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IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, Amit Mahajan, JJ.
M/s Ernst And Young Limited – Appellant
Versus
Additional Commissioner, CGST Appeals-ii, Delhi & Anr. – Respondents
W.P.(C) 8600 of 2022
Decided On : 23-03-2023
Intermediary - Goods and Services Tax - Central Goods and Services Tax Act, 2017, Section 112 - The petitioner, an Indian Branch Office of M/s Ernst & Young Limited, filed a petition against the rejection of its refund applications for input tax credit (ITC) in respect of export of services. The court held that the petitioner's services to overseas entities constituted export of services and were not intermediary services as defined under Section 2(13) of the IGST Act. The court set aside the impugned orders and directed the Adjudicating Authority to process the petitioner's refund application.
Fact of the Case:
The petitioner, an Indian Branch Office of M/s Ernst & Young Limited, provided professional services to overseas entities and applied for refund of ITC. The Adjudicating Authority rejected the refund applications, considering the petitioner as an 'intermediary' and holding that the place of supply of services was in India.
Finding of the Court:
The court found that the petitioner's services constituted export of services and were not intermediary services as defined under the IGST Act. It held that the place of supply of the services was outside India, and therefore, the petitioner's refund application should be processed.
Issues: The issues included the classification of the petitioner's services as intermediary services and the determination of the place of supply of the services.
Ratio Decidendi: The court interpreted the definition of 'intermediary' under the IGST Act and emphasized that a person who provides services, as opposed to arranging or facilitating goods or services, is not an intermediary. It also considered the definition of 'export of services' and the provisions of Section 13 of the IGST Act to determine the place of supply of services.
Final Decision: The court allowed the petition, set aside the impugned orders, and directed the Adjudicating Authority to process the petitioner's refund application.
JUDGMENT
Vibhu Bakhru, J. The petitioner is an Indian Branch Office of M/s Ernst & Young Limited and has filed the present petition impugning an order-in-appeal dated 15.03.2022 (Order-in-Appeal No.311-313/2021-22) (hereafter `the impugned order') passed by the Additional Commissioner of CGST Appeal-II (hereafter `the Appellate Authority'), whereby respective appeals preferred by the petitioner against orders-in-original dated 25.01.2020, 09.12.2020 and 21.05.2021 (hereafter `the impugned orders-in-original') passed by the Assistant Commissioner, CGST, Division Vasant Kunj (hereafter `the Adjudicating Authority') were rejected.
2. The petitioner had appealed against the impugned orders-in-original passed by the Adjudicating Authority being aggrieved by the rejection of its refund applications for input tax credit (hereafter `ITC') in respect of export of services for the period from December 2017 to March 2020. The Adjudicating Authority had denied the said applications for refund of ITC on the premise that the petitioner is an `intermediary' and thus, the place of services is located in India, where the petitioner's place of business is located and not where recipient of services is located.
3. The petitioner has the statutory right to appeal the decision of the Appellate Authority before the Goods and Service Tax Appellate Tribunal under Section 112 of the Central Goods and Services Tax Act, 2017 (hereafter `the Act'). However, the said remedy is unavailable as the Goods and Services Tax Appellate Tribunal has not been constituted as yet. Therefore, this Court considers it apposite to entertain the present petition.
Factual Context
4. The petitioner is an Indian Branch Office of M/s Ernst & Young Limited, a company incorporated under the laws of United Kingdom (hereafter `E&Y Limited'). The petitioner was established pursuant to the permission granted by the Reserve Bank of India on 04.04.2008.
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 29.09.2009 entered into between E&Y Limited and EY US; agreement dated 25.10.2010 between E&Y Limited and EY Australia; agreement dated 15.01.2018 entered into between E&Y Limited and EY NZ; agreement dated 20.12.2012 E&Y Limited and EY UK; and agreement dated 25.09.2018 between E&Y Limited and EY US.
8. The terms and conditions for rendering services under the aforementioned agreements are broadly similar in material aspects. It would be relevant to set out the contents of one such agreement dated 29.09.2009 between E&Y Limited and EY US for purpose of setting out a definite context in which the present controversy arises. The same are set out below:
"Ernst & Young US LLP ("EY US") wishes to retain Ernst & Young Limited ("E&Y Limited"), acting through its Indian branch, to provide certain professional services in India, as may be agreed from time to time by the parties (the "Services").
The Services may be in the nature of, but not limited to, the following activities:
(i) assurance and business a
The main legal point established is that the definition of 'intermediary' under the IGST Act does not include a person who provides services on his own account, and the determination of the place of ....
The main legal point established in the judgment is that the petitioner's services did not qualify as 'Intermediary Services' and that the place of supply of services was not in India as per the rele....
The main legal point established in the judgment is that the characterization of services as intermediary services under the IGST Act requires a careful analysis of the nature of the services provide....
The court emphasized that for services to qualify as 'export of services', authorities must accurately ascertain the petitioner's role as an intermediary, citing inadequate findings in previous rulin....
The services provided were not intermediary services but on a principal-to-principal basis, justifying the refund of unutilized input tax credit as the denial was arbitrary and without jurisdiction.
The petitioner is not an intermediary under the IGST Act; their services qualify as export rather than intermediary services, exempting them from GST liability.
The Court determined that the services provided by the petitioner do not constitute intermediary services under the IGST Act but qualify as export of services, leading to the quashing of the impugned....
The court ruled that the tax authority's reliance on non-submitted documents to reject a GST refund claim was improper, requiring reconsideration of evidence validating export service transactions.
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