2024(09)LCX0563
Amazon Development Centre India Private Limited
Versus
Additional Commissioner Of Central Tax
WRIT PETITION NO. 13007 OF 2024 decided on 17-09-2024
NC: 2024:KHC:38510
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 17TH DAY OF SEPTEMBER, 2024
BEFORE
THE HON'BLE MR JUSTICE S.R.KRISHNA KUMAR
WRIT PETITION NO. 13007 OF 2024 (T-RES)
BETWEEN:
M/S AMAZON DEVELOPMENT CENTRE
INDIA PRIVATE LIMITED
NO.26/1, BRIGADE GATEWAY, WORLD TRADE CENTRE,
10TH FLOOR, DR. RAJKUMAR ROAD,
MALLESHWARAM, BANGALORE – 560 055.
(REP. BY SHRI ALOK CHANDNA,
AUTHORISED SIGNATORY)
INCORPORATED UNDER THE COMPANIES ACT
1956 (NO 1 OF 1956)
…PETITIONER
(BY SRI. G. SHIVADASS, SENIOR COUNSEL APPEARING FOR
SRI. RAVIRAGHAVAN & SRI.SYED M.PEERAN, ADVOCATES)
AND:
1. ADDITIONAL COMMISSIONER OF
CENTRAL TAX
GST APPEALS-II, TRAFFIC TRANSIT
MANAGEMENT CENTRE,
BMTC BUILDING, 4TH FLOOR,
ABOVE BMTC BUS STAND,
DOMLUR, OLD AIRPORT ROAD,
BANGALORE – 560 071.
2. ASSISTANT COMMISSIONER OF
CENTRAL TAX,
DIVISION-4, 16/1, 1ST FLOOR, S.P. COMPLEX,
LALBAGH ROAD,
BANGALORE - 560027.
…RESPONDENTS
(BY SRI.JEEVAN.J.NEERALAGI.,ADVOCATE)
THIS W.P IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT IN THE NATURE OF CERTIORARI OR ANY OTHER APPROPRIATE WRIT OR ORDER OR DIRECTION UNDER ARTICLE 226 OF CONSTITUTION QUASHING THE IMPUGNED ORDER-IN-APPEAL NO. 265-266/2023-24/ADC-AII/GST DATED 04.01.2024 PASSED BY RESPONDENT NO.1 AT ANNEXURE-A FOR THE PERIOD OCTOBER 2019 TO MARCH 2020 & ETC.,
THIS PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE S.R.KRISHNA KUMAR
ORAL ORDER
In this petition, petitioner seeks for the following reliefs:-
“a) Issue a writ in the nature of Certiorari or any other appropriate writ or order or direction under Article 226 of the Constitution quashing the impugned Order-in-Appeal No. 265-266/2023-24/ADC-AII/GST dated 04.01.2024 passed by Respondent No.1 at Annexure-A for the period October 2019 to March 2020;
b) Hold that the pre-sale and post-sale services provided by the Petitioner to its Foreign Affiliates is not in the nature of 'intermediary' under Section 2 (13) of the IGST Act and that such service qualifies as 'export of service' under Section 2 (6) of the IGST Act;
c) Hold that the Petitioner is not an intermediary' in terms of Section 2 (13) of the IGST Act and does not meet the requirements of an intermediary that are laid down in the CBIC Circular dated 20.09.2021;
d) Sanction refund of Rs. 1,09,42,824/- being the accumulated ITC relating to the export of customer support services to Foreign Affiliate-during the period October 2019 to March 2020 along with applicable interest vide Annexure-A.
e) Sanction refund of Rs. 2,52,29,456/- by including the credit availed the Petitioner on input services under HSN Code 9954 i.e., Construction services, during the period October 2019 to March 2020 in the 'N-for calculating the maximum refund to the Petitioner along applicable interest vide ANNEXURE-K.
f) pass such further order(s) and other reliefs as the circumstances of the case may require.
g) Issue a writ in the nature of certiorari or any other writ or order or direction under Article 226 of the Constitution of India quashing the show cause notice No. 08/2022 dated 01.09.2022 issued by respondent No. 2 at Annexure-M.
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, 2nd 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 2nd 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 1st 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. Heard learned Senior counsel for the petitioner and learned counsel for the
respondents – Revenue and perused the material on record.
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.
5. Per contra, learned counsel
for the respondents – Revenue would reiterate the various contentions urged in
the statement of objections and submits that there is no merit in the petition
and that the same is liable to be dismissed.
6. I have given my anxious consideration to the rival submissions and perused
the material on record.
7. Before proceeding further, it is relevant to state that the present petition
is restricted to rejection of the refund claim of the petitioner pertaining to
the issue of “intermediary” in that, the respondents have rejected the refund
claim in relation to customer support services provided by the petitioner by
holding that the petitioner was an “intermediary” within the meaning of Section
2 (13) of the IGST Act and that the customer support services provided by the
petitioner does not qualify as export of services under Section 2 (6) of the
IGST Act. It is made clear that the other issues / contentions urged by the
petitioner other than intermediary / intermediary services are not dealt with in
the present order and the same are kept open by reserving liberty in favour of
the petitioner to contest all remaining issues / questions / contentions before
the GST Appellate Tribunal as and when it is constituted by the Central
Government.
8. Before adverting to the rival contentions, it would be relevant to state that
it is an undisputed fact borne out from the material on record that the Amazon
Consumer Entities which are part of Amazon Group companies have entered into
Customer Services Agreements with their Foreign Affiliates and one such
agreement is produced by the petitioner vide Annexure-C, a perusal of which will
clearly indicate that the petitioner is neither an executant nor a party to the
said agreements; on the other hand, the foreign affiliates, in particular,
Amazon CS Ireland Ltd., having its principal place of business in Ireland
entered into customer service agreements, one of which is at Annexure-D with the
petitioner herein; in this context, it is significant to note that the Amazon
Consumer Entities supra are neither executants nor parties to these agreements
which are entered into only between petitioner and the foreign affiliates; it is
needless to state that it follows therefrom that in the absence of any agreement
/ contract between the Amazon Consumer Entities and the petitioner herein who
have entered into agreements only with the foreign affiliates, there is no
privity of contract between the petitioner and the Amazon Consumer Entities as
can be seen from the aforesaid agreements at Annexures-C and D, which are
extracted as hereunder:
ANNEXURE-C
Customer Services Agreement“This Customer Services Agreement (this “Agreement), effective as of, October 1, 2018 (the “Effective Date”), is by and between Amazon CS Ireland Limited (“Provider”), a Limited Liability Company, having its principal place of business in Ireland, and Amazon Business EU SARL (“Recipient”), a Society Responsibility Limited; having its principal place of business in Luxembourg. Provider and Recipient are collectively referred to as the “Parties”, and each individually is a “Party.”
RECITALS
A. Recipient wishes to engage Provider to perform the services listed in Exhibit B (the “Services”) pursuant to the terms of this Agreement; and
B. Provider desires to perform the Services pursuant to the terms of this Agreement.AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises contained In this Agreement, and for other good and valuable consideration, the adequacy and sufficiency of which are hereby acknowledged, Recipient and Provider agree as follows:
1. Services. Provider and Recipient agree that Provider shall provide (or cause to be provided) Services to Recipient pursuant to this Agreement as from time to time requested by Recipient orally or in writing; provided, however, that Provider reserves the right to decline to render, or cause to be rendered, any Services where Provider, in its sole judgment, does not have adequate facilities, personnel or resources to perform or cause to be performed the Services, or where providing the Services would violate Provider's policies or applicable law. Recipient shall provide Provider with sufficient information and assistance as reasonably requested by Provider to enable Provider to provide the Services or cause the Services to be provided. Provider shall provide the Services or cause the Services to be provided in accordance with any reasonable services standards and guidelines provided by Recipient from time to time with a reasonable time period to implement as may be appropriate. Provider may outsource any or all of the Services to be provided pursuant to this Agreement as well as any other obligations under this Agreement to third parties or Affiliates (as defined below) without the consent of Recipient; provided, however, that such third party or Affiliate must perform the Services in the same manner and to the same standards otherwise agreed to by Provider. “Affiliate” means any business entity that is directly or indirectly controlled by, or under common control with Amazon.com, Inc. For this purpose, control will mean beneficial ownership of 50% or more of the outstanding equity interests in a business entity.
2. Related Services. Provider agrees to provide Recipient with such other services as may be required by Recipient from time to time. Such services shall be negotiated on a case-by-case basis and set forth in either an addendum to this Agreement, a purchase order, or separate contract, as may be appropriate. Without limiting the foregoing, “Intellectual Property rights between the parties are set forth on Exhibit A hereto.2.1 Intellectual Property. “Intellectual Property” shall mean and include, but not limited to: (a) any and all intellectual property rights, owned or otherwise held or Recipient as rights to use, whether existing under intellectual property, unfair competition or trade secret laws, or under statute or at common law or equity, including but not limited to: (i) copyrights and author's rights (including but not limited to reviews and editorial content), trade secrets. trademarks trade names brand names, logos and trade dress, look and feel. “moral right mask works, rights or personality, publicity or privacy, rights in associate or vendor Information rights in customer information (including but not limited to customer lists and customer data), patents, software technologies and tools, Inventions, designs, processes. know-how, and any other intellectual property and proprietary rights (including but not limited to rights in databases, software, marketing strategies and marketing surveys);(ii) any application or right to apply for any of the rights referred to in this clause; and(iii) any and all modifications, enhancements, replacements, renewals, extensions, future equivalents and restorations thereof, now or hereinafter in force and effect; and (b) any and assigned from any third party or
2.2 Derivative Works. “Derivative Works” shall include any and all new or enhanced Intellectual Property and works created in or from the process of use of the existing Intellectual Property by Provider in providing services per this Agreement.3. Pricing and Payment.
3.1. Accounting Principles. All aspects of preparation, presentation, and reporting in regards to this Agreement shall be conducted pursuant to accounting principles set forth on Exhibit C.
3.2. Service Fees. In consideration of Provider's performance of the Services, Recipient shall pay to Provider the fees set forth on Exhibit C attached hereto together with any Taxes Invoiced to Recipient in accordance with Section 8.2 (collectively, the “Service Fees). Service Fees may be paid by cancellation of amounts owing by Provider to Recipient.
3.3. Invoices. Provider will invoice Recipient on a monthly basis unless otherwise defined in Exhibit C attached hereto for the Service Fees. For agreements with a mid-month effective date (any effective date not on the first of the month), the first invoice will be issued in the month following the effective date and shall include all costs incurred beginning in the month following the effective date. Service Fees will be charged through the last day of the month of termination of this Agreement. Payment for any non-contested amounts will be due and payable in accordance with the payment provisions of Exhibit C. Payments for all contested amounts will become due and payable upon the resolution of the contested fee(s) by Provider and the Recipient.
3.4. True-Up. After the close of each calendar year or other period, Provider may conduct an audit of the Services provided by Provider to the Recipient and if Service Fees for any such Services have not been previously invoiced to the Recipient, Provider shall prepare and submit an invoice to the Recipient for such Service Fees. Upon receipt of the invoice, the Recipient will have thirty (30) days from the date of delivery of the invoice to the Recipient to contest any such invoiced amounts. Payment for any non-contested amounts will be due and payable in accordance with the provisions of Exhibit C. Payments for all contested amounts will become due and payable upon the resolution of the contested fee(s) by Provider and the Recipient. The Parties agree that a good faith estimate of the Service Fees may be invoiced during the calendar year pursuant to this Agreement and, as such, this Section 3.4 shall apply to adjust such estimates in accordance herewith. The final calculation of Service Fees for any calendar year, including without limitation adjustments to the Service Fees as a result of an audit performed under this Section 3, 4, may occur after the end of the calendar year and, If so, any adjustments to the estimate will attach in the subsequent calendar year. To the extent that Service Fees include payments estimated by Recipient, no adjustments are required to be made in the event that the actual Service Fees provided are less than those estimated by the Recipient.
3.5. Audit. Provider will keep copies of all books and records relating to the Services during the term of this Agreement and for the later of (1) the expiration of the statute of limitations for any tax return filed by the parties to this agreement that would be impacted by adjustments to the Service Fees or (ii) three years thereafter. Recipient may upon reasonable notice and during normal business hours examine and make copies of all books and records relating to the Services.3.6. Arm's Length Price. It is the intent of the parties that the price paid by Recipient for the Services hereunder equal the price that an unrelated third party would have charged for the Services purchased by Recipient (such amount hereinafter referred to as an “Arm's Length Price”). In the event that any taxing jurisdiction finally determines that the aggregate amount paid to Provider hereunder is not equal to an Arm's Length Price, Recipient shall pay to Provider, as additional compensation hereunder, an amount equal to the difference between the amount actually paid by Recipient and the amount finally determined by such taxing jurisdiction to be an Arm's Length Price. A final determination for this purpose means a final judgment of a federal or state court, or other governmental court, of competent Jurisdiction not appealed from, or a final agreed assessment between the Parties and any tax authority with jurisdiction over the matter holding that the amount paid to Provider hereunder is not equal to an Arm's Length Price.
4. Confidentiality and Data Protection
4.1 Confidentiality. Recipient shall retain in confidence and require its employees at all levels to retain in confidence all Information and know-how transmitted to it by Provider or any other Affiliate that has been Identified by Provider as proprietary or confidential, or that by the nature of the circumstances surrounding the disclosure ought to be treated as proprietary or confidential. Recipient will not use such materials, information and know-how except under the terms and during the existence of this Agreement. Recipient's will return or destroy all tangible materials embodying confidential information promptly following Provider's written request. Recipient's obligations under this Section 4 survive any termination or expiration of this Agreement and extend to the earlier of: (a) such time as the information and know-how protected by this Agreement is in the public domain through no fault of Recipient; and (b) five (5) years following the termination or expiration of this Agreement, or earlier or later if agreed to in writing by the Parties.
4.2 Data Protection. The Recipient will observe all applicable data protection laws, rules and regulations. In particular, Recipient will ensure that it uses appropriate technical and organizational measures to protect Personal Data. “Personal Data” means any data that either on its own or in combination with other available data allows identification of a natural person, (e.g., a human customer or a contact within a corporate customer). Personal Data Includes interest-based profiles of Recipient's or any Affiliate's customers for so long as these profiles have not been anonymized.
5. Status and Liabilities of the Parties.5.1. Relationship Between Parties. Unless otherwise set forth in Exhibit A or Exhibit B or as otherwise authorized in writing, no Party has any authority of any kind to enter into agreements of licenses in the name of or binding on any other Party, or offer of create any warranty or other obligation, express or implied, on behalf of any other Party. Any services performed by a Party pursuant to this Agreement are performed by such Party, as an independent contractor on a non-exclusive basis, and nothing in this Agreement creates a partnership, joint venture franchise of agency relationship between the Parties as a result of this Agreement Provider has exclusive control over its employees, representatives. agents, contractors and subcontractors (collectively, “Personnel”), and over its employee relations and its policies relating to wages, hours, working conditions and other employment conditions Provider has the exclusive right to hire transfer, suspend, dismiss, recall. with its Personnel. Provider is responsible for all salaries and other compensation of its Personnel who provide Services and for making all deductions and withholdings from its employees' salaries and other compensation and paying all contributions, taxes and assessments. Provider's Personnel are not eligible to participate in any employment benefit plans or other benefits available to Recipient's employees.
5.2. Indemnity. Each Party ('Indemnifying Party”) shall indemnify and hold harmless the other Party (Indemnified Party”) and its Affiliates, licensees, permitted assigns, and subcontractors, and their respective directors, officers, and employees and agents from and against any and all claims, costs, losses, damages and expenses (including reasonable attorney fees and costs) arising out of or in connection with: (a) any claims of any employee of the Indemnifying Party relating to his or her employment, including claims of breach of express or implied contract, benefits, wrongful termination, discrimination or harassment; (b) any claims arising from the breach by the Indemnifying Party of its obligations hereunder, and (c) any claims arising out of or in connection with the performance, mis-performance or non-performance of obligations under this Agreement, except to the extent the same arise by reason of the Indemnified Party's gross negligence or willful misconduct5.3. No Warranties. EACH PARTY PROVIDES THEIR RESPECTIVE MATERIALS, AND SERVICES, PURSUANT TO THIS AGREEMENT “AS IS,” “WITH ALL FAULTS” AND WITHOUT WARRANTIES OF ANY KIND, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, REASONABLE CARE, WORKMANLIKE EFFORT, RESULTS, LACK OF VIRUSES, ACCURACY OR COMPLETENESS, ALL OF WHICH EACH PARTY EXPRESSLY DISCLAIMS, AND THE PARTY RECEIVING SUCH MATERIALS, AND SERVICES ASSUMES THE ENTIRE RISK AS TO THE RESULTS AND PERFORMANCE OF THOSE SERVICES, AND MATERIALS. THERE IS NO WARRANTY OF TITLE OR NONINFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OR ANY WARRANTY AGAINST INTERFERENCE WITH ANY PARTY'S OR ANY OTHER ENTITY'S ENJOYMENT OF INFORMATION PROVIDED TO IT RELATING TO THIS AGREEMENT.
5.4. Compliance. Each Party shall comply with all applicable laws, rules and regulations relating to the subject matter of this Agreement.
6. Term.
6.1. Term. The initial term of this Agreement shall commence on the Effective Date and subject to earlier termination as provided herein, continue through the following December 31. The term of this Agreement shall automatically renew every January 1 following the expiration of the initial term for a renewal term that shall expire each following December 3.1 The initial term and any renewal term shall be referred as “Term”.
6.2. Termination without cause. Either Recipient or Provider may terminate this Agreement upon 30 days written notice given to the other Party. This Agreement will automatically terminate in the event that either Party ceases to be an Affiliate.
6.3. Termination for Breach. Either Party may terminate the Agreement, effective upon written notice to the other Party, If:
6.3.1 the other Party materially breaches any of the material provisions of this any Agreement and fails to cure the same within thirty (30) days after receipt of written notice from the other Party; or
6.3.2. the other Party is unable to pay its debts when due, makes any assignment for the benefit of creditors, files any petition under the bankruptcy or insolvency laws, has a receiver or trustee to be appointed for its business or property, or is adjudicated bankrupt or insolvent, and fails to rectify the same within thirty (30) days after receipt of written notice from the other Party.6.4. Effect of Termination. Any termination shall be without prejudice to any other right or remedy afforded to either Party under this Agreement or any applicable law, and will not affect any rights or obligations that have arisen prior to the date of such termination Subject to the foregoing, upon any termination or expiration of this Agreement, all rights and obligations of the Parties hereunder shall be extinguished, except (a) Recipient shall pay all compensation due under Section 3 for Services rendered, up to and including the date of termination, and (b) that Sections 4 through 8 shall survive and continue to bind the Parties in accordance with their terms.
7. General.
7.1. Non-Exclusivity. This Agreement is non-exclusive for both Parties, and nothing in this Agreement shall be read to preclude either Party from entering into a similar agreement with a third party.
7.2. Severability. If any provision hereof shall be held invalid or unenforceable by any court, such holding or action shall be strictly construed and shall not affect the validity or enforceability of any other provisions hereof.
7.3. Entire Agreement. This Agreement (including its Exhibits) constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior agreements, proposals, or understandings, whether written or oral. No representative of Provider or Recipient is authorized to amend the terms hereof except as provided in the following sentence. No amendment or waiver of any provision of this Agreement (including the Exhibits hereto), nor consent to any departure by Provider or Recipient therefrom, shall be effective unless set forth in writing and signed by authorized agents of both Parties, except as otherwise provided in Section 7.4 of this Agreement.
7.4. Binding Effect: Assignment. This Agreement inures to the benefit of and is binding upon the Parties and their respective successors and assigns. Any Party may assign its rights and obligations under this Agreement without the other Parties' consent provided the assignee is an Affiliate of the assignor.
7.5 Force Majeure. This Agreement shall not be terminated as a result of any failure of Party to perform any of its obligations hereunder if such failure is due to an Event of Force Majeure (as defined below), provided, that at such time as an Event of Force Majeure no longer exists, the respective obligations of the Parties hereto shall be reinstated and this Agreement shall continue in full force and effect. The Party affected by any Event of Force Majeure shall give prompt written notice thereof to the other Party hereto and each Party shall use good faith efforts to minimize the duration and consequences of, and to eliminate any such Event of Force Majeure An Event of Force Majeura” means unforeseen control, including without limitation, God, war, not, embargoes, fire, flood, or earthquake, which circumstances prevent that Party from fulfilling its obligations under this Agreement.
7.6 Headings. The headings of the sections of this Agreement have been set forth for use of reference only and shall not be used to construe or interpret the terms and conditions of this Agreement.
7.7 Execution of Agreement: Counterparts: Electronic Signatures. This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Instrument. The exchange of coples of this Agreement and of signature pages by facsimile transmission (whether directly from one facsimile device to another by means of a dial-up connection or whether mediated by the worldwide web), by electronic mail in “portable document format” (“.pdf”) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, or by combination of such means, shall constitute effective execution and delivery of this Agreement as to the Parties and may be used in lieu of the original Agreement for all purposes. Signatures of the Parties transmitted by facsimile shall be deemed to be their original signatures for all purposes.7.8 Further Assurances. Each Party agrees to take such further action and execute, deliver and/or file such documents or instruments as are necessary to carry out the purposes of this Agreement.
8. Other.
8.1. Governing Law. This Agreement is governed by and will be construed in accordance with the laws set forth in Luxembourg. Any dispute arising under, in connection with, or incident to this Agreement or concerning its interpretation will be resolved exclusively in the courts located in Luxembourg, and each Party irrevocably consents to the exercise of jurisdiction of said courts over it. In such a dispute, legal process may be served upon Provider or Recipient in the same manner as provided in this Agreement for delivery of non-electronic notices.
8.2. Taxes. The fees to be paid by Recipient herein do not include any foreign, U.S. federal, state, local, municipal or other governmental taxes, duties, levies, fees, excises or tariffs, arising as a result of or in connection with the transactions contemplated under this Agreement (“Transaction Taxes”). However, Provider may charge and Recipient will pay applicable Transaction Taxes that Provider is legally obligated to charge and pass to authorities, provided that such Transaction Taxes are stated on the original invoice that Provider provides to Recipient and Provider's Invoices state such Transaction Taxes separately and meet the appropriate tax requirements for a valid tax invoice. Recipient may provide Provider an exemption certificate acceptable to the relevant taxing authority, in which case, Provider shall not collect the Transaction Taxes covered by such certificate.
If any taxes are legally required to be withheld on payments made by Recipient to Provider, Recipient shall maintain the right to withhold such taxes and pay them to the appropriate tax authority; provided however, that Recipient will deliver a receipt for any such taxes withheld and any other documents as may be necessary to enable Provider to claim a foreign tax credit or deduction for the taxes withheld. Payment to Provider as reduced by such withholdings will constitute full payment and settlement to Provider of such amounts.
Provider will be responsible for all other taxes (including interest and penalties) or fees arising from transactions and the documentation of transactions under this Agreement.EXHIBIT A
INTELLECTUAL PROPERTY RIGHTSRecipient shall provide to Provider the right to access and/or use any Intellectual Property that Recipient has rights to use that are required in order for the Provider to perform the designated Services listed on Exhibit B or agreed upon by both Parties from time to time per the terms of this Agreement. Recipient retains all rights and any Derivative Works if any may evolve in the course of Provider having access to or using any Intellectual Property in its course of the Provider meeting or carrying out its obligations under this Agreement as a Service Provider.
EXHIBIT B
CUSTOMER SUPPORT SERVICES
“Services” may Include, but are not limited to, the following:
a. Pre-sale customer services to prospective and existing e-commerce customers, or other service customers;
b. Post-sale customer services to address inquiries from e-commerce customers, or other service customers; and
c. Other services, as mutually agreed to by the parties, from time to time;
d. Services will not include Provider entering into or negotiating any contracts for sale of Product or services offered by Recipient.
e. Customer service communications shall be conducted via electronic mail, telephone or other means of communication.
EXHIBIT C
SERVICE FEES
1. Fee Payment. The Recipient agrees to pay the Provider compensation that shall result in an Arm's Length Price for the provision of Services provided under this Agreement The Service Fee calculation may be adjusted from time to time by the Parties in order to maintain an Arm's Length Price as determined by benchmarking studies obtained by the Parties, and maintained In accordance with the applicable regulations governing such transactions.
2. “Costs” means expenses incurred by Provider in performing the Services provided for hereunder, including, but not limited to2.1. Employee compensation and benefits (not including costs of equity compensation)
2.2. Costs associated with hiring and overseeing Independent contractors, reasonable out-of-pocket expenses incurred by Provider personnel in connection with Provider's performance of Services hereunder;
2.3. General and administrative expenses such as payroll, maintenance, and accounting; and
2.4. Provided, however, that Costs do not include interest expense, dividends paid by the Provider, foreign exchange expense or any other expense the Parties may from time to time mutually agree to exclude, as deemed appropriate.3. “Other Costs” means certain expenses that both Parties agree to be charged at Cost.
4. “Costs Percentage(s)” is equal to: 5% (five percent)
5. “Service Fees” means the Recipient shall pay or cause to be paid to Provider as compensation for Services performed an amount equal to the sum of Other Costs and Costs and Costs multiplied by the Costs Percentage(s)Service Fees = (Other Costs]+ [Costs] + [Costs x Costs Percentage(s)]
6. Currency. Unless otherwise agreed to by the parties, the Service Fees will be invoiced and paid in EUR Euro.
7. Invoices. Payment shall be due and payable NET 90 days after the date of the invoice.
8. True-Up Payment. To the extent that a True-Up Payment is required, payment of non-contested amounts is due and payable 90 days after the end of the month in which the invoice containing the True-Up amount is issued.
9. Accounting Principles. United States Generally Accepted Accounting Principles shall apply.10. Advance Payments. As agreed upon from time to time by Parties, Recipient may make advance payments to the Provider for services to be rendered by the Provider to Recipient under this Agreement. To the extent the advance payment differs from the Service Fees actually accrued during a given month, the excess advance payment will be credited against the next invoice for Service Fees, while any shortfall shall be added to the next invoice for Service Fees. Any excess advance payment will be repaid by the Provider to Recipient if this Agreement expires or is terminated.
11. Manner of Payment. Recipient may pay Service Fees hereunder by way of cash or by book entry offset against other amounts due and payable. Payment of Service Fees in cash shall be made in the Currency set forth herein, directly to Provider or to such bank as is designated by Provider.
12. Amazon Security Policy. Provider will comply in all respects with Amazon's Security Policy. Recipient may change the Security Policy, from time to time, at its sole discretion. Recipient, or retained third party, may audit and verify Provider's compliance with this Agreement. Such audit shall be conducted on prior written notice at the expense of Recipient and will be performed during Provider's normal business hours.ANNEXURE-D
“Customer Services AgreementThis Customer Services Agreement (this “Agreement”), effective as of April 1, 2016, (the “Effective Date”), is made and entered into by and between Amazon Development Centre (India) Private Limited (“Provider”), a Private Limited Company, having its principal place of business in India, and Amazon CS Ireland Limited (“Recipient”), a Limited Liability Company, having its principal place of business in Ireland. Provider and Recipient are collectively referred to as the “Parties”, and each individually is a “Party.”
RECITALS
A. Recipient wishes to engage Provider to perform the services listed in Exhibit B (the “Services”) pursuant to the terms of this Agreement; and
B. Provider desires to perform the Services pursuant to the terms of this Agreement.AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises contained in this Agreement, and for other good and valuable consideration, the adequacy and sufficiency of which are hereby acknowledged, Recipient and Provider agree as follows:
1. Services. Provider and Recipient agree that Provider shall provide (or cause to be provided) Services to Recipient pursuant to this Agreement as from time to time requested by Recipient orally or in writing; provided, however, that Provider reserves the right to decline to render, or cause to be rendered, any Services where Provider, in its sole judgment, does not have adequate facilities, personnel or resources to perform or cause to be performed the Services, or where providing the Services would violate Provider's policies or applicable law. Recipient shall provide Provider with sufficient information and assistance as reasonably requested by Provider to enable Provider to provide the Services or cause the Services to be provided. Provider shall provide the Services or cause the Services to be provided in accordance with any reasonable services standards and guidelines provided by Recipient from time to time with a reasonable time period to implement as may be appropriate. Provider may outsource any or all of the Services to be provided pursuant to this Agreement as well as any other obligations under this Agreement to third parties or Affiliates (as defined below) without the consent of Recipient: provided, however, that such third party or Affiliate must perform the Services in the same manner and to the same standards otherwise agreed to by Provider. “Affiliate” means any business entity that is directly or indirectly controlled by, or under common control with Amazon.com, Inc. For this purpose, control will mean beneficial ownership of 50% or more of the outstanding equity Interests in a business entity.
2. Related Services. Provider agrees to provide Recipient with such other services as may be required by Recipient from time to time. Such services shall be negotiated on a case-by-case basis and set forth in either an addendum to this Agreement, a purchase order, or separate contract, as may be appropriate. Without limiting the foregoing intellectual property rights between the Parties as set forth on Exhibit A hereto.
3. Pricing and Payment.
3.1 Accounting Principles. All aspects of preparation, presentation, and reporting in regards to this Agreement shall be conducted pursuant to accounting principles set forth on Exhibit C.
3.2 Service Fees. In consideration of Provider's performance of the Services, Recipient shall pay to Provider the fees set forth on Exhibit C attached hereto together with any Taxes invoiced to Recipient in accordance with Section 8.2 (collectively, the “Service Fees”) Service Fees may be paid by cancellation of amounts owing by Provider to Recipient.
3.3 Invoices. Provider will invoice Recipient on a monthly basis unless otherwise defined in Exhibit C attached hereto for the Service Fees. For agreements with a mid-month effective dale (any effective date not on the first of the month), the first invoice will be issued in the month following the effective date and shall include all costs incurred beginning in the month following the effective date. Service Fees will be charged through the last day of the month of termination of this Agreement. Payment for any non-contested amounts will be due and payable in accordance with the payment provisions of Exhibit C. Payments for all contested amounts will become due and payable upon the resolution of the contested fee(s) by Provider and the Recipient.
3.4 True-Up. After the close of each calendar year or other period, Provider may conduct an audit of the Services provided by Provider to the Recipient and if Service Fees for any such Services have not been previously invoiced to the Recipient, Provider shall prepare and submit an invoice to the Recipient for such Service Fees. Upon receipt of the invoice, the Recipient will have thirty (30) days from the date of delivery of the invoice to the Recipient to contest any such invoiced amounts. Payment for any non-contested amounts will be due and payable in accordance with the provisions of Exhibit C. Payments for all contested amounts will become due and payable upon the resolution of the contested fee(s) by Provider and the Recipient. The Parties agree that a good faith estimate of the Service Fees may be invoiced during the calendar year pursuant to this Agreement and, as such, this Section 3.4 shall apply to adjust such estimates in accordance herewith. The final calculation of Service Fees for any calendar year, including without limitation adjustments to the Service Fees as a result of an audit performed under this Section 3.4, may occur after the end of the calendar year and, if so, any adjustments to the estimate will attach in the subsequent calendar year. To the extent that Service Fees include payments estimated by Recipient, no adjustments are required to be made in the event that the actual Service Fees provided are less than those estimated by the Recipient.3.5 Audit. Provider will keep copies of all books and records relating to the Services during the term of this Agreement and for the later of (i) the expiration of the statute of limitations for any tax return filed by the parties to this agreement that would be impacted by adjustments to the Service Fees or (ii) three years thereafter, Recipient may upon reasonable notice and during normal business hours examine and make copies of all books and records relating to the Services.
3.6 Arm's Length Price. It is the intent of the parties that the price paid by Recipient for the Services hereunder equal the price that an unrelated third party would have charged for the Services purchased by Recipient (such amount hereinafter referred to as an “Arm's Length Price 7. In the event that any taxing jurisdiction finally determines that the aggregate amount paid to Provider hereunder is not equal to an Arm's Length Price, Recipient shall pay to Provider, as additional compensation hereunder, an amount equal to the difference between the amount actually paid by Recipient and the amount finally determined by such taxing Jurisdiction to be an Arm's Length Price. A final determination for this purpose means a final judgment of a federal or state court, or other governmental court, of competent jurisdiction not appealed from, or a final agreed assessment between the Parties and any tax authority with jurisdiction over the matter, holding that the amount paid to Provider hereunder is not equal to an Arm's Length Price.4. Confidentiality and Data Protection
4.1 Confidentiality. Recipient shall retain in confidence and require its employees at all levels to retain in confidence all information and know-how transmitted to it by provider or any other Affiliate that has been identified by Provider as proprietary or confidential, or that by the nature of the circumstances surrounding the disclosure ought to be treated as proprietary or confidential. Recipient will not use such materials, information and know-how except under the terms and during the existence of this Agreement. Recipient's will return or destroy all tangible materials embodying confidential information promptly following Provider's written request. Recipient's obligations under this Section survive any termination or expiration of this Agreement and extend to the earlier of: (a) such time as the information and know-how protected by this Agreement is in the public domain through no fault of Recipient; and (b) five (5) years following the termination or expiration of this Agreement, or earlier or later if agreed to in writing by the Parties.
4.2 Data Protection. The Recipient will observe all applicable data protection laws, rules and regulations. In particular, Recipient will ensure that it uses appropriate technical and organizational measures to protect Personal Data. “Personal Data” means any data that either on its own or in combination with other available data allows identification of a natural person, (e.g., a human customer or a contact within a corporate customer). Personal Data includes interest-based profiles of Recipient's or any Affiliate's customers for so long as these profiles have not been anonymized.
5. Status and Liabilities of the Parties.5.1 Relationship Between Parties. Unless otherwise set forth in Exhibit A, Exhibit B, or Exhibit C as otherwise authorized in writing, no Party has any authority of any kind to enter into agreements or licenses in the name of or binding on any other Party, or offer or create any warranty or other obligation, express or implied, on behalf of any other Party. Any services performed by a Party pursuant to this Agreement are performed by such Party as an independent contractor on a non-exclusive basis, and nothing in this Agreement creates a partnership, joint venture, franchise or agency relationship between the Parties as a result of this Agreement. Provider has exclusive control over its employees, representatives, agents, contractors and subcontractors (collectively, “Personnel”), and over its employee relations and its policies relating to wages, hours, working conditions and other employment conditions. Provider has the exclusive right to hire, transfer, suspend, dismiss, recall, promote, discipline, discharge and adjust grievances with its Personnel. Provider is solely responsible for all salaries and other compensation of its Personnel who provide Services and for making all deductions and withholdings from its employees' salaries and other compensation and paving all contributions, taxes and assessments. Provider's Personnel are not eligible to participate in any employment benefit plans or other benefits available to Recipient's employees.
5.2 Indemnity. Each Party (“Indemnifying Party”) shall indemnify and hold harmless the other Party (“Indemnified Party”) and its Affiliates, licensees, permitted assigns, and subcontractors, and their respective directors, officers, and employees and agents from and against any and all claims, costs, losses, damages and expenses (including reasonable or connection with: (a) any claims of employee of the Indemnifying Party relating to his or her employment, including claims of preach of express or implied contract, benefits, wrongful termination, discrimination or harassment (b) any claims arising from the breach by the Indemnifying Party of its obligations hereunder, and (c) any claims arising out of or in connection with the performance, mis-performance or non-performance of obligations under this Agreement, except to the extent the same arise by reason of the Indemnified Party's gross negligence or willful misconduct.5.3 No Warranties. EACH PARTY PROVIDES THEIR RESPECTIVE MATERIALS, AND SERVICES, PURSUANT TO THIS AGREEMENT “AS IS,” “WITH ALL FAULTS AND WITHOUT WARRANTIES OF ANY KIND, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, REASONABLE CARE, WORKMANLIKE EFFORT, RESULTS, LACK OF VIRUSES, ACCURACY OR COMPLETENESS, ALL OF WHICH EACH PARTY EXPRESSLY DISCLAIMS, AND THE PARTY RECEIVING SUCH MATERIALS, AND SERVICES ASSUMES THE ENTIRE RISK AS TO THE RESULTS AND PERFORMANCE OF THOSE SERVICES, AND MATERIALS. THERE IS NO WARRANTY OF TITLE OR NONINFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OR ANY WARRANTY AGAINST INTERFERENCE WITH ANY PARTY'S OR ANY OTHER ENTITY'S ENJOYMENT OF INFORMATION PROVIDED TO IT RELATING TO THIS AGREEMENT.
5.4 Compliance. Each Party shall comply with all applicable laws, rules and regulations relating to the subject matter of this Agreement.
6.Term .
6.1 Term. The initial term of this Agreement shall commence on the Effective Date and subject to earlier termination as provided herein, continue through the following March 31. The term of this Agreement shall automatically renew every April 1 following the expiration of the initial term for a renewal term that shall expire each following March 31. The initial term and any renewal term shall be referred to as the “Term”.
6.2 Termination without cause. Either Recipient or Provider may terminate this Agreement upon 30 days written notice given to the other Party. This Agreement will automatically terminate in the event that either Party ceases to be an Affiliate.
6.3 Termination for Breach. Either Party may terminate the Agreement, effective upon written notice to the other Party, if:
6.3.1. the other Party materially breaches any of the material provisions of this Agreement and fails to cure the same within thirty (30) days after receipt of written notice from the other Party, or
6.3.2. the other Party is unable to pay its debts when due, makes any assignment for the benefit of creditors, files any petition under the bankruptcy or insolvency laws, has a receiver or trustee to be appointed for its business or property, or is adjudicated bankrupt or insolvent, and fails to rectify the same within thirty (30) days after receipt of written notice from the other Party.
6.4 Effect of Termination. Any termination shall be without prejudice to any other right or remedy afforded to either Party under this Agreement or any applicable law, and will not affect any rights or obligations that have arisen prior to the date of such termination. Subject to the foregoing, upon any termination or expiration of this Agreement, all rights and obligations of the Parties hereunder shall be extinguished, except (a) Recipient shall pay all compensation due under Section 3 for Services rendered, up to and including the date of termination, and (b) that Sections 4 through 8.2 shall survive and continue to bind the Parties in accordance with their terms.7. General.
7.1 Non-Exclusivity. This Agreement is non-exclusive for both Parties, and nothing in this Agreement shall be read to preclude either Party from entering into a similar agreement with a third party.
7.2 Severability. If any provision hereof shall be held invalid or unenforceable by any court, such holding or action shall be strictly construed and shall not affect the validity or enforceability of any other provisions hereof.
7.3 Entire Agreement. This Agreement (including its Exhibits) constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior agreements, proposals, or understandings, whether written or oral. No representative of Provider or Recipient is authorized to amend the terms hereof except as provided in the following sentence. No amendment or waiver of any provision of this Agreement (including the Exhibits hereto), nor consent to any departure by Provider or Recipient therefrom, shall be effective unless set forth in writing and signed by authorized agents of both Parties, except as otherwise provided in Section 7.4 of this Agreement.
7.4 Binding Effect; Assignment. This Agreement inures to the benefit of and is binding upon the Parties and their respective successors and assigns. Any Party may assign its rights and obligations under this Agreement without the other Parties' consent provided the assignee is an Affiliate of the assignor.
7.5 Force Majeure. This Agreement shall not be terminated as a result of any failure of a Party to perform any of its obligations hereunder if such failure is due to an Event of Force Majeure (as defined below), provided, that at such time as an Event of Force Majeure no longer exists, the respective obligations of the Parties hereto shall be reinstated and this Agreement shall continue in full force and effect. The Party affected by any Event of Force Majeure shall give prompt written notice thereof to the other Party hereto and each Party shall use good faith efforts to minimize the duration and consequences of, and to eliminate any such Event of Force Majeure. An “Event of Force Majeure” means unforeseen circumstances beyond a Party's reasonable control, including without limitation, acts of God, warriol embargoes, fire flood or earthquake, which circumstances prevent that Party from fulfilling is obligations under this Agreement.
7.6 Headings. The headings of the sections of this Agreement have been set forth for use of reference only and shall not be used to construe or interpret the terms and conditions of this Agreement.
7.7 Execution of Agreement Counterparts: Electronic Signatures. This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument The exchange of copies of this Agreement and of signature pages by facsimile transmission (whether directly from one facsimile device to another by means of a dial-up connection or whether mediated by the worldwide web), by electronic mail in “portable document format (.pdf) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, or by combination of such means, shall constitute effective execution and delivery of this Agreement as to the Parties and may be used in lieu of the original Agreement for all original signatures for all purposes. shall be deemed to be their original signature for all purposes.7.8 Further Assurances. Each Party agrees to take such further action and execute, deliver and/or file such documents or instruments as are necessary to carry out the purposes of this Agreement.
8. Other.
8.1 Governing Law. This Agreement is governed by and will be construed in accordance with the laws set forth in India. Any dispute arising under, in connection with, or incident to this Agreement or concerning its interpretation will be resolved exclusively in the courts located in Bangalore, India, and each Party irrevocably consents to the exercise of jurisdiction of said courts over it. In such a dispute, legal process may be served upon Provider or Recipient in the same manner as provided in this Agreement for delivery of non-electronic notices.
8.2 Taxes. The fees to be paid by Recipient herein do not include any foreign, U.S. federal, state, local, municipal or other governmental taxes, duties, levies, fees, excises or tariffs, value added tax, service tax, goods and services tax arising as a result of or in connection with the transactions contemplated under this Agreement (“Transaction Taxes”) that Provider is legally obligated to charge under the applicable legislation. Provider should raise a valid invoice under the applicable law(s) and regulations within prescribed time limit. Provider may charge and Recipient will pay applicable Transaction Taxes that Provider is legally obligated to charge and pass to authorities, provided that such Transaction Taxes are stated separately on the valid invoice that Provider provides to Recipient. Recipient may provide Provider an exemption certificate acceptable to the relevant taxing authority, in which case, Provider shall not collect the Transaction Taxes covered by such certificate.
If any taxes are legally required to be withheld on payments made by Recipient to Provider, Recipient shall maintain the right to withhold such taxes and pay them to the appropriate tax authority, provided however, that Recipient will deliver a receipt for any such taxes withheld and any other documents necessary to enable Provider to claim a tax credit for the taxes withheld. Payment to Provider as reduced by such withholdings will constitute full payment and settlement to Provider of such amounts.
The provider shall provide necessary support and documentation (including permanent account number) as may be required by the Recipient to discharge its obligations. If the a lower or no tax with reference to the payment by the Recipient to the Provider under this Agreement, the Recipient may consider such certificate in undertaking its tax withholding obligations.
Provider confirms that it will pay any applicable taxes on its income, as applicable under this agreement on all amounts on which taxes are not withheld and file a return of income reporting such income under the applicable laws.
Provider will be responsible for all other taxes (including interest and penalties) or fees arising from transactions and the documentation of transactions under this Agreement.
EXHIBIT A
INTELLECTUAL PROPERTY RIGHTS
1. Definitions
1.1. “Affiliate” as defined in Section 1 of the Agreement.
1.2. “Intellectual Property” means (a) any and all intellectual property rights, owned or otherwise held for the right to use, whether existing under intellectual property, unfair competition or trade secret laws, or under statute or at common law or equity, including but not limited to: (i) copyrights and author's rights (including but not limited to reviews and editorial content), trade secrets, trademarks, patents, inventions, designs, logos and trade dress, look and feel, “moral rights,” mask works, rights or personality, publicity or privacy, rights in associate or vendor information, rights in customer information (including but not limited to customer lists and customer data), and any other intellectual property and proprietary rights (including but not limited to rights in databases, software, marketing strategies and marketing surveys); (ii) any application or right to apply for any of the rights referred to in this clause; and (iii) any and all renewals, extensions, future equivalents and restorations thereof, now or hereinafter in force and effect; and (b) any and all intellectual property licensed, transferred or assigned from any third party or Affiliate.
1.3. “Trademarks” means any and all trademarks, service marks, trade names, style or model names, domain names, logos and designs owned or controlled or having rights to use by the Recipient.
2. Intellectual Property
2.1. Use by Provider. Provider shall be entitled to use such Intellectual Property of the Recipient as the Recipient makes available to Provider, for the purpose and to the extent that is only necessary for the provision of Services. Nothing in this Agreement shall be construed as transferring to Provider any rights in Intellectual Property of Recipient. To the extent such use applies to Trademarks, trade names, trade dress, “look and feel” and service marks, (a) Provider's use of such Trademarks, trade names, trade dress, “look and feel” and service marks are subject to Provider's compliance with any trademark usage guidelines that Recipient may provide to Provider from time to time during the term of this Agreement, and (b) Provider acknowledges and agrees that as between the parties all goodwill arising from the use of such Trademarks, trade names. trade dress, “look and feel” and service marks inure solely to the Recipient's benefit.
2.2. Ownership by Recipient. The parties agree that the results and proceeds of Provider's Services under this Agreement have been specially ordered or commissioned by Recipient. As between the Parties, Recipient shall be deemed to own, without any restrictions or limitations whatsoever, the sole and exclusive rights to all Intellectual. Property developed or acquired by Provider in the course of providing the Services throughout the world and in perpetuity, and Provider irrevocably, solely and exclusively assigns to Recipient, it successors and assigns, all right (including without limitation sublicensing rights), title, interest and ownership in and to such Intellectual Property. T the extent any of Provider's rights in such Intellectual Property, including without limitation any moral rights, are not subject to assignment under this Agreement, and to the extent such Intellectual Property includes material subject to copyright, patent, trade secret, or other proprietary right protection, Provider hereby irrevocably and unconditionally waives all enforcement of such rights. Provider will execute and deliver to Recipient such additional instruments, and take such other actions as Recipient may reasonably request to confirm evidence or carry out the grant of rights contemplated by this Section 2.2 of Exhibit A.
EXHIBIT B
SERVICES
The Services shall consist of the services described in this Exhibit B.
1. “Services” may include, but are not limited to the following:1.1. Presale and after sale customer services as are reasonably required by Recipient to address inquiries from e-commerce customers, interested website visitors, or other service customers. Customer services communications shall be conducted via electronic email, telephone or other means of communication. Services will not include entering or negotiating any contracts for sale of products;
1.2. Human resources including but not limited to, headcount, planning, personnel policies, procedures and training programs, compensation planning including performance of evaluation, salary and bonus determination, stock option plans, deferred compensation plans, development and implementation of benefit plans, including health insurance, life insurance, accidental death insurance, child care and employee assistance, tax deferred savings plans, and other human resource matters as mutually agreed by the parties;
1.3. Finance, accounting and payroll services, including but not limited to, budgeting, forecasting, financial analysis and planning, treasury activities including cash management, local accounting and payroll assistance;
1.4. Tax Services, including but not limited to, assistance with tax planning, policy, advisory and compliance (both direct and indirect taxation matters) advice with tax risk management, assistance in structuring tax reporting and accounting processes, and other related tax matters as mutually agreed by the parties;
1.5. Legal Services, including but not limited to, assistance with legal planning and negotiation of commercial transactions involving corporate law and other relevant jurisdiction legal issues, legal review of commercial documents, contracts, real property and employment related issues, advice regarding legal corporate compliance matters, keeping and updating corporate records, and other legal matters as mutually agreed to by the parties.
1.6. Any other services the Parties may agree to from time to time.2. Compliance. Provider shall comply with all applicable laws, rules and regulations in providing the Services, including without limitation, Section 4 of this Agreement and any other export and privacy laws and regulations.
EXHIBIT C
SERVICE FEES
1. Fee Payment. The Recipient agrees to pay the Provider compensation that shall result in an Arm's Length Price for the provision of Services provided under this Agreement. The Service Fee calculation may be adjusted from time to time by the Parties in order to maintain an Arm's Length Price in accordance with the applicable regulations governing such transactions.
2. “Costs” means expenses incurred by Provider in performing the Services provided for hereunder, including, but not limited to:2.1. Employee compensation and benefits;
2.2. Costs associated with hiring and overseeing independent contractors, reasonable out-of-pocket expenses incurred by Provider personnel in connection with Provider's performance of Services hereunder,
2.3. General and administrative expenses such as payroll, maintenance, and accounting: and
2.4. Provided, however, that Costs do not include interest expense, dividends paid by the Provider, foreign exchange expense or any other expense the Parties may from time to time mutually agree to exclude, as deemed appropriate.
3. “Other Costs” means certain expenses that both Parties agree to be charged at Cost.
4. “Costs Percentage(s)” is equal to: 15.0% (fifteen percent)
5. “Services Fees” means the Recipient shall pay or cause to be paid to Provider as compensation for Services performed an amount equal to the sum of Other Costs and Costs and Costs multiplied by the Costs Percentage(s)Service Fees = [Other Costs] + [Costs] + [Costs x Costs Percentage(s)]
6. Currency. Unless otherwise agreed to by the parties, the Service Fees will be invoiced and paid in EUR-EURO.
7. Invoices. Payment shall be due and payable NET 30 days after the date of the invoice.
8. True-Up Payment. To the extent that a True-Up Payment is required, payment of non-contested amounts is due and payable 30 days after the end of the month in which the invoice containing the True-Up amount is issued.
9. Accounting Principles. United States Generally Accepted Accounting Principles shall apply.
10. Advance Payments. As agreed upon from time to time by Parties, Recipient may take advance payments to the Provider for services to be rendered by the Provider to Recipient under this Agreement. To the extent the advance payment differs from the Fees actually accrued during a given month, the excess advance payment will be credited against the next invoice for Service Fees, while any shortfall shall be added to the next invoice for Service Fees. Any excess advance payment (net of withholding taxes) will be repaid by the Provider to Recipient if this Agreement expires or is terminated.11. Manner of Payment., Recipient may pay Service Fees hereunder by way of cash or by book entry offset against other amounts due and payable. Payment of Service Fees in cash shall be made in the Currency set forth herein, directly to Provider or to such bank as is designed by Provider.
12. Amazon Security Policy. Provider will comply in all respects with Amazon's Security Policy. Recipient may change the Security Policy, from time to time, at its sole discretion. Recipient, or retained third party, may audit and verify Provider's compliance with this Agreement. Such audit shall be conducted on prior written notice at the expense of Recipient and will be performed during Provider's normal business hours.
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-GSTGovernment 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 services2.1 ‘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.
(2) Subject to the provisions of sub-section (5) of section 17 of the Central Goods and Services tax Act, credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply.
(3) A registered person making zero rated supply shall be eligible to claim refund of unutilised input-tax credit on supply of goods or services or both, without payment of integrated tax, under bond or letter of undertaking, in accordance with the provisions of section 54 of the Central Goods and Services tax Act or the rules made thereunder, subject to such conditions, safeguards and procedure as may be prescribed :
Provided that the registered person making zero rated supply of goods shall, in case of non-realisation of sale proceeds, be liable to deposit the refund so received under this sub-section 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 form 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”. The relevant extract of the recitals and the clauses in question read as follows :
Master Services Sub-contracting Agreementbetween
Genpact International, Inc.,and
Genpact IndiaRecitals
Whereas, GI is in the business of providing business process outsourcing and information technology services to its customers (each a “GI Customer,” and, collectively, the “GI Customers” ) and establishing, maintaining and expanding mutually beneficial relationships with such GI Customers.
Whereas, provider is an affiliates of GI and has agreed to act as non-exclusive subcontractor for GI, subject to, and in accordance with, the terms of this agreement ;
Whereas, GI intends to appoint the provider or any of them as its sub-contractor(s) to perform certain of these business process outsourcing and information technology services on behalf of GI for the GI customers, as may be appropriate, from time to time ;
Whereas, provider shall have the opportunity to accept or reject any such proposed appointment by GI in its sole discretion, subject to the terms of this agreement ;
Whereas, each provider agrees that, in the event it shall have agreed to accept any such appointment by GI, to perform its obligations in a manner and at a level that satisfies in all respects GI's obligations to the relevant GI customers, as set forth in the agreements and statements of work (each, a “Customer Statement of Work”) entered into from time to time between GI and the GI Customers (collectively, the “GI Customer Agreements”).
Whereas the provider acknowledges that upon such acceptance to perform services for GI, customer statement of work terms on performance standards, indemnities, liabilities and other operating terms, excepting pricing under each customer statement of work will be applicable by reference to all services to be performed by the provider under this agreement.
Whereas, GI will have continuing responsibility for obtaining new GI customers and managing and expanding its relationships with existing GI customers, for the benefit of the provider and other similarly situated affiliates of GI (the “Other GI Provider Affiliates”) who also provide services to GI in satisfaction of GI's obligations to the GI Customers under the GI customer agreements ;
Now, therefore, in consideration of the foregoing and the mutual promises herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows :Article 3 GI'S obligations and services
In addition to any other obligations set forth below in this agreement, GI shall be obligated to provide the following services :
3.1 Managing new and existing customer relationships, GI shall be responsible for performing all functions necessary to obtain new GI customers for whom services shall be performed by the provider and by the other GI provider affiliates and for maintaining and expanding all existing GI customer relationships. Such functions shall include, but not be limited to, scheduling regular meetings with existing and potential GI customers ; developing presentations for GI customers on existing and new product and service offerings; preparation for, and attendance at, appropriate conventions and industry meetings ; handling all public relations and advertising matters, etc.
3.2 GI account representatives. GI shall at all times have one or more specific senior personnel identified and appointed to serve each GI Customer (each, a “GI Account Representative”) who shall be responsible for managing the relationship with each GI customer to whom they are assigned. GI and the applicable GI account representatives shall also be responsible for determining which providers and/or other GI provider affiliate(s) shall be assigned to perform services for each GI customer as per GI customer requirements (in consultation with the relevant providers and other GI provider affiliates) and for balancing to the extent feasible, the allocation of services among the providers and other GI provider affiliates so that each GI affiliate is providing Services in accordance with its capacity and capabilities. The GI account representatives for each customer shall also (a) be the primary contact for the providers in dealing with the respective GI customer under this agreement, (b) have overall responsibility for managing and co-ordinating the receipt of the services for such GI customer, (c) interact regularly with the provider account representative (as hereinafter defined) and (d) have the authority to make decisions with respect to actions to be taken by GI in the ordinary course of day-to-day management of GI's receipt of the services.
3.3. ..
3.4 Customer invoicing and collection. GI shall be responsible for processing all invoices rendered to GI customers, in the form required by each GI customer, as set forth in the relevant customer agreement, and for handling all disputes with GI customers. Notwithstanding the foregoing, it shall be the responsibility of each Provider to furnish GI with all financial data and other support as may be necessary in order for GI to render invoices to GI customers with respect to services provided by the provider.
Article 4 Personal data processing4.1 Personal data. In performance of this agreement, each provider may have access to, or otherwise process, GI customer personal data on a GI customer's behalf. GI customer personal data will be accessed and otherwise processed by each provider only to the extent strictly necessary to perform this agreement, or upon GI's written instructions and in strict compliance thereof.
4.2 Data protection
(a) Notwithstanding anything in article 11 (confidentiality) to the contrary, each Provider agrees to keep the GI customer personal data confidential, and agrees to not disclose any GI customer personal data to third parties without having first received express written approval from the GI customer and GI and, if required by applicable law, the applicable data subject. All provider personnel with process GI customer personal data only on a need-to-know basis in connection with the performance of this agreement.
Article 5 services
5.1 The customer agreement and customer statements of work are by reference incorporated into the terms of this agreement and standard operating procedures.
(a) On or before the service commencement date for any customer statement of work, each provider shall deliver a draft of the standard operating procedures for the services which will be finalized and adopted by the provider.
(b) Subject to the terms of this agreement, the parties shall comply at all times with the standard operating procedures.
(c) Each provider shall update the standard operating procedures from time to time to reflect changes in the services being delivered.
5.2 Disaster recovery services. Provider shall provide to GI the disaster recovery assistance, co-operation and services, if any, that are relevant. Each provider shall be responsible for business continuity planning or disaster recovery to the extent set forth in a customer statement of work.
5.3 Reports. Each provider shall provide to GI, and directly to the GI customer, where so agreed, the reports set forth in the customer statements of work in accordance with the frequencies set forth therein.
5.4 Records retention.—Each provider shall retain applicable books and records in accordance with the records retention standards in accordance with law, or as required by GI or the GI customer, whichever is the longest.
Article 7 service levels
7.1 General. The service levels mentioned in each customer statement of work shall be used to measure provider's performance (the “Service Levels”). For project based customer statement of work all the deliverables and the milestones or any other such measurement shall be used to measure the provider's progress with respect to completion of the applicable services.
7.2 and 7.3. ..7.4 Measurement and monitoring tools. Provider shall implement its measurement and monitoring tools and procedures to measure and monitor its performance against the service levels in any given customer statement of work. Upon GI's reasonable request, provider shall provide GI with information and access to such measurement and monitoring tools and procedures for purposes of verification.
Article 10 fees and payment terms
10.1 Service charges
(a) The charges for services provided to GI by a provider during a particular calendar year with respect to each GI customer (the “Provider Service Fee”) shall be invoiced to and paid for by GI to the provider at an amount equal to the excess of (i) over the sum of (ii), (iii) and (iv) below :
(i) the amount invoiced to the GI customer for such services (as denominated in US Dollars), in accordance with such customer statements of work and customer agreements including amount invoiced for special projects/migration.
(ii) (a) GI's fully-loaded costs in providing its services with respect to such GI customer, calculated in U. S. Dollars, as described in article 3 hereof and (b) GI's pass through costs including attributable to special projects/migration ((a) and (b) together referred to as “GI costs”)
(iii) Arms' length net margin to be retained by GI pursuant to an economic analysis in accordance with internationally accepted principles as agreed between the parties from time to time.
(iv) Any adjustments made by GI for compensating the support region ((ii), (iii) and (iv) together referred to as “GI service fee”).
Article 16 termination
16.1 Termination for cause. If a provider fails to perform any of its material obligations under this agreement or a customer statement of work and does not cure such failure within the cure period mentioned in such customer statement of work or where no such cure period is mentioned in a customer statement of work, within 30 days of receipt of a notice of default from GI, then GI may, by giving notice to the provider within 120 days (or such number of days as mutually agreed) of the last day of such cure period, terminate such customer statement of work as of the date specified in such notice of termination.
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 sub-contracting. 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 11-11-2022 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 11-11-2022 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 Co-ordinate 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 sub-contractors, 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 65 (05) (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.
26. 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 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.…
(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. 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 20-9-2021 which clearly defines the scope of “intermediary services”. The relevant extracts of the said circular are set out below:
“2. Scope of intermediary services
2.1. ‘Intermediary’ has been defined in the sub-section (13) of Section 2 of the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as ‘IGST’ Act) as under—
‘Intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account.’
2.2. The concept of ‘intermediary’ 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 re-adjudication.
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 3TH represented by its duly authorised signatory Mr. Stuart Burns hereinafter referred to as ‘the Foreign Company’ of the One Partand
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 XXXX5. 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 intermediary, 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 3rd 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 3rd 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.
2. 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.
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 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 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.’(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.
(xii) In Genpact India (P) Ltd. v. UOI - 2022 SCC OnLine P&H 425, the Hon’ble Punjab & Haryana High Court held as under:-
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 3rd 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 3rd party to render the main service which has actually been rendered by the petitioner.
(xiii) So also the Hon’ble Division Bench of the Delhi High Court in M/s Ernst and Young Ltd. v. Commr., CGST - 2023 SCC OnLine Del 1764, held as under:-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.
(xiv) Similarly, in Ohmi Industries Asia (P) Ltd. v. Commr. (CGST) - 2023 SCC OnLine Del 2029, reiterating the view held in Ernst & Young (supra), the Delhi High Court held 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.”
18. Admittedly, in the present case, the petitioner is rendering the market research services directly to OHMI, Japan. Therefore, insofar as providing market research services is concerned, the petitioner cannot be held to be an intermediary.(xv) So also, in Xilinx India Technology Services (P) Ltd. v. Commr.,- 2023 SCC OnLine Del 5628, the Delhi High Court held as under:-
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.(xvi) The Delhi High Court examining the requirements of an ‘intermediary’ in Boks Business Services (P) Ltd. v. Commr. (CGST) - 2023 SCC OnLine Del 5312, held as under:-
10. It is clear from the aforesaid terms, that the petitioner is not an intermediary, 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.’
14. The aforesaid facts and circumstances and the principles enunciated in the aforesaid judgments clearly establish that respondents 2 and 5 committed an error in setting aside the refund sanction order passed by respondent No.3 and rejecting the refund claim of the petitioner by passing the impugned orders and SCNs which are illegal, arbitrary and contrary to law and facts and without jurisdiction or authority of law warranting interference by this Court in the present petition.
15. In the result, I pass the following:ORDER
(i) Petition is hereby allowed.
(ii) The impugned orders at Annexure-A dated 18.05.2022 passed by 2nd respondent, the impugned show cause notice at Annexure-B dated 06.09.2021 issued by 4th respondent, impugned show cause notice at Annexure-C dated 07.07.2022 issued by the 5th respondent and the impugned order at Annexure-AG dated 26.07.2022 passed by the 5th respondent are hereby quashed.
29. In the light of the aforesaid
discussion and the facts and circumstances narrated supra and the principles
laid down in the aforesaid judgments, I am of the considered opinion that the
petitioner is not an “intermediary” under Section 2 (13) of the IGST Act in
terms of the Circular dated 20.09.2021 and the Customer support services
provided by the petitioner to foreign affiliates qualify as export of service
under Section 2 (6) of the IGST Act and consequently, the impugned orders and
show cause notice deserve to be quashed.
30. In the result, I pass the following:-
ORDER
(i) Petition is hereby partly allowed.
(ii) The impugned Order-in-Appeal at Annexure-A dated 04.01.2024 passed by the 1st respondent insofar as it relates to rejection of the refund claim of the petitioner pertaining to the issue of intermediary / intermediary services is hereby quashed.
(iii) The impugned show cause notice at Annexure-M dated 01.09.2022 issued by the respondents seeking recovery of refund sanctioned in relation to customer support services in favour of the petitioner is hereby quashed.
(iv) Liberty is reserved in favour of the petitioner to contest the remaining issues before the GST Appellate Tribunal as and when the same is constituted by the Central Government.
Sd/-
(S.R.KRISHNA KUMAR)
JUDGE