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 provided, the parties involved, and the applicability of relevant provisions.

JUDGMENT

Vibhu Bakhru, J. (Oral)

1. M/s McDonald's India Pvt. Ltd. (hereafter `the petitioner') has filed the present petition impugning an order dated 14.02.2022 (hereafter `the impugned order') passed by the Appellate Authority (Additional Commissioner, CGST Appeals - II, Delhi) rejecting the petitioner's appeal against an Order-in-Original dated 31.08.2020.

2. The petitioner is a company incorporated in India and is a subsidiary of McDonald's Corporation, USA (hereafter `McDonald's USA').

3. The petitioner had entered into a service agreement dated 01.01.1996 (hereafter `Service Agreement'), whereby the petitioner had agreed to perform certain services. The petitioner claims that it is an independent service provider for the services falling within the scope of the Service Agreement. The petitioner is entitled to a consideration on cost plus 10% mark-up basis for the services rendered under the Service Agreement. The petitioner claims that the services rendered by it to McDonald's USA are `zero rated supplies' under Section 16 of the Integrated Goods and Services Tax Act, 2017 (hereafter `IGST Act').

4. The controversy in the present petition relates to the period of April 2018 to March 2019. The appellant claims that during the said period, it had provided services under the said Service Agreement without payment of Integrated Goods and Services Tax (hereafter `IGST') and thus, is entitled to refund of tax paid on inputs (hereafter `ITC')

5. The petitioner filed an application dated 04.08.2020 for refund of goods and service tax paid on the inputs used for the services rendered to McDonald's USA, its holding company, under the Service Agreement.

6. Respondent no. 2 issued a Show Cause Notice dated 14.08.2020 proposing to reject the petitioner's claim for refund of ITC of Rs.9,26,34,542/- as claimed by the petitioner.

7. The petitioner responded to the said Show Cause Notice by a letter dated 27.08.2020. The Adjudicating Authority considered the petitioner's application for refund of ITC and rejected the same by the Order-in-Original dated 31.08.2020. The Adjudicating Authority held that the services rendered by the petitioner could not be considered as export of services as the services rendered by the petitioner were intermediary services and therefore, the place of supply of the said service was in India.

8. The petitioner preferred an appeal against the Order-in-Original dated 31.08.2020 before the Appellate Authority. However, the same was rejected as well.

9. The Appellate Authority upheld the decision of the Adjudicating Authority, holding that the services rendered by the petitioner were intermediary services and the place of supply was in India. The Appellate Authority also held that the services included making periodic visits to existing and prospective suppliers on behalf of McDonald's USA and in terms of Section 13(3)(b) of the IGST Act, the supply of such services was located in India as it required the personal presence of the recipient of services or the person acting on its behalf. The Appellate Authority held that the provisions of Sections 13(3)(b), 13(5) and 13(8)(b) of the IGST Act covered the petitioner's case and held that the place of supply of services was in the taxable territory (India) and did not qualify as export of services under Section 2(6) of the IGST Act.

Submissions

10. Mr Gulati, learned senior counsel appearing for the petitioner, submitted that the impugned order passed by the Appellate Authority was beyond the scope of the Show Cause Notice dated 14.08.2020 and further did not arise from the petitioner's appeal against the Order-in- Original dated 31.08.2020 passed by the Adjudicating Authority. He submitted that the impugned order is liable to be set aside on this ground alone.

11. Next, he submitted that the Adjudicating Authority as well as the Appellate Authority has misconstrued the services rendered by the petitioner in terms of the Service Agreement. He submitted that