Globolive 3D Private Limited vs Union Of India (Represented By ... on 24 August, 2023

1. Outcome
The High Court allowed the Petitioner's writ petition, quashing and setting aside the Appellate Authority's order dated 31 March 2022. It declared that the Petitioner is entitled to a refund on account of export of services and directed that no recovery proceedings be initiated against the Petitioner based on the impugned order.

2. Core Issue
The core issue for determination was whether the services rendered by the Petitioner, involving the provision of Satellite derived 3D model services, fall within the definition of "export of services" under Section 2(6) of the IGST Act, or if they are categorized as "Online Information Database Access or Retrieval services" (OIDAR) under Section 2(17) of the IGST Act, specifically in the context of Section 13 of the IGST Act.

3. Key Facts
* The Petitioner, Globolive 3D Private Limited (an Indian company), entered into a Service Agreement dated 09 September 2019 with M/s. Emirates Defence Industries Co. PJSC, located in the UAE.
* The agreement was for the production and supply of satellite-derived 3D city models of Abu Dhabi, AL Ain, and AL Dhafra, as per specified technical requirements.
* The Petitioner imported Very High Resolution (VHR) stereo satellite images, processed and digitalized them, and delivered the 3D models to Abu Dhabi Digital Authority (ADDA) via File Transfer Protocol (FTP).
* The Petitioner received payment of USD 659,000 in convertible foreign exchange.
* The Petitioner filed a refund claim of Rs. 35,27,745/- for accumulated unutilized Input Tax Credit (ITC) for the period 01 September 2019 to 31 March 2020, classifying its services as "export of services."
* Initially, the Deputy Commissioner sanctioned the refund on 05 February 2021.
* Subsequently, the department reviewed the refund order and filed an appeal before the Joint Commissioner (Appeals-I), Mumbai (the Appellate Authority).
* The Appellate Authority, through an order dated 31 March 2022, allowed the department's appeal, concluding that the services were not "export of services" but rather "Online Information Database Access or Retrieval services" (OIDAR), and denied the refund.
* The department's appeal also contended that the remittance was made by M/s. Bayanat LLC (a partner of Emirates Defence Industries Co. PJSC), not directly by the foreign recipient, implying the place of supply was in the taxable territory per the explanation to Section 13(12) of the IGST Act.

4. Arguments (Taxpayer vs Revenue)

• Taxpayer (Globolive 3D Private Limited):

  • The services meet all five conditions for "export of services" under Section 2(6) of the IGST Act: supplier in India, recipient outside India, place of supply outside India, payment in convertible foreign exchange, and not distinct persons.
  • The agreement clearly defines the specialized scope of services, and the recipient is located outside India.
  • The payment was received in convertible foreign exchange from the foreign entity, even if remitted by its affiliate (M/s. Bayanat LLC). This does not change the nature of the recipient or the service.
  • The services are not "Online Information Database Access or Retrieval services" (OIDAR) under Section 2(17) of the IGST Act. The services involve significant human intervention, specialized skill, and processing, making them distinct from automated OIDAR services. Merely using electronic means (FTP) for delivery does not convert a specialized service into an OIDAR service.
  • The Appellate Authority's interpretation and application of the IGST Act were erroneous and contrary to the agreement's terms.

• Revenue (Union of India & GST Authorities):

  • The services do not comply with conditions (ii) and (iv) of Section 2(6) of the IGST Act, thus not qualifying as "export of services."
  • The services provided are "Online Information Database Access or Retrieval services" (OIDAR) as defined under Section 2(17) of the IGST Act, as they are IT services for 3D model creation transferred online (via FTP).
  • The Petitioner failed to establish that the recipient was located in a non-taxable territory as per the Explanation to Section 13(12) of the IGST Act (applicable to OIDAR services).
  • The FRCs showed M/s. Bayanat for Mapping and Surveying Services (Bayanat LLC) as the remitter, not the contractually agreed foreign recipient (Emirates Defence Industries Co. PJSC). Therefore, the place of supply is deemed to be in the taxable territory (India) under Section 13(12) explanation.

5. Court’s Reasoning
* Export of Services (Section 2(6) IGST Act): The High Court meticulously analyzed the service agreement and found that all five conditions of Section 2(6) for "export of services" were satisfied. The supplier (Petitioner) is in India, the recipient (Emirates Defence Industries Co. PJSC) is outside India, the place of supply is outside India, payment was received in convertible foreign exchange, and the parties are not distinct persons. The fact that an affiliate (M/s. Bayanat LLC) remitted the payment did not alter the core transaction or the fact that the actual recipient of service was the foreign entity as per the invoice and agreement.
* OIDAR Services (Section 2(17) IGST Act): The Court held that the Petitioner's services do not fall under the definition of OIDAR services. OIDAR services are characterized by being "essentially automated and involving minimal human intervention." The specialized nature of creating 3D city models from satellite imagery involves significant human expertise, processing, and customization, which is far removed from the automated nature described for OIDAR. The mere use of electronic file transfer (FTP) for delivery, a common method for large data, does not transform such a specialized service into an OIDAR service. Such an interpretation by the department would lead to absurd results, where any electronic communication of information would be classified as OIDAR.
* Place of Supply (Section 13 IGST Act): Since the services are not OIDAR, Section 13(12) and its explanation, which deal specifically with the place of supply for OIDAR services, were not applicable to the Petitioner's case. Even if they were to be applied, the Court found no material to suggest that any of the contradictory conditions in the explanation (e.g., recipient's address, credit card, IP address in taxable territory) were met to deem the recipient located within India.
* Interpretation of Agreement: Citing the principle of looking to the "substance rather than the form of the agreement" (as laid down in Bhopal Sugar Industries Ltd.), the Court concluded that the Appellate Authority had misconstrued the true purport and intent of the agreement. The reasons provided by the Appellate Authority for denying the refund were deemed meager and insufficient.

6. Statutory References
* Constitution of India: Articles 226, 227
* Integrated Goods and Services Tax Act, 2017 (IGST Act):
* Section 2(6) ("export of services")
* Section 2(14) ("location of the recipient of services")
* Section 2(17) ("online information and database access or retrieval services")
* Section 8 (Explanation 1) (distinct person)
* Section 13 (Place of supply of services where location of supplier or recipient is outside India)
* Section 13(12) (Place of supply of OIDAR services and its explanation)
* Central Goods and Services Tax Act, 2017 (CGST Act):
* Section 54 (Refund of tax)
* Section 54(3) (Refund of unutilized ITC)
* Section 70 (Power to summon persons to give evidence and produce documents)
* Section 9 (Levy and collection of CGST)
* Companies Act, 1956
* Reserve Bank of India Act, 1934: Section 45A, Section 45-I (c)

7. Precedents Cited
* Bhopal Sugar Industries Ltd. Vs. Sales Tax Officer, AIR 1977 SC 1275 (cited for the principle that courts interpret agreements by looking to the substance rather than the form, and the true relationship of parties is gathered from the nature and terms of the contract).