M/S Ernst And Young Limited vs Additional Commissioner, Cgst Appeals ... on 23 March, 2023

Outcome**
The High Court allowed the petitioner's writ petition, setting aside the impugned order-in-appeal and the orders-in-original. The Adjudicating Authority was directed to process the petitioner's refund applications expeditiously.

2. Core Issue
The core issue was whether the professional consultancy services rendered by the petitioner (an Indian Branch Office of M/s Ernst & Young Limited) to its overseas group entities (EY Entities) qualified as 'intermediary services' under Section 2(13) read with Section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017 (IGST Act). If deemed an intermediary service, the place of supply would be in India, disqualifying it as an 'export of service' and thus denying the Input Tax Credit (ITC) refund.

3. Key Facts
* The petitioner is an Indian Branch Office of M/s Ernst & Young Limited (UK company), permitted by RBI to establish a branch office and provide professional/consultancy services, among others.
* The petitioner provided various professional consultancy services (e.g., business advisory, technical assistance for tax compliance, audit processes) to overseas EY Entities (e.g., EY US, EY Australia) under service agreements.
* The service agreements were entered into between E&Y Limited (petitioner's head office) and the respective overseas EY Entities.
* The petitioner issued invoices for these services directly to the overseas EY Entities and received payment in convertible foreign exchange.
* The petitioner filed refund applications for accumulated ITC for the periods December 2017 to March 2020, treating its services as 'export of services' (zero-rated supplies).
* The Adjudicating Authority and subsequently the Appellate Authority rejected these refund claims, holding that the petitioner's services were 'intermediary services', and therefore, the place of supply was in India per Section 13(8)(b) of the IGST Act, not qualifying as 'export of services'.
* The Goods and Services Tax Appellate Tribunal had not yet been constituted, leading the petitioner to file a writ petition before the High Court.
* Prior to the GST regime, under the Service Tax law, similar services rendered by the petitioner were not considered 'intermediary services', and refunds were allowed. The Adjudicating Authority also accepted the petitioner's refund claim for the period after March 2020.

4. Arguments
* Taxpayer (M/S Ernst And Young Limited):
* The petitioner directly provided professional/consultancy services to overseas EY Entities and not merely arranged or facilitated services from a third party.
* The invoices were raised directly to and payment received from the overseas recipients in foreign currency.
* The services were provided on its "own account," not as an agent or broker.
* The definition of 'intermediary' under the IGST Act is similar to the Service Tax regime, where its services were not classified as intermediary.
* The services meet all conditions for 'export of services' under Section 2(6) of the IGST Act.
* Revenue (Additional Commissioner, CGST Appeals):
* The petitioner provided services "on behalf of" E&Y Limited (UK head office) to its overseas clients.
* This "on behalf of" aspect implied that services were not provided on the petitioner's "own account", thus classifying them as 'intermediary services' under Section 2(13) of the IGST Act.
* As intermediary services, the place of supply is the location of the supplier (India) as per Section 13(8)(b) of the IGST Act, hence not 'export of services'.
* The RBI permission letter for the branch office also listed "acting as buying/selling agent" as a permissible activity, supporting the intermediary classification.
* Prior rulings under the Service Tax regime or subsequent GST refunds were not determinative for the period in question under current GST law.

5. Court’s Reasoning
* Interpretation of 'Intermediary': The Court emphasized a strict reading of Section 2(13) of the IGST Act. An 'intermediary' "arranges or facilitates" supply between two or more persons. Crucially, it "does not include a person who supplies such goods or services...on his own account."
* Petitioner's Role vs. Intermediary Role: The Court found that the petitioner directly provided professional services to the overseas EY Entities. It did not arrange or facilitate services from any third party. The services were rendered by the petitioner itself.
* Flawed Revenue Reasoning: The Revenue's interpretation that services provided "on behalf of" the head office meant not on "own account" was held to be fundamentally flawed. The exclusionary part of Section 2(13) merely restricts the definition and does not expand it to cover direct service providers. A person supplying services directly is not an intermediary, even if part of a larger group structure.
* RBI Letter: The Court clarified that while the RBI letter allowed "acting as buying/selling agent," it also permitted "rendering professional or consultancy services." The actual services rendered were professional and consultancy services, not acting as an agent.
* Consistency and CBIC Circular: The Court noted the similarity between the definition of 'intermediary' under the IGST Act and Rule 2(f) of the Place of Provision of Service Rules, 2012 (Service Tax regime). It heavily relied on CBIC Circular No.159/15/2021-GST, which unequivocally states that intermediary services require a minimum of three parties, two distinct supplies (main and ancillary), and the intermediary's role is merely supportive (arranging/facilitating), not providing the main supply. A person supplying the main supply on a principal-to-principal basis is not an intermediary.
* Export of Services Fulfilled: Since the petitioner was the actual supplier of services on its own account, it was not an intermediary. Therefore, Section 13(8)(b) of the IGST Act (place of supply for intermediary being supplier's location) was inapplicable. Instead, Section 13(2) of the IGST Act applied, fixing the place of supply as the location of the recipient of services (outside India). All five conditions under Section 2(6) of the IGST Act for 'export of services' were thus met.
* The Court also noted that the petitioner's prior Service Tax claims and subsequent GST refund claims for similar services were allowed, indicating a consistent understanding of its service nature.

6. Statutory References
* Central Goods and Services Tax Act, 2017:
* Section 112 (Appeal to Appellate Tribunal)
* Integrated Goods and Services Tax Act, 2017:
* Section 2(6) (Definition of 'export of services')
* Section 2(13) (Definition of 'intermediary')
* Section 13 (Place of supply of services where location of supplier or recipient is outside India)
* Section 13(2) (General rule for place of supply)
* Section 13(8)(b) (Place of supply for intermediary services)
* Central Goods and Services Tax Rules, 2017:
* Rule 89 (Application for refund of tax, interest, penalty, fee or any other amount)
* Finance Act, 1994: (Context of Service Tax regime)
* Place of Provision of Service Rules, 2012:
* Rule 2(f) (Definition of 'intermediary' under Service Tax)
* Reserve Bank of India Act, 1934:
* Section 45A(a), Section 45-I(c) (referenced in IGST Act explanations for banking/financial institutions)

7. Precedents Cited
* CBIC Circular No.159/15/2021-GST dated 20.09.2021 (extensively relied upon for interpreting 'intermediary' services).
* Circular No. 125/44/2019 - GST dated 18-11-2019 (mentioned in Adjudicating Authority's issues).
* Service Tax Authorities' order dated 08.05.2018 (in the context of Finance Act, 1994, where petitioner was not held to be an intermediary).
* Adjudicating Authority's acceptance of petitioner's ITC refund for the period after March 2020 (not a formal precedent but noted as a factual inconsistency in Revenue's stance).