Commissioner Of Cgst And Central Excise ... vs Vodafone Idea Limited on 4 July, 2022

1. Outcome
The High Court dismissed the Revenue's writ petition (Writ Petition (L) No. 12860 of 2022) which sought to quash the order-in-appeal. Consequently, the High Court allowed Vodafone Idea Limited's (VIL) writ petition (Writ Petition No. 3221 of 2021), thereby upholding the Joint Commissioner (Appeals) order dated 18.08.2021 and directing the implementation of the refund of Rs.1,02,74,14,843/- to VIL. A stay on the order was granted until August 31, 2022.

2. Core Issue
The core issue was whether the International Inbound Roaming (IIR) and International Long Distance (ILD) services provided by Vodafone Idea Limited (VIL) to Foreign Telecom Operators (FTOs) qualify as "export of services" under Section 2(6) of the Integrated Goods and Services Tax Act, 2017 (IGST Act), specifically concerning the determination of the "recipient of service" and the "place of supply of service" under Section 2(93) of the CGST Act and Section 13 of the IGST Act, respectively, for the purpose of claiming IGST refund.

3. Key Facts
* Vodafone Idea Limited (VIL) provides IIR and ILD services to Foreign Telecom Operators (FTOs) under a telecommunication license from the Government of India.
* VIL claimed these services as "export of services" under Section 2(6) of the IGST Act and opted to pay IGST on these zero-rated supplies, subsequently seeking a refund under Section 16(3)(b) of the IGST Act.
* VIL filed refund applications for IGST amounting to Rs. 1,02,74,14,843/- for the period April 2019 to September 2019.
* The Deputy Commissioner rejected the refund claims via orders dated 16.07.2021 and 19.07.2021, primarily arguing that the place of supply was within Maharashtra and therefore not an export, and that some claims were time-barred.
* VIL appealed to the Joint Commissioner (Appeals), who, by a common order dated 18.08.2021, allowed VIL's appeals, holding that the services qualified as export and were eligible for refund.
* The Revenue challenged this appellate order before the High Court, while VIL sought its implementation.
* VIL's services are contractually provided to FTOs, who are liable to pay and make payments in convertible foreign exchange. VIL has no direct contractual relationship or payment arrangement with the FTOs' individual subscribers roaming in India.

4. Arguments
* Taxpayer (Vodafone Idea Limited):
* The services qualify as "export of services" as all conditions under Section 2(6) of the IGST Act are met.
* The "recipient of service" is the FTO (located outside India) because the FTO is contractually obligated and liable to pay VIL for the services, as per Section 2(93)(a) of the CGST Act. VIL has no contract with the individual subscriber of the FTO.
* The "place of supply of service" is outside India, determined by Section 13(2) of the IGST Act, which designates the location of the recipient of services (FTO) as the place of supply, as the specific provisions of Section 13(3) to (13) do not apply.
* Section 13(3)(b) is inapplicable as it pertains to services supplied "to an individual" requiring physical presence, whereas VIL's services are supplied to a corporate entity (FTO).
* Prior jurisprudence and Board circulars have consistently treated such services as exports.
* Treating these as domestic supplies would lead to complexities, including no refund of IGST on outward supply, but also cessation of reverse charge payments on inward roaming services and potential past refunds for the same.
* Revenue (Commissioner of CGST):
* The services do not qualify as "export of services" because the "place of supply of service" is within India.
* The individual customers of FTOs, while roaming, consume the services physically in Maharashtra (India).
* Therefore, Section 13(3)(b) of the IGST Act applies, which identifies the place of supply as the location where the services are actually performed (i.e., India), as the services are supplied to an individual requiring physical presence for consumption.
* Consequently, condition (iii) of Section 2(6) of the IGST Act (place of supply outside India) is not fulfilled.
* The orders relied upon by the Joint Commissioner (Appeals) are currently under challenge before higher forums, implying their precedential value is not final.

5. Court’s Reasoning
* The Court affirmed the Joint Commissioner (Appeals)'s order.
* Recipient of Service: Citing Section 2(93)(a) of the CGST Act, the Court held that the "recipient" is the person liable to pay consideration. Since VIL's contracts are with FTOs and FTOs make payments, the FTOs are the recipients of the services, not the FTOs' individual subscribers. The principle "customer's customer cannot be your customer" was applied.
* Place of Supply - Applicability of Section 13(3)(b): The Court ruled that Section 13(3)(b) of the IGST Act is not applicable. This provision specifically applies to services supplied "to an individual" requiring physical presence. As the recipient of VIL's services is the FTO (a corporate entity), and not an individual, this specific exception does not apply.
* Place of Supply - Applicability of Section 13(2): Since Section 13(3) to (13) are not applicable, the default rule under Section 13(2) of the IGST Act applies, which states that the "place of supply of services...shall be the location of the recipient of services." Given that the FTO (the recipient) is located outside India, the place of supply is outside India.
* Export of Services: With the FTO as the recipient (located outside India) and the place of supply outside India, VIL fulfills all conditions for "export of services" under Section 2(6) of the IGST Act.
* Precedents: The Court explicitly accepted and followed the views and law laid down by the CESTAT benches in cases like Vodafone Essar Cellular Ltd. v. CCE, CST v. Bayer Material Science, and ABS India Ltd. v. CST, which dealt with similar facts and consistently held that such services qualify as exports.
* Agency Argument: The Court found no evidence to substantiate the Revenue's argument that the subscriber acts as an agent for the FTO. The fact that a subscriber would approach the FTO (not VIL) for service deficiencies reinforced that no principal-agent relationship existed between VIL and the subscriber.

6. Statutory References
* Integrated Goods and Services Tax Act, 2017 (IGST Act):
* Section 2(6) - Definition of "export of services"
* Section 2(24) - Words and expressions defined in other Acts
* Section 13 - Place of supply of services where location of supplier or recipient is outside India (specifically 13(2) and 13(3)(b))
* Section 16 - Zero rated supply (specifically 16(3) for refund options)
* Section 20 - Application of provisions of Central Goods and Services Tax Act
* Central Goods and Service Tax Act, 2017 (CGST Act):
* Section 2(93) - Definition of "recipient" (specifically 2(93)(a))
* Section 2(110) - Definition of "telecommunication service"
* Section 8 (Explanation 1) - Distinct person
* Section 17(5) - Credit of input tax
* Section 54 - Refunds
* Central Goods and Service Tax Rules, 2017 (CGST Rules):
* Rule 89 & 96(9) - Refund procedures
* Constitution of India:
* Article 226 - Writ jurisdiction
* Companies Act, 2013
* Maharashtra Goods and Services Tax Act, 2017

7. Precedents Cited
* Vodafone Essar Cellular Ltd. V. CCE, (2013) (31) STR 738 (Tri-Mum)
* CST v. Bayer Material Science, (2015) 38 STR 1206 (Tri-Mumbai)
* ABS India Ltd. v. CST, (2009) 13 STR 65 (Tri Bang)
* Circular No. 111/5/2009-S.T., dated 24-2-2009 (CBEC)
* Paul Merchant's case (supra) (Cited within Vodafone Essar Cellular Ltd. judgment)
* M/s. Blue Star v. CCE, Final Order No. 489/2008, dated 27-3-2008 [2008 (11) S.T.R.23] (Tribunal) (Cited within ABS India Ltd. judgment)