M/S Gap International Sourcing (INDIA) Private Limited vs. Additional Commissioner, CGST Appeals- Ii & Ors.

Held

The Court found merit in the petitioner's contention that services relating to market research and strategy development cannot be classified as intermediary services. However, acknowledging a serious controversy regarding the exact nature of the services rendered, the Court decided to remand the matter to the Adjudicating Authority for a fresh decision. This decision is to be made in light of the High Court's ruling in M/s Ernst & Young Ltd. v. Additional Commissioner, CGST Appeals-II, Delhi & Anr. The impugned orders were set aside, and the refund applications for FY 2018-19 and 2019-20 were restored before the Adjudicating Authority. The issue regarding the partial rejection of the refund claim for July-September 2018, which was based on the Appellate Authority's finding of insufficient documentary evidence for eligible turnover, was also encompassed within this remand. The Court did not expressly leave any issue undecided, as the entire matter was remitted for fresh adjudication.

Facts

The petitioner, M/s GAP International Sourcing (India) Private Limited, filed a writ petition challenging orders that allowed Revenue's appeals against refund orders for unutilized Input Tax Credit (ITC) for exports of services. The petitioner also challenged orders rejecting its own appeals against the rejection of refund claims for FY 2019-20 and partial denial of refund for July-September 2018. The dispute centers on whether services rendered under an 'Advisory Services Agreement' with an overseas entity constitute intermediary services, thereby disqualifying them from being treated as exports of services. The petitioner argued that these services, involving identifying business opportunities, market research, and strategy development, were not intermediary services as no third party was involved. The Revenue, through the Appellate Authority, held that the petitioner acted as an agent and the services fell under intermediary services, citing Section 13(8) read with Section 2(6) of the IGST Act.

Key Issues

1. Whether the Appellate Authority erred in holding that the services rendered by the petitioner under the Advisory Services Agreement constitute intermediary services, thereby rendering them ineligible for export of services treatment under Section 2(6) of the IGST Act read with Section 13(8) of the IGST Act? Petitioner's arguments: The petitioner contended that the Adjudicating Authority and Appellate Authority erred in confusing services rendered under the 'Support Services Agreement' (which they concede are intermediary services) with those under the 'Advisory Services Agreement'. They argued that the advisory services, focused on market research and strategy development, do not involve a third party and are rendered on a principal-to-principal basis, thus not qualifying as intermediary services. They relied on the decision in M/s Ernst & Young Ltd. v. Additional Commissioner, CGST Appeals-II, Delhi & Anr. Revenue's arguments: The Revenue, through the Appellate Authority, held that the petitioner was acting as an agent and the services provided fell under intermediary services. The judgment does not record specific arguments made by the Revenue before the High Court.