Singapore. The customers of Blackberry Singapore are not a part of the contract and the appellant at no point in time is involved in providing any service to the customers of Blackberry Singapore. The appellant does not even have any knowledge about the final customers of Blackberry Singapore;

(iv) The appellant receives consideration on a cost-plus basis. The consideration is not dependent on the sale made by the Blackberry Singapore to their customers; and

(v) The appellant raises invoices on Blackberry Singapore for the services provided by it in US dollars and Blackberry Singapore has to make the payment within 45 days of the date of such monthly invoices.”

20. We find no infirmity with the aforesaid conclusions.

21. The term “intermediary” is defined under rule 2(f) of the Place of Provision of Services Rules, 2012 as under:

“2(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;”

22. It is apparent from the aforesaid definition that an intermediary merely arranges or facilitates provision of services. In the present case, the services rendered by BlackBerry India to BlackBerry Singapore under the Agreement, were not in the nature of facilitating services from another supplier. Blackberry India, as an independent service provider, was required to render the promotional and marketing services; technical marketing assistance; and other related services. Blackberry India did not arrange or facilitate these services from another supplier.

23. It is also relevant to refer to the circular dated September 20, 2021 issued by the Central Board of Indirect Taxes and Customs. Although the said circular has been issued in the context of the Goods and Services Tax, it notes that the concept of intermediary, as defined under section 2(13) of the Integrated Goods and Services Tax Act, 2017, was borrowed from rule 2(f) of the Place of Provision of Services Rules, 2012 and explains the said concept. The relevant extract of the said circular is 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’ was borrowed in GST from the Service Tax Regime. The definition of ‘intermediary’ in the Service Tax law as given in rule 2(f) of the Place of Provision of Services Rules, 2012 issued vide Notification No. 28/2012-S.T., dated June 20, 2012 was as follows:

‘“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. ’

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 principals, which can be a supply of services or securities:

(2) Ancillary supply, which is the service of facilitating or arranging the main supply between the two principals. This ancillary supply is supply of intermediary service and is clearly identifiable and distinguished from the main supply.

A person involved in supply of main supply on principal to principal basis to another person cannot be considered as supplier of intermediary service.

3.3. Intermediary service provider to have the character of an agent, broker or any other similar person : The definition of ‘intermediary’ itself provides that intermediary service providers-means a broker, an agent or any other person, by whatever name called… This part of the definition is not inclusive but uses the 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…”

24. It is clear from the aforesaid circular that Blackberry India cannot be considered as an intermediary in the context of the services rendered by it under the agreement.

25. This court had also considered a similar question albeit in the context of refund of input-tax credit under the Integrated Goods and Services Tax Act, 2017 in Ernst and Young Limited v. Additional Commissioner, CGST Appeals-II, Delhi : W.P. (C) No. 8600 of 2022, decided on March 23, 2023 [(2023) 113 GSTR 252 (Delhi).] and Ohmi Industries Asia Private Ltd. v. Assistant Commissioner, CGST : W.P. (C) No. 6838 of 2022, decided on March 29, 2023 [(2023) 116 GSTR 319 (Delhi).] . In our view, the said decisions are squarely covering the controversy sought to be raised by the Revenue in this appeal.

26. The conclusion of the adjudicating authority that the services covered under section 165(105)(zzb) of the Act were excluded from the scope of Export of Taxable Services under rule 3(1) of the Export of Services Rules, 2005 is, plainly, erroneous. The learned CESTAT has rightly concluded that all services except those specifically mentioned in rule 3(1) of the Export of Services Rules, 2005 are covered within the scope of export of taxable services. The adjudicating authority had clearly misread the said rule.

27. In view of the above, we find that the present petition does not raise any substantial question of law.

28. The present appeal is, accordingly, dismissed. The pending applications are also disposed of.

21. As already stated earlier, in Genpact-1’s case supra, the Punjab and Haryana High Court found that the assessee therein did not get any remuneration from the customers of its foreign affiliates and held that the assessee was providing main service which was sub-contracted to it by the foreign affiliates and that it was receiving its fee from the main contractor i.e., foreign affiliate for its services and consequently, the assessee was not an ‘intermediary’ in terms of paragraph 3.5 of the aforesaid Circular and on this score also, the contentions of the respondents cannot be accepted.

22. It is pertinent to note that in order to constitute an ‘intermediary’, it is imperative that the nature of the second service from the agent to the principal ought to be that of arranging or facilitating the service between principal and third person and the activity undertaken by the intermediary should satisfy the natural meaning of the terms “arranging” or “facilitating”, the provision of another person’s service, especially when performance of the very service cannot be construed or treated to fall within the scope of the phrase “arrange” or “facilitate” the same service; paragraph 3.3 of the Circular provides that the use of the expression “arranges” or “facilitates” in the definition of ‘intermediary ’ suggests a subsidiary role for the intermediary, wherein it must arrange or facilitate some other supply and the person does not himself provide the main supply by clarifying that the role of a ‘intermediary’ is only supportive; in the instant case, the material on record clearly establishes that the petitioner cannot be said to be facilitating or arranging supply of services, since the meaning of “facilitation / arrangement” cannot be extended to cover the subject agreements, where the petitioner himself undertook to perform / execute the main service, particularly when the “main service” allegedly being facilitated separately / independently by the petitioner has not been identified by the respondents whose contention cannot be accepted on this ground also.

23. As stated supra, the petitioner is engaged in addressing the queries of customers of Amazon consumer entities / selling partners on their own account, which falls outside the scope and ambit of intermediary services as explained in illustration No.4 to the aforesaid Circular; in the case on hand, the material on record clearly indicates that the petitioner does not engage in marketing products or procuring orders for sale and is in fact, expressly / explicitly barred from entering into or negotiating any contracts for sale of produces or services in terms of the aforesaid agreements; further, the petitioner neither identifies customers for foreign affiliates / marketplace entities / selling partners nor does the petitioner perform any activity which results in arranging or enabling the supply of goods or services between these entities and their end customers and consequently, viewed from this angle also, the contentions of the respondents cannot be accepted.

24. As stated supra, the petitioner provides main service on its own account and does not qualify as an ‘intermediary’ within the meaning of Section 2(13) of the IGST Act as borne out from the material on record which clearly establishes that customer support services are provided by the petitioner independently and unconnected to the services provided by the foreign affiliates to its customers on a principal–to–principal basis and thus, do not qualify as intermediary services. In the case of Ernst & Young Ltd., supra, the Delhi High Court held as under:-

5. Prior to the enactment of the Act, the petitioner was registered with the Central Excise Department as a separate tax entity, for providing services of “management or business consultant service, rent a cab scheme operator service, manpower recruitment/supply agency service, legal consultancy service”, for the purposes of service tax.

6. E&Y Limited has entered into service agreements for providing professional consultancy service to various entities of Ernst & Young group (hereafter “EY entities”) including Ernst & Young US LLP (hereafter “EY US”), Ernst & Young Service Pty Ltd. Australia (hereafter “EY Australia)”, Ernst & Young Group Ltd. New Zealand (hereafter “EY NZ”) and Ernst & Young LLP, UK (hereafter “EY UK”) on arm’s length basis.

7. In terms of the aforementioned service agreements, the overseas entities had retained E&Y Limited, acting through its Indian branch (the petitioner herein) to provide certain professional services (the services). It is material to note that the petitioner had placed on record the agreements dated 29-9-2009 entered into between E&Y Limited and EY US; agreement dated 25-10-2010 between E&Y Limited and EY Australia; agreement dated 15-1-2018 entered into between E&Y Limited and EY NZ; agreement dated 20-12-2012 E&Y Limited and EY UK; and agreement dated 25-9-2018 between E&Y Limited and EY US.

19. The term “intermediary” is defined under Section 2(13) of the IGST Act.

“‘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;”

20. A plain reading of the aforesaid definition makes it amply clear that an intermediary merely “arranges or facilitates” supply of goods or services or both between two or more persons. Thus, it is obvious that a person who supplies the goods or services is not an intermediary. The services provided by the intermediary only relate to arranging or facilitating the supply of goods or services from the supplier. In the present case, there is no dispute that the petitioner does not arrange or facilitate services to EY entities from third parties; it renders services to them. The petitioner had not arranged the said supply from any third party.

21. It is important to note that the adjudicating authority had also accepted that the petitioner has provided the services. As noted hereinbefore, the adjudicating authority had returned a categorical finding that “the party provides services on behalf of E&Y Ltd., UK in India to its (E & Y Ltd., UK) overseas client”. The adjudicating authority had reasoned that since the petitioner provides services on behalf of E&Y Limited (the petitioner’s head office), it was an intermediary. This reasoning is fundamentally flawed. The adjudicating authority has misunderstood the expression “intermediary” as defined under Section 2(13) of the IGST Act. A person who provides services, as opposed to arranging or facilitating of goods from another supplier, is not an intermediary within the definition of Section 2(13) of the IGST Act.

22. In the present case, the petitioner has provided professional services in terms of the service agreements to overseas entities (EY entities). It had issued the invoices for the said services directly to EY entities and had received the invoiced consideration from EY entities, in foreign convertible exchange. As stated hereinbefore, there is no dispute that the professional services were, in fact, rendered by the petitioner. The adjudicating authority has proceeded on the basis that since the service agreements were between EY entities and the petitioner’s head office (E&Y Limited), the petitioner has rendered services on behalf of its head office (E&Y Limited). It reasoned that since the professional services were rendered on behalf of its head office, the same were not on the petitioner’s “own account”; therefore, the petitioner is an intermediary.

23. It is apparent that the adjudicating authority has interpreted the last limb of the definition of “intermediary” under Section 2(13) of the IGST Act as controlling the definition of the term. We are unable to agree with this interpretation. The limb of Section 2(13) of the IGST Act reads as “but does not include a person who supplies such goods or services or both or securities on his own account” but this does not control the definition of the term “intermediary”; it merely restricts the main definition.

The opening lines of Section 2(13) of the IGST Act expressly provides that an intermediary means a broker, agent or any other person who “arranges or facilitates supply of goods or services or both or securities between two or more persons”. The last line of the definition merely clarifies that the definition is not to be read in an expansive manner and would not include a person who supplies goods, services or securities on his own account. There may be services, which may entail outsourcing some constituent part to a third party. But that would not be construed as intermediary services, if the service provider provides services to the recipient on his own account as opposed to merely putting the third party directly in touch with the service recipient and arranging for the supply of goods or services.

24. Thus, even if it is accepted that the petitioner has rendered services on behalf of a third party, the same would not result in the petitioner falling within the definition of “intermediary” under Section 2(13) of the IGST Act as it is the actual supplier of the professional services and has not arranged or facilitated the supply from any third party.

25. The assumption that the petitioner has acted as a buying and selling agent, is without any basis. The adjudicating authority had referred to the letter dated 4-4-2008 issued by RBI permitting E&Y Limited to open a branch office in India (that is establishing the petitioner) and further clarifying the activities that a branch office could carry on. The same included export-import of goods; rendering professional or consultancy services, carrying out research work in which the parent company is engaged, promoting technical or financial collaboration between Indian companies and parent or overseas group companies and representing the parent company in India and acting as a buying or selling agent in India. However, merely because one of the activities that could be carried on by the petitioner is to act as buying/selling agent in India does not mean that the petitioner had carried on such activities and the invoices raised were for services as a buying/selling agent. As noted above, in the facts of the present case, there is no dispute that the petitioner had, in fact, rendered professional and consultancy services, which is also one of the permissible activities.

It is also relevant to refer to clause (f) of Rule 2 of the Place of Provision of Services Rules, 2012. The said clause defines “intermediary” as under:

“(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;”

27. It is at once apparent that the definition of the term “intermediary” for the purposes of levy of service tax under the Finance Act, 1994 is similar to the definition of the term “intermediary” under Section 2(13) of the IGST Act.

28. The Circular dated 20-9-2021 (Circular No. 159-15-2021-GST) issued by the Central Board of Indirect Taxes and Customs also acknowledges that there is broadly no change in the scope of intermediary services in the GST regime vis-à-vis the service tax regime. The relevant extract of the said circular is 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 ‘the 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’ was borrowed in GST from the service tax regime. The definition of ‘intermediary’ in the service tax law as given in Rule 2(f) of the Place of Provision of Services Rules, 2012 issued vide Notification No. 28 of 2012-S.T., dated 20-6-2012 was as follows:

‘“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. ’

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 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 between the two principals. This ancillary supply is supply of intermediary service and is clearly identifiable and distinguished from the main supply.

A person involved in supply of main supply on principal-to-principal basis to another person cannot be considered as supplier of intermediary service.

3.3. Intermediary service provider to have the character of an agent, broker or any other similar person.—The definition of ‘intermediary ’ itself provides that intermediary service providers-means a broker, an agent or any other person, by whatever name called…. This part of the definition is not inclusive but uses the 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….”

30. It is also relevant to refer to Section 2(6) of the IGST Act, which defines the expression “export of services”. Section 2(6) of the IGST Act is set out below:

“‘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 establishment of a distinct person in accordance with Explanation 1 in Section 8;”

31. Section 13 of the IGST Act contains provisions for determining the place of services where the location of supplier or location of the recipient is outside India. Thus, the question whether the supply of service by the petitioner is outside India is required to be determined with reference to Section 13 of the IGST Act.

32. In terms of Section 13(2) of the IGST Act, the place of supply of services except the services specified in sub-sections (3) to (13) is the location of the recipient of the services. In the present case, there is no dispute that the provisions of sub-sections (3) to (13) except sub-section (8) of Section 13 are not attracted. The relevant extract of Section 13 of the IGST Act is set out below:

“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 sub­sections (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….

(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; and

(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 45-A 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 class of such institutions, as the Reserve Bank of India may, with the previous approval of the Central Government and by notification in the Official Gazette, specify.”

33. In terms of sub-section (8) of Section 13 of the IGST Act, the place of supply of certain services would be the location of the supplier of the services. In terms of clause (b) of sub-section (8) of Section 13 of the IGST Act, the place of supply of intermediary services is the location of the supplier of services. In the present case, the place of supply of services has been held to be in India on the basis that the petitioner is providing intermediary services. As discussed above, the services rendered by the petitioner are not as an intermediary and therefore, the place of supply of the services rendered by the petitioner to overseas entities is required to be determined on basis of the location of the recipient of the services. Since the recipient of the services is outside India, the professional services rendered by the petitioner would fall within the scope of definition of “export of services” as defined under Section 2(6) of the IGST Act.

34. 33. There is no dispute that the recipient of services—that is EY entities— are located outside India. Thus, indisputably, the services provided by the petitioner would fall within the scope of the definition of the term “export of service” under Section 2(6) of the IGST Act.

25. The said judgment was followed by the Delhi High Court in Ohmi Industries Asia’s case supra as under:-

15. The term intermediary is defined under Section 2(13) of the IGST Act as under:

“2(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.”

16. It is also apparent form the plain language of Section 2(13) of the IGST that intermediary is one that arranges or facilitates supply of goods and services. In the present case, there is no dispute that the petitioner had rendered market research services on its own; there is no allegation that it had arranged supply of such services from a third party.

17. It is also relevant to refer to the Circular dated 20-9-2021 (Circular No. 159-15-2021-GST) issued by the Central Board of Indirect Taxes. The said circular makes it clear that the concept of intermediary services contemplates minimum of three parties. The said circular explains as under:

“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.”

26. So also, in M/s Cube Highways case supra, the Delhi High Court held as under:-

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 20-9­2021 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’ was borrowed in GST from the service tax regime. The definition of ‘intermediary’ in the service tax law as given in Rule 2(f) of the place of provision of Service Rules, 2012 issued vide Notification No. 28 of 2012-ST, dated 20-6-2012 was as follows:

‘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 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 principals, which can be a supply of services or securities.

(2) Ancillary supply, which is the service of facilitating or arranging the main supply between the two principals. This ancillary supply is supply of intermediary service and is clearly identifiable and distinguished from the main supply. A person involved in supply of main supply on principal to principal basis to another person cannot be considered as supplier of intermediary service.

3.3. Intermediary service provider to have the character of an agent, broker or any other similar person: The definition of ‘intermediary’ itself provides that intermediary service providers—means a broker, an agent or any other person, by whatever name called… This part of the definition is not inclusive but uses the 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.”

42. 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 or arranging the said supply. Where a party renders advisory or consultancy services on its own account and does not merely arrange it from another supplier or facilitate such supply, there are only two entities, namely, service provider and the service recipient. In such a case, rendering of consultancy services cannot be considered as “intermediary services” or services as an “intermediary”.

44. Undisputedly, this question is also squarely covered by an earlier decisions of this Court in Ernst & Young Ltd. v. Commr. (CGST) [Ernst & Young Ltd. v. Commr. (CGST), (2023) 113 GSTR 252 : 2023 SCC OnLine Del 1764) and in Ohmi Industries Asia (P) Ltd. v. Commr. (CGST) [Ohmi Industries Asia (P) Ltd. v. Commr. (CGST), (2023) 5 HCC (Del) 46 : (2023) 116 GSTR 319).

46. As noticed above, the definition of “intermediary” under Rule 2(f) of the Place of Provision of Service Rules, 2012 is similar to the definition of “intermediary” 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 1-7-2017.

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 the respective States or Union Territories and the value of such supplies specific to each State or Union 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.”

52. Sub-section (3)(b) of Section 13 of the IGST Act is equally inapplicable. First of all, it relates to services which are supplied to an individual and which require physical presence of the recipient (or a person acting on his 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 situation where the modeling agency is the receiver of the service, but the service is rendered to the models, who are receiving the beauty treatment service on behalf of the modeling agency. Hence, notwithstanding that the modeling agency does not qualify as the individual receiver in whose presence the service is rendered, the nature of the service is such 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 authorities concerned (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 explained that its overseas group company (I Squared) is not bound by its advices and takes its own decision at its discretion as expressly stated in the agreement.

54. The petitioner had also provided invoices which indicated that it was charging “market services and advisory fee”.

55. In view of the above, the orders impugned in the present petitions are liable to be set aside.

56. Mr Ramachandran had filed written submissions, inter alia, praying that the matter be remanded for re-adjudication in the light of the decision in Ernst & Young Ltd. v. Commr. (CGST) [Ernst & Young Ltd. v. Commr. (CGST), (2023) 113 GSTR 252 : 2023 SCC OnLine Del 1764) by, inter alia, praying as under:

“In view of the foregoing facts and circumstances, it is respectfully prayed that this Court be pleased to remand the matter for re-adjudication in the light of the decision of this Court in Ernst & Young Ltd. v. Commr. (CGST) [Ernst & Young Ltd. v. Commr. (CGST), (2023) 113 GSTR 252 : 2023 SCC OnLine Del 1764) 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 authorities concerned 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 BSNL v. Union of India [BSNL v. Union of India, (2023) 4 HCC (Del) 394 : (2023) 115 GSTR 47) and in GAP International Sourcing (India) (P) Ltd. v. Commr. (CGST) [GAP International Sourcing (India) (P) Ltd. v. Commr. (CGST), (2023) 117 GSTR 107 : 2023 SCC OnLine Del 8443) relied upon by the Revenue in support of the aforesaid prayer are inapplicable in the facts of the present case. In BSNL v. Union of India [BSNL v. Union of India, (2023) 4 HCC (Del) 394 : (2023) 115 GSTR 47) , the petitioner’s claim for refund was rejected on the ground of limitation and not on merits. Thus, it was essential that the adjudicating authority consider the merits of the claim in the first instance. In GAP International Sourcing (India) (P) Ltd. v. Commr. (CGST) [GAP International Sourcing (India) (P) Ltd. v. Commr. (CGST), (2023) 117 GSTR 107 : 2023 SCC OnLine Del 8443) , this Court had noted that there was a serious controversy as to the exact nature of the services rendered by the petitioner. Thus, it was apposite to remand the matter for readjudication.

27. Similarly in Boks Business’s case supra, the Delhi High Court held as under:-

Undisputedly, the petitioner has rendered services to its foreign affiliate, Boks Business Services Limited, in terms of the agreement dated 12.05.2017. The recitals and clauses 1, 2 and 5 are relevant. The same are set out below:

“This Agreement is made on this 12 day of May, 2017 between. M/s. BOKS BUSINESS SERVICES LIMITED incorporated in England and Wales with company identification number 10551877 under the Laws of the United Kingdom and having its registered office at 3 Acorn Business Centre, Northarbour Road, Coshant, Portsmouth, United Kingdom, P06 3^TH represented by its duly authorised signatory Mr. Stuart Burns hereinafter referred to as ‘the Foreign Company’ of the One Part

and

M/s. BOKS BUSINESS SERVICES PRIVATE LIMITED a Company registered under the Indian Companies Act, 2013, and having its registered office at 204, Corporate Towers, 85A, Zamrudpur, Greater Kailash New Delhi-110048 represented by Mr. Rantesh Dhar s/o Mr. Moti Lal Dhar resident of F-123, sector -41, Noida -201301 hereinafter referred to as: ‘Indian Company’ of the Other Part.

Whereas the Foreign Company is carrying on the business of providing outsourcing services of a technical nature to its various clients located across the globe.

xxxx xxxxx xxxx

1. That the foreign Company shall engage the Indian company for executing Bookkeeping, Payroll, and accounts, through the use of cloud techno logy for our UK/Europian based clients.

2. That the Indian company shall devote whole time for the work assigned by the foreign company and shall maintain all work-related ethics. It is expected that work will be accomplished efficiently and intelligently.

XXXX XXXX XXXX

5. That the foreign company shall pay a monthly fee for the services rendered by the Indian company as follows:—

a. GBP 3250/- (Fixed) to be paid every month till the period of engagement.

b. GBP 500/- per Workstation engaged by the Indian company for completion the work assigned.

c. The above fees is subject to review and change with mutual consent from time to time.”

10. It is clear from the aforesaid terms, that the petitioner is not an inteimediaiy, inasmuch, as the petitioner is neither facilitating the provision of services by a third entity nor acting as a middleman for procuring such services for its affiliate. The petitioner is, in fact, contracted to provide the services, and is the principal service provider in the context of the services provided by it – book keeping, payrolls, and accounts through the use of cloud technology.

11. In case of intermediary services, there are three entities – one providing the principal service, one receiving the principal service, and an intermediary who acts as an agent or a broker for facilitating or arranging such services for the service recipient.

12. In the present case, although the agreement does use the word ‘agent’ but is clear that the petitioner is not acting as an agent for procurement of services for the service recipient. It is, in fact, providing the principal service of “Bookkeeping, Payroll, and accounts, through the use of cloud technology”. The fact that such services may be for the clients of the petitioner’s affiliate, Boks Business Services Limited, does not make the petitioner an “intermediary”.

28. The aforesaid judgments were followed under identical circumstances by this Court in the case of M/s.Nokia Solutions and Networks India Pvt. Ltd., vs. The Principal Commissioner of Central Tax & Anr. – W.P.No.14827/2022 dated 22.08.2024, held as under:-

(xi) A perusal of the aforesaid facts and circumstances comprising of the material on record and the principles enunciated in the aforementioned judgments and the Circular dated 18.11.2019 is sufficient to come to the conclusion that respondents 2 and 5 clearly fell in error in setting aside the refund sanction order passed by the 3^rd respondent and rejecting the refund claim of the petitioner and making a demand from him by passing the impugned orders which are illegal, arbitrary and without jurisdiction or authority of law and the same deserve to be set aside.

(xii) The respondents 2 and 5 have come to the conclusion that the services provided by the petitioner are in the nature of ‘intermediary services’as contemplated in Section 2(13) of the IGST Act and the place of supply of such intermediary services by the petitioner shall be location of the supplier of services i.e., the petitioner which is located in India and consequently, the refund claim of the petitioner was liable to be rejected. In this context, respondents 2 and 5 failed to appreciate that the material on record clearly establish that the services provided by the petitioner was on principal–to–principal basis and did not involve any 3^rd party and there was no principal / agency relationship between the petitioner and the overseas entity.

(xiii) A perusal of the agreements entered into between the petitioner and the overseas entity will indicate that services provided by the petitioner cannot be construed or treated as intermediary services as is evident from the relevant covenants/clauses of the Agreement, which reads as under-

BACKGROUND

WHEREAS, Recipient is the operational headquarter of Networks business within Nokia Group as well as the business principal, responsible for developing, improving, maintaining. protecting and funding of portfolio of the intellectual assets related to Networks Network business;

WHEREAS, Provider is the wholly owned subsidiary of Nokia Solutions and Networks BV. Netherlands and engaged in Networks business in India. Provider is also providing software development support services (hereinafter referred to as the “Services”) to the Recipient from the Technology Centre located in Bangalore, Karnataka (India) and is willing to provide the Services to Recipient on continuous basis pursuant to the terms of this Agreement;

WHEREAS, Provider has recently entered into a unilateral Advanced Pricing Agreement (“APA”) with the Central Board of Direct Taxes, India (“CBDT”) on March 28, 2016 and has agreed on the arm’s length price of the Services provided to Recipient. The terms and conditions of the APA are binding on the Provider and are effective from April 1, 2009 through March 31, 2018 in respect of the covered transaction involving provision of the Services to Recipient;

WHEREAS, as of April 1, 2007, Parties had entered into Research and Development Subcontracting Agreement relating to the provision Services (the “Original Agreement”) subsequently revised w.e.f. 1 April 2008 till December 2010 and further extended w.e.f. 1 January 2011; WHEREAS, pursuant to APA entered between Provider and CBDT, Parties are desirous of giving effect to the terms of the APA and accordingly, intend to amend and restate the Original Agreement to read as set forth herein with effect from April 1, 2009.

NOW, THEREFORE, based on the above premises and in consideration of the mutual covenants and agreements contained herein, Parties agree as follows:

TERMS AND CONDITIONS OF THE AGREEMENT

1. SCOPE OF SERVICES

1.1. All the work performed by the Provider for Recipient shall be governed by this Agreement. Further, details and special provisions may be set forth in specific Project Agreement(s). which may be drawn up in respect of individual software development projects between the Parties. Project Agreements will normally concentrate on software development process. targets and management. Where no separate Project Agreements exists, the terms of this Agreement is applied on the Services provided by the Provider together with the global management product and customer process procedures of Recipient.

1.2. In the event of a conflict between this Agreement and individual Project Agreements, this Agreement shall prevail.

1.3. Provider shall use reasonable skill and care, and carry out all work under this Agreement and individual Project Agreements expeditiously.

1.4. Provider shall make available any such reports to Recipient of the Services as specified in the Project Agreements and otherwise in accordance with the planning and reporting procedures laid down by Recipient and its R&D function management or, if not specified therein, as Recipient may from time to time request as its sole discretion.

1.5. ROLES AND RESPONSIBILITIES OF THE PARTIES

1.5.1. Recipient shall be responsible for conceptualising and determining the characteristics/ functionalities of the software/software module to be developed by the Provider.

1.5.2. Recipient shall provide the software module specifications, project/ product specifications for the software to be developed/ tested by the Provider. On a need basis, the Provider will provide its inputs in the requirement analysis phase of the software development process. Recipient shall be fully responsible for the specifications and the requirements of the software to be developed/tested by the Provider.

Services performed by the Provider will be based on the statement/ schedule of work issued by Recipient.

1.5.3. Provider shall undertake the coding and documentation function with respect to the software modules that it will develop. Coding shall primarily consist of writing and documenting the software module being developed.

1.5.4. Provider shall be fully responsible for the project management activities and fully control and supervise the entire process in relation to the end deliverable of the software module(s) being developed/tested by it and shall provide regular update to the Recipient for it to analyse the progress of the project against the project plan. Recipient shall not have any rights to access the facilities of the Provider, unless specifically authorised by the Provider.

1.5.5. Provider shall be responsible to undertake all quality control procedures with respect to the software modules developed/tested by it, in accordance with the standard guidelines provided by Recipient on the quality control procedures to be adopted for the rendition of the Services. 1.5.6. Provider shall perform unit testing’ on the software modules developed by it and shall prepare test reports. After testing each individual module, all the tested modules will be sent to Recipient for integration and validation. Recipient shall, then, carry out system testing and various other tests in a specially designed testing environment. 1.6.CONTROL AND THE PROJECT MANAGEMENT

1.6.1. Recipient’s standard processes/ practices for provision of services covered within the scope of this Agreement shall be applied by the Provider for the purpose of the work done under the scope of this Agreement.

1.6.2. Recipient has decide on the R&D projects, their start and termination. The Provider shall assist the Recipient in making these decisions.

1.6.3. Provider shall undertake project management activities and control/ supervise the entire process in relation to the development/ testing of the software module(s) and shall provide regular update to the Recipient for it to analyse the progress of the project against the project plan.

1.6.4. Provider shall promptly report to Recipient if it appears that any change in the project scope, timelines and costs, is desirable, or if it appears that the work will not meet the project schedule or total cost of the project, or of any relevant phase. Any modifications to the project scope, project schedule or payments have to be accepted by both parties in writing.

1.7. PROPRIETARY RIGHTS

1.7.1. Recipient shall become the sole owner of all results of the Services provided by the Provider. All documents, drawings, models or any other materials, in whatever form, which have been provided to the Provider by Recipient or which the Provider creates, produces, builds, or has created, produced or built in the course of any work under this Agreement including all intellectual property rights therein shall rest in and remain Recipient’s property and Recipient is entitled to take possession of them, at any time.

1.7.2. Recipient shall be entitled to take possession of the materials referred to in Clause 1.5. It is expressly understood that the Provider shall use such documents, drawings, models or any other materials only for the purpose of providing the Services under this Agreement and for no other purpose whatsoever and that such materials are subject to confidentiality as set out in Clause 12.

1.7.3. No license to the Provider under any trademark, patent, copyright or any other intellectual property right is either granted or implied by the conveying of any documents, drawings, models or any other materials in whatever form to the Provider (in respect of any rights of Recipient) save for the purpose of carrying out the Services under this Agreement.

1.6 CONSIDERATION, INVOICING AND PAYMENT TERMS

2.1. CONSIDERATION

2.1.1. In consideration for the performance of the Services by the Provider under this Agreement, the Recipient shall pay service fee (“Service Fee”) to the Provider as follows, unless otherwise agreed in writing by the Parties.

2.1.2. Service Fee shall be calculated as the Costs incurred by the Provider in the provision of the Services plus a Service Mark-up as defined below. The total Consideration shall be calculated as follows:

Consideration = Costs x (1 + Service Mark-up); where

Costs include 

• • • Operating expenses incurred by the Provider in connection with provision of Services under this Agreement including depreciation and amortisation expenses relating to the assets used in the provision of the Services. Cost will also include any foreign exchange loss, either directly identifiable or reasonably allocable towards the Services under this Agreement. For the removal of doubt, it is clarified that in case of foreign exchange gain (either directly identifiable or reasonably allocable towards the Services), the same shall be reduced from the Service Fee for the purpose of invoicing to the Recipient.
    • In addition, where any stock based compensation plan has been extended to the employees of the Provider engaged in the provision of the Services by the ultimate parent entity of Nokia Group or the Recipient or any other Nokia Group entities responsible for such stock based compensation plan, Provider will include the annual estimate cost/expense related to such stock based compensation plan in the cost base for purpose of applying Service Mark-up and billing to the Recipient, unless and until such provision (or estimate thereof) is already included in the operating expenses of the Provider.

• • Operating expenses incurred by the Provider in connection with provision of Services under this Agreement including depreciation and amortisation expenses relating to the assets used in the provision of the Services. Cost will also include any foreign exchange loss, either directly identifiable or reasonably allocable towards the Services under this Agreement. For the removal of doubt, it is clarified that in case of foreign exchange gain (either directly identifiable or reasonably allocable towards the Services), the same shall be reduced from the Service Fee for the purpose of invoicing to the Recipient.
  • In addition, where any stock based compensation plan has been extended to the employees of the Provider engaged in the provision of the Services by the ultimate parent entity of Nokia Group or the Recipient or any other Nokia Group entities responsible for such stock based compensation plan, Provider will include the annual estimate cost/expense related to such stock based compensation plan in the cost base for purpose of applying Service Mark-up and billing to the Recipient, unless and until such provision (or estimate thereof) is already included in the operating expenses of the Provider.

• Operating expenses incurred by the Provider in connection with provision of Services under this Agreement including depreciation and amortisation expenses relating to the assets used in the provision of the Services. Cost will also include any foreign exchange loss, either directly identifiable or reasonably allocable towards the Services under this Agreement. For the removal of doubt, it is clarified that in case of foreign exchange gain (either directly identifiable or reasonably allocable towards the Services), the same shall be reduced from the Service Fee for the purpose of invoicing to the Recipient.
• In addition, where any stock based compensation plan has been extended to the employees of the Provider engaged in the provision of the Services by the ultimate parent entity of Nokia Group or the Recipient or any other Nokia Group entities responsible for such stock based compensation plan, Provider will include the annual estimate cost/expense related to such stock based compensation plan in the cost base for purpose of applying Service Mark-up and billing to the Recipient, unless and until such provision (or estimate thereof) is already included in the operating expenses of the Provider.

Costs exclude:

• • • Interest expense, pre-operating expenses, extra-ordinary expenses, expenses on account of income-tax, loss on sale of assets or investments, or any other expenses not related to the provision of the Services under this Agreement

• • Interest expense, pre-operating expenses, extra-ordinary expenses, expenses on account of income-tax, loss on sale of assets or investments, or any other expenses not related to the provision of the Services under this Agreement

• Interest expense, pre-operating expenses, extra-ordinary expenses, expenses on account of income-tax, loss on sale of assets or investments, or any other expenses not related to the provision of the Services under this Agreement

Service Mark-up for the Services is 17.50 percent.

2.1.3. Costs, as defined under clause 2.1.2 and for the purpose of computation of Service Fee, shall be determined in accordance with the generally accepted accounting standards in India (Indian GAAP) regularly followed by the Provider in the preparation of financial statement for local statutory reporting.

2.2. INVOICING AND PAYMENT TERMS

2.2.1. Provider shall provide Recipient with monthly activity and cost report in accordance with the Recipient’s instructions and practice. In addition, when requested by Recipient, Provider shall provide any such additional information, in the form separately agreed, of the costs incurred and the allocation of the costs together with supporting materials to the Recipient, as may be required by the Recipient.

2.2.2. For all of the Services under this Agreement, Provider shall prepare a detailed action plan and cost and investments plan in accordance with the Nokia Group’s planning process. Such plan shall be subject to approval within the Provider’s legal entity and regional management for the purposes of corporate authorization on behalf of the Provider. The approval and adoption of Recipient’s relevant R&D management group and relevant operational units short term plans shall constitute approval of the R&D action plan on behalf of Recipient, as well as a purchase order for the Services under this Agreement. Any activities added or materially changed during the year shall be approved by corresponding bodies in accordance with applicable procedures of Nokia Group prior to implementation of any changes.

2.2.3. Provider will raise monthly invoice of the Service Fee on the Recipient as per Consideration methodology defined under clause 2.1 above. The invoice will be raised in Euros on the Recipient before the end of every month following the relevant month in which Services has been provided and the invoice is to be raised.

2.2.4. All the invoices under this Agreement shall be due and payable within a period of Ninety (90) days from the date of invoice. Where the weighted average period of realisation of invoices for a particular financial year is more than Ninety (90) days, the Provider shall be entitled to receive interest at the rate of I percent per month on the aggregate invoice amount of the financial year for excess realisation period. For the purpose of calculation of interest on late realisation, a month shall be assumed to comprise of 30 days.

2.2.5. Financial year (“FY”) means twelve (12) month period starting April 1 of the calendar year and ending on March 31 of the following calendar year, as followed by the Provider for its local statutory and tax reporting. 2.2.6. This Agreement is effective April 1, 2009 and supersedes the terms of the Original Agreement. In lieu of this, as per the APA terms agreed by the Provider, for FY 2009-10 to 2014-15 (for which statutory books of accounts are already closed) and period of FY 2015-16 before the date of signing of the APA, the Provider shall raise additional invoice(s) (hereinafter referred to as the “Additional Invoice(s)”) on the Recipient of the Service Fee equivalent to the difference between the terms of Consideration defined under clause 2.1 of this Agreement vis-à-vis the Consideration already invoiced as per the terms of the Original Agreement or otherwise till the date of signing of APA, by the Provider on the Recipient.

2.2.7. Provider shall ensure collection of payment against the Additional Invoice(s) raised under Clause 2.2.6 above from the Recipient by June 30, 2016. Recipient shall provide due support to the Provider in this regard. ’

(ix) In this regard, it is significant to refer to the relevant portions of CBIC Circular No.159/15/2021-GST dated 21.09.2021, which reads as under:-

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 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 between the two principals. This ancillary supply is supply of intermediary service and is clearly identifiable and distinguished from the main supply. A person involved in supply of main supply on principal to principal basis to another person cannot be considered as supplier of intermediary service.

3.3 Intermediary service provider to have the character of an agent, broker or any other similar person: The definition of “intermediary” itself provides that intermediary service provider means a broker, an agent or any other person, by whatever name called….”. This part of the definition is not inclusive but uses the 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 Circular No. 159/15/2021-GST 3 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”.

3.5 Sub-contracting for a service is not an intermediary service: An important exclusion from intermediary is sub-contracting. The supplier of main service may decide to outsource the supply of the main service, either fully or partly, to one or more sub-contractors. Such sub-contractor provides the main supply, either fully or a part thereof, and does not merely arrange or facilitate the main supply between the principal supplier and his customers, and therefore, clearly is not an intermediary. For instance, ‘A’ and ‘B’ have entered into a contract as per which ‘A’ needs to provide 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 sub­contract, 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.’

(x) As can be seen from the aforesaid Circular, the scope and requirements of intermediary services are; (i) minimum of three parties (ii) Two distinct supplies (iii) character of an agent, broker or any other similar person (iv) does not include persons who supplies goods and services or both on his own account.

(xi) In the instant case, none of the aforesaid criteria/requirement is fulfilled by the petitioner who provides services to its overseas entity on its own account and consequently, the services provided by the petitioner clearly cannot be construed or treated as intermediary services as wrongly held by respondents 2 and 5 in the impugned orders, which deserve to be set aside. In other words, the material on record clearly establishes that the activities of the petitioner is of software development and support as well as project management which are rendered by the petitioner on its own account and cannot be considered as intermediary services since the same are not services of arranging or segregating any other supply.

8. The material on record also discloses that subsequent to the aforesaid Circular dated 20.09.2021, the following two Circulars, both dated 10.09.2024 have been issued on the scope of what would constitute intermediary services vis-à-vis what would be services rendered on own account. The relevant portions of the said two circulars are reproduced for ready reference:

F. No. CBIC-20001/6/2024-GST

Government of India

Ministry of Finance

Department of Revenue

Central Board of Indirect Taxes and Customs

GST Policy Wing

***

New Delhi, dated the 10th September, 2024

To,

The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/ Commissioners of Central Tax (All), The Principal Directors General/ Directors General (All).

Madam/Sir,

Subject: Clarification on place of supply of data hosting services provided by service providers located in India to

cloud computing service providers located outside India-reg.

Representations have been received from the trade and industry seeking clarification on the place of supply in case of data hosting services provided by service providers located in India to cloud computing service providers located outside India.

2. Issue 

2.1 It has been represented that some field formations are of the view that the place of supply of data hosting services provided by the service providers located in India to cloud computing service providers located outside India is the location of data hosting service provider in India and therefore, the benefit of export of services is not available on such supply of data hosting services.

2.2 Thus, clarification has been sought in respect of the following issues-

(i) Whether data hosting service provider qualifies as ‘Intermediary’ between the cloud computing service provider and their end customers/users/subscribers as per Section 2(13) of the Integrated Goods and Services Tax Act, 2017 (herein after referred to as the “IGST Act”) and whether the services provided by data hosting service provider to cloud computing service providers are covered as intermediary services and whether the place of supply of the same is to be determined as per section 13(8)(b) of IGST Act. 

(ii) Whether the data hosting services are provided in relation to goods “made available” by recipient of services to service provider for supply of such services and whether the place of supply of the same is to be determined as per section 13(3)(a) of the IGST Act.

(iii) Whether the data hosting services are provided directly in relation to “immovable property” and whether the place of supply of the same is to be determined as per section 13(4) of the IGST Act.

3. Clarification 

3.1 Whether data hosting service provider qualifies as ‘Intermediary’ between the cloud computing service provider and their end customers/users/subscribers as per Section 2(13) of the IGST Act and whether the services provided by data hosting service provider to cloud computing service providers are covered as intermediary services and whether the place of supply of the same is to be determined as per section 13(8)(b) of IGST Act. 

3.1.1 As per section 2(13) of the IGST Act, read with Circular no. 159/15/2021-GST dated 20.09.2021, a broker, agent or any other person who arranges or facilitates the main supply of goods or services or both or securities and has not involved himself in the main supply on his own account is considered as ‘intermediary’. Persons who supply goods or services, or both on their own account are not covered in the definition of “intermediary”.

3.1.2 The cloud computing service providers generally enter into contract with data hosting service providers to use their data centres for hosting cloud computing services. Data hosting service provider either owns premises for data centre or operates data centre on leased premises, procures infrastructure and human resource, handles operations like infrastructure monitoring, IT management and equipment maintenance, etc. to provide the said supply of data hosting services to the cloud computing service providers. The data hosting service provider generally handles all aspects of data centre like rent, software and hardware infrastructure, power, net connectivity, security, human resource, etc. Importantly, the data hosting service providers do not deal with end users/consumers of cloud computing services and may not even know about the end users.

3.1.3 It is observed that data hosting service provider provides data hosting services to the cloud computing service provider on a web platform through computing and networking equipment for the purpose of collecting, storing, processing, distributing, or allowing access to large amounts of data. The cloud computing service provider provides cloud-based applications and software services to various end users/customers/subscribers for data storage, analytics, artificial intelligence, machine learning, processing, database analysis and deployment services, etc.. The end users/customers/subscribers access cloud computing services seamlessly over the internet through technology hosted on data centers. There appears to be no contact between data hosting service provider and the end users/ consumers/ subscribers of the overseas cloud computing service provider. Thus, it is observed that the data hosting service provider provides data hosting services to the cloud computing service provider on principal-to-principal basis on his own account and is not acting as a broker or agent for facilitating supply of service between cloud computing service providers and their end users/consumers.

3.1.4 Accordingly, it is clarified that in such a scenario, the services provided by data hosting service provider to its overseas cloud computing service providers cannot be considered as intermediary services and hence, the place of supply of the same cannot be determined as per section 13(8)(b) of IGST Act.

Circular No. 230/24/2024-GST

F. No. CBIC-20001/6/2024-GST

Government of India

Ministry of Finance

Department of Revenue

Central Board of Indirect Taxes and Customs

GST Policy Wing

***

New Delhi, dated the 10th September, 2024

To,

The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/ Commissioners of Central Tax (All), The Principal Directors General/ Directors General (All).

Madam/Sir,

Subject: Clarification in respect of advertising services provided to foreign clients–reg.

References have been received from the trade and industry requesting for clarification regarding advertising services being provided by Indian advertising companies/agencies to foreign entities, as some of the field formations are considering the place of supply of the said services as within India, thereby denying the export benefits to such advertising companies.

1.2 In view of the difficulties being faced by the trade and industry and to ensure uniformity in the implementation of the provisions of the law across field formations, the Board, in exercise of its powers conferred by section 168 (1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act)”, hereby clarifies the issues in succeeding paragraphs.

2. Issue in Brief

2.1 A foreign company or firm hires an advertising company/agency in India for advertisement of its goods or services and may enter into a comprehensive agreement with the advertising company/agency encompassing all the issues related to advertising services ranging from media planning, investment planning for the same, creating and designing content, strategizing for maximum customer reach, the identification of media owners, dealing with media owners, procuring media space, etc. for displaying/broadcasting/printing of advertisement including monitoring of the progress of the same. In such a case, the advertising agency provides a one stop solution to the client who outsources the entire activity to the agency.

2.2 In this scenario, media owners raise invoice to the advertising agency for inventory costs, which are then paid by the advertising agency. Subsequently, the advertising agency raises invoice to the foreign client for the rendered advertising services and receives the payments in foreign exchange from the foreign client. In this regard, clarification has been sought as to:

a. Whether the advertising company can be considered as an “intermediary” between the foreign client and the media owners in terms of section 2(13) of Integrated Goods and Services Tax Act, 2017 (herein after referred to as the “IGST Act)”, thereby resulting in determination of place of supply under section 13(8)(b) of the IGST Act?

b. Whether the representative of foreign client in India or the target audience of the advertisement in India can be considered as the recipient of the services being supplied by the advertising company under section 2(93) of CGST Act?

c. Whether the advertising services provided by the advertising companies to foreign clients can be considered as performance-based services as per section 13(3) of the IGST Act?

3. CLARIFICATION:

3.1 Issue 1 -Whether the advertising company can be considered as an “intermediary” between the foreign client and the media owners as per section 2(13) of IGST Act? 

3.1.1 As per section 2(13) of IGST Act, read with Circular no. 159/15/2021-GST dated 20.09.2021, a broker, agent or any other person who arranges or facilitates the main supply of goods or services or both or securities and has not involved himself in the main supply on his own account is considered as intermediary.

3.1.2 In the instant scenario, it is observed that the foreign clients enter into a comprehensive agreement with advertising companies/agencies in India and outsource the entire activity of advertising services to the advertising companies/agencies. Further, these advertising companies/agencies enter into an agreement with the media owners in India for implementing the said media plan and procurement of media space for airing or releasing or printing advertisement.

3.1.3 The advertising agency, in this case, enters into two agreements:

i. With the client located outside India for providing a one stop solution starting from designing the advertisement to its display in the media as agreed to with the client. The advertising company raises invoice to its foreign client for the above advertising services and the payments of the same is received from the foreign client in foreign exchange.

ii. With the media company to procure media space for display of the advertisement and to monitor campaign progress based on data shared by the media company. The media company bills the advertising agency and the payment for same is made by the advertising agency to the media company.

3.1.4 Thus, the agreement, in the instant case, is in the nature of two distinct principal-to-principal supplies and no agreement of supply of services exists between the Media company and the foreign client. The advertising company is not acting as an agent but has been contracted by the client to procure and provide certain services. The advertising agency is providing the services to the client on its own account.

3.1.5 In view of above, it is clarified that in the present scenario, the advertising company is involved in the main supply of advertising services, including resale of media space, to the foreign client on principal-to-principal basis as detailed above and does not fulfil the criteria of “intermediary” under section 2(13) of the IGST Act. Thus, the same cannot be considered as “intermediary” in such a scenario and accordingly, the place of supply in the instant matter cannot be linked with the location of supplier of services in terms of section 13(8)(b) of the IGST Act.

9. Learned Senior Counsel also drew my attention to the judgement of the Apex Court in the case of Bharati Cellular Ltd vs ACIT – (2024) 160 taxmann.com 12 (SC), wherein the concept of agency vis-a-vis distributorship agreements came up for detailed consideration, wherein the Supreme Court while holding that the said agreement was one of distributorship and not agency, held as under:

“8. Agency is therefore a triangular relationship between the principal, agent and the third party. In order to understand this relationship, one has to examine the inter se relationship between the principal and the third party and the agent and the third party. When we examine whether a legal relationship of a principal and agent exists, the following factors/aspects should be taken into consideration:

(a) The essential characteristic of an agent is the legal power vested with the agent to alter his principal’s legal relationship with a third party and the principal’s co-relative liability to have his relations altered.

(b) As the agent acts on behalf of the principal, one of the prime elements of the relationship is the exercise of a degree of control by the principal over the conduct of the activities of the agent. This degree of control is less than the control exercised by the master on the servant, and is different from the rights and obligations in case of principal to principal and independent contractor relationship.

(c) The task entrusted by the principal to the agent should result in a fiduciary relationship. The fiduciary relationship is the manifestation of consent by one person to another to act on his or her behalf and subject to his or her control, and the reciprocal consent by the other to do so.⁸

(d) As the business done by the agent is on the principal’s account, the agent is liable to render accounts thereof to the principal. An agent is entitled to remuneration from the principal for the work he performs for the principal.

9. At this stage, three other relevant aspects/considerations should be noted. First is the difference between ‘power’ and ‘authority’. The two terms though connected, are not synonymous. Authority refers to a factual position, that is, the terms of contract between the two parties. The power of the agent however, is not, strictly speaking, conferred by the contract or by the principal but by the law of agency. When a person gives authority to another person to do the acts which bring the law of agency into play, then, the law vests power with the agent to affect the principal’s legal relationship with the third parties. The extent and existence of the power with the agent is determined by public policy. The authority, as observed above, refers to the factual situation. The second consideration is that the primary task of an agent is to enter into contracts on behalf of his principal, or to dispose of his principal’s property. The factors mentioned in clauses (b) to (d) in paragraph 8 above flow, and are indicia of this primary task. Clauses (b) to (d) of paragraph 8 are useful as tests or standards to examine the true nature or character of the relationship. Lastly, the substance of the relationship between the parties, notwithstanding the nomenclature given by the parties to the relationship, is of primary importance. The true nature of the relationship is examined by reference to the functions, responsibility and obligations of the so-called agent to the principal and to the third parties.

10. An agent is distinct from a servant, in that an agent is subject to less control than a servant, and has complete, or almost complete discretion as to how to perform an undertaking. As Seavey said, ”a servant (…) is an agent under more complete control than is a non- servant”.⁹ The difference is “in the degree of control rather than in the acts performed. The servant sells primarily his services measured by time; the agent his ability to produce results.”¹⁰ This distinction can be criticised, for servants may have very wide discretion, and may not really be subject to control at all in practice, while agents may have their power to act circumscribed by detailed instructions.¹¹

11. This Court in Bhopal Sugar Industries Ltd. v. Sales Tax Officer [1977] 3 SCC 147. has expounded the difference between principal-agent and principal-principal relationship, in the following words:-

“5. … the essence of the matter is that in a contract of sale, title to the property passes on to the buyer on delivery of the goods for a price paid or promised. Once this happens the buyer becomes the owner of the property and the seller has no vestige of title left in the property. The concept of a sale has, however, undergone a revolutionary change, having regard to the complexities of the modern times and the expanding needs of the society, which has made a departure from the doctrine of laissez faire by including a transaction within the fold of a sale even though the seller may by virtue of an agreement impose a number of restrictions on the buyer, e.g. fixation of price, submission of accounts, selling in a particular area or territory and so on. These restrictions per se would not convert a contract of sale into one of agency, because in spite of these restrictions the transaction would still be a sale and subject to all the incidents of a sale. A contract of agency, however, differs essentially from a contract of sale inasmuch as an agent after taking delivery of the property does not sell it as his own property but sells the same as the property of the principal and under his instructions and directions. Furthermore, since the agent is not the owner of the goods, if any loss is suffered by the agent he is to be indemnified by the principal. This is yet another dominant factor which distinguishes an agent from a buyer—pure and simple. In Halsbury’s Laws of England, Vol. 1, 4th Edn., in para 807 at p. 485, the following observations are made:

“807. Rights of agent. —The relation of principal and agent raises by implication a contract on the part of the principal to reimburse the agent in respect of all expenses, and to indemnify him against all liabilities, incurred in the reasonable performance of the agency, provided that such implication is not excluded by the express terms of the contract between them, and provided that such expenses and liabilities are in fact occasioned by his employment.”

12. The aforesaid judgment in the context of distinction between a contract of sale and contract of agency observes that the agent is authorised to sell or buy on behalf of the principal, whereas the essence of contract of sale is the transfer of title of goods for the price paid or promised to be paid. In case of an agency to sell, the agent who sells them to the third parties, sells them not as his own property, but as a property of the principal, who continues to be the owner of the goods till the sale. The transferee is the debtor and liable to account for the price to be paid to the principal, and not to the agent for the proceeds of the sale. An agent is entitled to his fee or commission from the principal.

13. This distinction and test was referred to by this Court in CIT v. Ahmedabad Stamp Vendors Association [2012] 25 com 201/210 Taxman 269/348 ITR 378/[2014] 16 SCC 114. which is a case relating to Section 194-H of the Act. This Court had approved the decision of the High Court in Ahmedabad Stamp Vendors Association v. Union of India[2002]124 Taxman 628/257 ITR 202 (Guj.) We may also refer to two more decisions of this Court. In the case of Director, Prasar Bharati v. CIT [2018] 92 taxmann.com 11/255 Taxman 1/403 ITR 161/7 SCC 800 this Court has observed that the explanation appended to Section 194-H of the Act defining the expression ‘commission or brokerage’ is an inclusive definition giving wide meaning to the expression ‘commission’. The second decision is in the case of Singapore Airlines Ltd. v. CIT [2022] 144 taxmann.com 221/[2023] 290 Taxman 139/449 ITR 203/[2023] 1 SCC 497 which we shall refer to subsequently in some detail as to its exact purport and ratio. However, at this stage, we would like to examine in some detail commercial relationships in the nature of an independent contractor, that are legally, principal to principal dealings.

14. The passage from Bhopal Sugar Industries Limited (supra) highlights the principles and the complexities involved in determining the correct nature of the legal relationship between a principal and an agent. Law permits individuals to enter into complex contracts incorporating multiple rights and obligations. The relationships between contacting parties have become multi-dimensional, which may not strictly fall within an employer-employee, principal-agent or principal-principal relationship. A singular contract may create different legal relationships and obligations. Independent contractors on occasion act for themselves, and at other times may be creating legal relations between their employers and third persons. For example, a solicitor may start by giving advice (independent contractor), and then as a consequence make a contract for his employer with another person (agent).

15. In Labreche v. Harasymiw [1992] 89 DLR (4th) 95 at 107. Valin J. delineated the question of what an agency involves, stating that: (i) it refers to the power of the agent to affect the principal’s position. However, this is not the sole test, though it still remains one of the main criteria in determining whether someone is an agent. There are several features in the definition of an agent¹². There can be several situations where one person represents or acts for another, but this does not create the relationship of principal and agent. It is only when the representation or action on another’s behalf affects the latter’s legal position, that is to say his rights against, or his liability towards, other people, that the law of agency applies; (ii) the second feature is the importance of the way in which law regards the relationship which is created. The effect of the law is that it regulates the way in which parties conduct themselves. The conduct of the parties is considered in terms of law, regardless of the language or nomenclature used by the parties. The true factual position must be investigated to determine whether a relationship of agency has come into existence between a set of parties or individuals.

16. The significant observation in the aforesaid judgment is that all kinds of interactions with third parties or interested parties, resulting from the introduction of the third parties with one who wishes a particular undertaking to be performed, may not be a result of an agency. For instance, a retail dealer or supplier of goods, obtains goods from a wholesale supplier or a manufacturer for subsequent resale to retail customers or suppliers who, in turn, deals with retail dealers or shopkeepers. Such ‘middlemen’ are sometimes referred to as ‘agents’, when in fact they are franchisees of the manufacturer or supplier, or are distributors of the manufactures’ goods, perhaps with a ‘sole agency’ or special dealership for his goods. Such ‘agents’ can be real buyers, acting as principals on their own behalf. Consequently, they are not liable to the manufacturer or supplier in the way an agent might be for failure of duty, nor do their contracts with other parties – whether it be suppliers, retail dealers or individual customers – hold the party who sold to them, liable, for any breach including misrepresentation or sale of defective goods. The seller’s contractual or tortious liability is different from the manufacturer’s liability on account of warranty/guarantee, statutory liability or even obligation to a third party who purchases the goods or avails services from/through the independent contractor. An agent renders service to the principal, who he/she represents, and therefore the principal, and not the agent, is liable to the third parties. Further, the money received by an independent contractor from his customers will belong to the independent contractor and not to the party who sold to him. The money will be a part of such independent contractor’s property in the event of his bankruptcy or liquidation. This may be the case even if the contract of sale is one of ‘sale or return’. It is important to avoid confusion, by applying the legal tests, that may arise where the functions of the ‘buyer’ – described as an ‘agent’ – is really as that of a ‘middleman’, and the necessary elements for creation of principal and an agent relationship are absent. Two level commercial transaction can result in an tripartite arrangement/agreement with respective rights and obligations, without any of the two parties having principal-agent relationship.

17. Clause (d) in paragraph 8 observes that the agent is liable to render accounts to the principal as the business done by the agent is on principal’s account. The agent is entitled to remuneration from the principal for the work he performs. To decide whether a contracting party acts for himself as an independent contractor, we may examine whether in the course of work, he intends to make profits for himself, or is entitled to receive prearranged remuneration. If the party is concerned about acting for himself and making the maximum profits possible, he is usually regarded as a buyer, or an independent contractor and not as an agent of the principal. This would be true even when certain terms and conditions have been fixed relating to the manner in which the seller conducts his business. We shall subsequently further elucidate on the characteristics of an independent contractor, and differentiate them from the principal-agent relationship.”

10. Further, the Apex Court in the case of Union of India vs. Future Gaming Solutions Pvt.Ltd -2025 (2) TMI 483, held as under:

“15.1 The relevant provisions of the Indian Contract Act, 1872 read as under:

“182. “Agent” and “principal” defined.— An “agent” is a person employed to do any act for another, or to represent another in dealings with third person. The person for whom such act is done, or who is so represented, is called the “principal”.

183. Who may employ agent.— Any person who is of the age of majority according to the law to which he is subject, and who is of sound mind, may employ an agent.

184. Who may be an agent.— As between the principal and third person any person may become an agent, but no person who is not of the age of majority and of sound mind can become an agent, so as to be responsible to his principal according to the provisions in that behalf herein contained.

185. Consideration not necessary.— No consideration is necessary to create an agency.

186. Agent’s authority may be expressed or implied.— The authority of an agent may be expressed or implied.

187. Definitions of express and implied authority.— An authority is said to be express when it is given by words spoken or written. An authority is said to be implied when it is to be inferred from the circumstances of the case; and things spoken or written, or the ordinary course of dealing, may be accounted circumstances of the case.

188. Extent of agent’s authority.— An agent, having an authority to do an act, has authority to do every lawful thing which is necessary in order to do such act. An agent having an authority to carry on a business, has authority to do every lawful thing necessary for the purpose, or usually done in the course, of conducting such business.

xxx

191. “Sub-agent” defined.— A “sub-agent” is a person employed by, and acting under the control of, the original agent in the business of the agency.

xxx

222. Agent to be indemnified against consequences of lawful acts.— The employer of an agent is bound to indemnify him against the consequences of all lawful acts done by such agent in exercise of the authority conferred upon him.”

15.2 According to Bowstead and Reynolds on Agency, 23rd Edition, agency is the fiduciary relationship which exists between two persons, one of whom expressly or impliedly manifests assent that the other should act on his behalf so as to affect his legal relations with third parties and the other of whom similarly manifests assent so as to act or so acts pursuant to the manifestation. Thus, the one on whose behalf the act or acts have to be done is called the principal and the other who is to act is called the agent. Any person other than the principal and the agent may be referred to as the third party. The authority of the agent to act on behalf of the principal constitutes a power to affect the principal’s legal relations with third parties. Such authority could be called actual authority or apparent authority. Thus, the essence of agency is that a person acts on the principal’s behalf. Therefore, the term agency is used to connote an authority or capacity in one person to create legal relations between a person occupying the position of principal and third parties. Usually, the legal relations so created will be contractual in nature. Conversely, the mere fact that a person does something in order to benefit another and the latter is relying on the former to do so or may have requested or even contracted for performance of the action, does not make the former the agent of the latter. The centrality to agency is the conferral of authority to alter legal relations; as such in common law, being an agent is not a status but a description of a person, while and only so long as the person is exercising such authority. Thus, where one person (the principal), requests or authorises the other (agent), to act on his behalf and the other agrees to do so, the law recognises that such agent has power to affect the principal’s legal position by acts which, though performed by the agent, are to be treated in certain respects as if they were acts of the principal. It is common to regard control by the principal as a defining characteristic of agency. Thus, agency is termed as acting on behalf of the principal and subject to principal’s control.

15.3 An agency has to be distinguished from other relationships such as an agent and trustee; agent and bailee; agent and employee; agent and independent contractor; agent and seller; agent and buyer; agent and borrower; agent and person supplying services.

15.4 Suppliers of the goods of a manufacturer, whether on a retail or wholesale basis, who have some form of concession as a regular stockist, distributor or franchisee, are often described as agent, selling agent, main agent, etc. for the manufacturer of goods which they supply. However, nowadays the distributor actually buys from the manufacturer and resells it to his own customers. In such cases, the term ‘agent’ is used in a complimentary sense only, i.e., not to transact any business on behalf of the principal, except as regards purchase of the goods from the principal. Such a relationship is quite different from an agency. The distinction between an agent and the buyer for resale normally turns on whether the person concerned acts personally to make such profit as can be made, or is remunerated by pre-arranged commission. A supplier who fixes the resale price is likely to be a buyer for resale. If a party takes a profit on the resale, it will make him a seller. On the other hand, if a commission is paid on the resale, then, he is likely to be an agent.

15.5 In Benjamin’s Sale of Goods, Eleventh Edition, Sweet & Maxwell, it has been stated that sale has to be distinguished from a contract of agency. When goods are delivered to another for sale to a third party, the recipient may be an outright buyer, or may take the goods on sale or return, or may merely be the supplier’s agent to sell the goods, or an agent on a del credere commission, i.e., an agent who guarantees to the principal that the buyer will duly pay the price.

15.6 To determine the nature of the transaction, the whole agreement must be looked into as “the test is ultimately one of substance rather than form”. However, there are certain indicators.

It is not conclusive that the consignee should be described in the contract as an “agent” or even “sole agent”, or conversely that the transaction should be called a “sale”, although the way in which the parties label the transaction will, typically, play a significant part in the court’s determination of the issue. Also, certain stipulations may be consistent with both sale (and especially sale or return) and agency, and, therefore, cannot be taken as indicative of either; for instance, the transfer to the consignee of the property in goods shipped upon the acceptance of drafts. It is, however, evidence towards a sale that the recipient is entitled to sell at whatever price the recipient thinks fit, accounting to the supplier only for a predetermined sum, and this interpretation is given further support, if the recipient is free to alter or improve the goods. Where the consignee pays wholesale prices for the goods, he is likely to be acting as a principal in the sale. If the consignee sells (whether for cash or on credit) to a retail purchaser, this immediately gives rise to a debt to the supplier for the listed price, the transaction becomes quite inconsistent with agency, including del credere agency, and would be consistent only with sale or return.

11. A conspectus of the above discussion would indicate that the legal position regarding what would constitute intermediary services vis-a-vis a principal to principal relationship can be summarised as under:

• In terms of Section 2(13) of the IGST Act, 2017, the definition of what is an intermediary would show that it would mean a broker or agent or any other person and the name by what he is called is not important or relevant; what is important/relevant is the function he provides and that would be arranging or facilitating the supply of goods or services or both or of securities; such facilitation or arrangement should be between two or more persons; further, he should not make this supply on his own account;
• In terms of the above, it is clear that if a person acts as an intermediary, apart from him, at least two persons should be involved and the intermediary would facilitate supply between two or more of them. Therefore, there should be (i) a minimum of three parties (ii) two distinct supplies, where principal will supply the goods or services to a third party as one supply and such a transaction should be facilitated or arranged by one party who is then called an intermediary rendering the second supply to the principal (iii) such a transaction would therefore, mean that one person actually represents the principal as an agent and therefore (iv) does not do his service on his own account.
• The agreement, therefore, should clearly indicate that he is acting as such facilitator between two or more persons and therefore, at least three parties would then be involved as pointed out by the Apex Court in Bharati Cellular’s case supra stating that it should be a triangular relationship, though the third party need not be identified in the agreement itself but it would be apparent from the agreement that there is a triangular relationship being established in such agreement.
• Four essential features stand out in an agency relationship which are set out by the Apex Court as under :

a) The essential characteristic of an agent is the legal power vested with the agent to alter his principal’s legal relationship with a third party and the principal’s co-relative liability to have his relations altered;

b) As the agent acts on behalf of the principal, one of the prime elements of the relationship is the exercise of a degree of control by the principal over the conduct of the activities of the agent. This degree of control is less than the control exercised by the master on the servant, and is different from the rights and obligations in case of principal to principal and independent contractor relationship;

c) The task entrusted by the principal to the agent should result in a fiduciary relationship. The fiduciary relationship is the manifestation of consent by one person to another to act on his or her behalf and subject to his or her control, and the reciprocal consent by the other to do so;

d) As the business done by the agent is on the principal’s account, the agent is liable to render accounts thereof to the principal. An agent is entitled to remuneration from the principal for the work he performs for the principal.

• Absence of these ingredients would show that the relationship was not really one of agency but of an independent service provider. This is clear from the circular set out for data hosting services where it is clear that when a person does data hosting services for a foreign company and the foreign company uses this to store third party data, the person providing such services is doing it without any contact with the third party and therefore, cannot be called an intermediary as he does not facilitate or arrange. He is only doing the said services on his own account to the foreign company who could store any data on that platform.
• Therefore, even if there are three parties, one should clearly see whether the agreement casts an obligation on the service provider to act on someone else’s behalf in respect of such supply and only then it would be an intermediary services. For example, where one party to a contract with another party, sub contracts a portion of his work to a third party, it does not mean that an intermediary relationship is established. Sub contractors would very well be doing the said work on their own account as is often the case with software development or research work carried out in India on contract basis.
• It is also axiomatic that absence of three persons would straightaway rule out the agreement from the scope of intermediary services as the agreement would then be a service provider-service receiver relationship without the service provider doing any facilitating or arranging. Therefore, in a given agreement, if there is no scope for the service provider to act on behalf of the service receiver, then the agreement is one on principal to principal basis where services are provided on own account.
• It would be necessary to consider that the definition of “intermediary” is far more restricted than that of an “agent”. The term “agent” is not defined in the IGST Act, 2017 but it is defined in the CGST Act, 2017 under Section 2(5) to mean, a person who carries on the business of supply or receipt of goods or services or both on behalf of another person and he could be a factor, broker, commission agent, arhatia, del credere agent, auctioneer or any other mercantile agent by whatever name called. Therefore, the fine distinction that is there between these two is that while the agent supplies or receives goods or services on behalf of another person, the intermediary only arranges or facilitates supply on behalf of another person without himself supplying the same. This distinction also has to be kept in mind as the definition of intermediary calls him an agent who only does facilitation or arrangement and therefore, while he is an agent and acts for another, his job is to only facilitate or arrange supplies between his principal and a third party.
• The position in service tax remains identical as set out in the decisions extracted in Amazon’s case supra.

12. In the light of the principles that emerge from the aforesaid Judgments, Circulars, Notifications etc., in the facts and circumstances obtaining in the instant cases as set out supra analysing the said agreements, I am of the considered opinion that the petitioner is not an ‘intermediary’ under Section 2(13) of the IGST Act and provisions of the Finance Act, 1994 and the services provided by the petitioner to its service recipients are that of an independent service provider which qualify as export of services under the service tax provisions and 2(6) of the IGST Act and consequently, the impugned orders and demand of the respondents deserve to be quashed by issuing further directions in this regard for the following reasons:

(i) There are only two persons in the subject agreements;

(ii) The petitioner renders services on its own account to the service receiver located outside India and it does not enable supply between the foreign recipient and the third parties;

(iii) The acts of the petitioner are that of an independent contractor and it does not represent or bind the foreign client in the course of executing its services.

(iv) The foreign recipient, therefore, remunerates the petitioner by way of a service fee for the services rendered which is on a cost plus mark up basis and not based on percentage of success, etc. which is common in agency agreements.

(v) The foreign recipient is free to chose from whom he would procure and the petitioner’s recommendations are not final and binding on it and the petitioner cannot also represent that it is doing something on behalf of the foreign recipient.

(vi) The host of services rendered by the petitioner is more akin to business support services to enable efficient procurement of garments and a continuing business relationship rather than enabling procurement of orders on a commission basis.

13. In view of the aforesaid facts and circumstances, I am of the view that the impugned orders and demands made by the respondents deserve to be quashed.

14. A perusal of the orders impugned in W.P.No.3376/2023 and W.P.No.3420/2023 passed by the respondents will indicate that the refund claim of the petitioner has also been rejected on the ground that the same is barred by limitation under Section 54 of the CGST Act; in this context, the respondents failed to consider and appreciate the CBIC Notification bearing No.13/2022-Central Tax dated 05.07.2022 which clearly establishes that the said finding recorded by the respondents is erroneous and that the refund claim of the petitioner in these 2 petitions was not barred by limitation; the said Notification reads as under:

[TO BE PUBLISHED IN THE GAZETTE OF INDIA,
 EXTRAORDINARY, PART II, SECTION 3. SUB-SECTION (i)]

GOVERNMENT OF INDIA MINISTRY OF FINANCE
 DEPARTMENT OF REVENUE CENTRAL BOARD OF INDIRECT
 TAXES AND CUSTOMS
 NOTIFICATION
 No. 13/2022-Central Tax

New Delhi, the 5th July. 2022

G.S.R…… (E).- In exercise of the powers conferred by section 168A of the Central Goods and Services Tax Act, 2017 (12 of 2017) (hereinafter referred to as the said Act) read with section 20 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017) and section 21 of the Union Territory Goods and Services Tax Act, 2017 (14 of 2017) and in partial modification of the notifications of the Government of India in the Ministry of Finance (Department of Revenue), No. 35/2020-Central Tax, dated the 3^rd April, 2020, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub­section (i), vide number G.S.R. 235(E), dated the 3^rd April, 2020 and No. 14/2021-Central Tax, dated the 1^st May, 2021, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 310(E), dated the 1^st May, 2021, the Government, on the recommendations of the Council, hereby,-

(i) extends the time limit specified under sub-section (10) of section 73 for issuance of order under sub-section (9) of section 73 of the said Act, for recovery of tax not paid or short paid or of input tax credit wrongly availed or utilized, in respect of a tax period for the financial year 2017-18, up to the 30^th day of September, 2023;

(ii) excludes the period from the 1^st day of March, 2020 to the 28^th day of February, 2022 for computation of period of limitation under sub-section (10) of section 73 of the said Act for issuance of order under sub-section (9) of section 73 of the said Act, for recovery of erroneous refund;

(iii) excludes the period from the 1^st day of March, 2020 to the 28^th day of February, 2022 for computation of period of limitation for filing refund application under section 54 or section 55 of the said Act.

2. This notification shall be deemed to have come into force with effect from the 1^st day of March, 2020.

[F. No. CBIC-20001/2/2022-GST]

(Rajeev Ranjan) 

Under Secretary

15. In the light of the aforesaid Notification, the details and particulars as to how the refund claim of the petitioner in W.P.no.3420/2023 and W.P.No.3376/2023 is not barred by limitation is indicated below:

“W.P.No. 3420/2023 W.P.No. 3376/2023

Chart showing that the refund application filed by the petitioner are not barred by limitation

W.P.No. 3420/2023

W.P.No. 3376/2023

–

16. Under these circumstances, I am of the considered opinion that the refund claim of the petitioner in W.P.No.3420/2023 and W.P.No.3376/2023 is clearly not barred by limitation as erroneously/wrongly held by the respondents and consequently, the said findings also deserve to be set aside.

17. In the result, I pass the following:-

ORDER IN W.P. No. 12116/2024

(i) W.P.No.12116/2024 is hereby partly allowed.

(ii) The impugned Order-in-Original No.34/2022-23 dated 01.07.2022 vide Annexure-A and impugned Order-in-Original No.104/2022-23 dated 28.03.2023 vide Annexure-B passed by the 3rd respondent insofar as they relate to rejection of the refund claim of the petitioner pertaining to the issue of ‘intermediary / intermediary services’ are hereby quashed by holding that the services provided by the petitioner do not fall under the definition of ‘intermediary services’ and that the same is considered as export of services.

(iii) The impugned orders insofar as they relate to rejection of the refund claim of the petitioner on the ground that they are barred by limitation under Section 54 of the CGST Act are hereby set aside by holding that the refund claims of the petitioner are not barred by limitation in the light of the CBIC Notification bearing No.13/2022-Central Tax dated 05.07.2022 which is applicable to the refund claim of the petitioner;

(iv) The respondents are directed to grant/pay refund in favour of the petitioner together with interest under Section 56 of the CGST Act, 2017 as expeditiously as possible and at any rate within a period of three months from the date of receipt of a copy of this order.

(v) All other contentions and issues including rejection of all other refund claims of the petitioner are kept open to be adjudicated by the appropriate authorities bearing in mind the Circular No.183/15/2022-GST dated 27.12.2022 and Circular No.193/05/2023-GST dated 17.07.2023 and in accordance with law.

ORDER IN W.P.No.3420/2023 

(i) W.P.No.3420/2024 is hereby partly allowed.

(ii) The impugned Order-in-Appeal dated 12.08.2022 vide Annexure-A passed by the respondents insofar as they relate to rejection of the refund claim of the petitioner pertaining to the issue of ‘intermediary / intermediary services’ are hereby quashed by holding that the services provided by the petitioner do not fall under the definition of ‘intermediary services’ and that the same is considered as export of services.

(iii) The impugned orders insofar as they relate to rejection of the refund claim of the petitioner on the ground that they are barred by limitation under Section 54 of the CGST Act are hereby set aside by holding that the refund claims of the petitioner are not barred by limitation in the light of the CBIC Notification bearing No.13/2022-Central Tax dated 05.07.2022 which is applicable to the refund claim of the petitioner;

(iv) The respondents are directed to grant/pay refund in favour of the petitioner together with interest under Section 56 of the CGST Act, 2017 as expeditiously as possible and at any rate within a period of three months from the date of receipt of a copy of this order.

(v) All other contentions and issues including rejection of all other refund claims of the petitioner are kept open to be adjudicated by the appropriate authorities bearing in mind the Circular No.183/15/2022-GST dated 27.12.2022 and Circular No.193/05/2023-GST dated 17.07.2023 and in accordance with law.

ORDER IN W.P.No.3376/2023 

(i) W.P.No.3376/2024 is hereby partly allowed.

(ii) The impugned Order-in-Appeal dated 04.11.2022 vide Annexure-A passed by the respondents insofar as they relate to rejection of the refund claim of the petitioner pertaining to the issue of ‘intermediary / intermediary services’ are hereby quashed by holding that the services provided by the petitioner do not fall under the definition of ‘intermediary services’ and that the same is considered as export of services.

(iii) The impugned orders insofar as they relate to rejection of the refund claim of the petitioner on the ground that they are barred by limitation under Section 54 of the CGST Act are hereby set aside by holding that the refund claims of the petitioner are not barred by limitation in the light of the CBIC Notification bearing No.13/2022-Central Tax dated 05.07.2022 which is applicable to the refund claim of the petitioner;

(iv) The respondents are directed to grant/pay refund in favour of the petitioner together with interest under Section 56 of the CGST Act, 2017 as expeditiously as possible and at any rate within a period of three months from the date of receipt of a copy of this order.

(v) All other contentions and issues including rejection of all other refund claims of the petitioner are kept open to be adjudicated by the appropriate authorities bearing in mind the Circular No.183/15/2022-GST dated 27.12.2022 and Circular No.193/05/2023-GST dated 17.07.2023 and in accordance with law.

ORDER IN W.P.No.3486/2020

(i) W.P.No.3486/2020 is hereby partly allowed.

(ii) The impugned Order-in-Original dated 25.11.2019 vide Annexure-B passed by the respondents and all further demands, notices, orders, proceedings etc., pursuant thereto are hereby quashed.