Boks Business Services Pvt Ltd vs Commissioner Of Central Goods And ... on 22 August, 2023

Here's a summary of the judgment:

1. Outcome
The Delhi High Court allowed the petition, setting aside the impugned orders that denied the refund of unutilized Input Tax Credit (ITC). The respondents (tax authorities) were directed to process the petitioner's refund claim expeditiously, preferably within four weeks.

2. Core Issue
The principal question before the Court was whether the petitioner, providing book-keeping, payroll, and accounting services to its foreign affiliate, could be considered an "intermediary" within the meaning of Section 2(13) of the Integrated Goods and Services Tax Act, 2017 (IGST Act), thereby disqualifying its services as "export of services" under Section 2(6) of the IGST Act and denying the associated ITC refund for zero-rated supplies.

3. Key Facts
* The petitioner, Boks Business Services Pvt Ltd, is engaged in providing book-keeping, payroll, and accounting services through cloud technology to its affiliated entity, TC Outsourcing Limited (formerly Boks Business Services Limited), incorporated in the United Kingdom.
* The petitioner applied for a refund of unutilized ITC for export of services for the tax periods April 2018 to March 2019 and April 2019 to December 2019.
* The refund claims were denied by the tax authorities via show cause notices and subsequent orders, which were upheld by the Appellate Authority.
* The basis for denial was that the services rendered by the petitioner were deemed "intermediary services" under Section 2(13) of the IGST Act, making the place of supply within India and thus not qualifying as export of services.
* The authorities observed that the petitioner charged 500 GBP per workstation and noted that the agreement between the petitioner and its foreign affiliate stated the petitioner "agreed to act as an agent." This led them to conclude that the petitioner was not the principal service provider.
* The agreement dated 12.05.2017 stipulated that the foreign company would engage the Indian company (petitioner) for executing book-keeping, payroll, and accounts using cloud technology for its UK/European clients, and the foreign company would pay a monthly fee (fixed + per workstation) for these services.

4. Arguments
* Taxpayer (Boks Business Services Pvt Ltd): The petitioner contended that its services constituted "export of services" and were zero-rated supplies under the IGST Act, entitling it to the refund of unutilized ITC. It argued that it was the principal service provider and not an "intermediary."
* Revenue (Commissioner of Central Goods and Services Tax Delhi South and Anr): The Revenue argued that the petitioner's services were "intermediary services" because the petitioner was not the principal service provider but merely facilitating services to the foreign client's customers, as evidenced by the per-workstation charge and the term "agent" in the agreement. Therefore, the place of supply was in India, not qualifying as export of services, and the ITC refund was correctly denied.

5. Court’s Reasoning
* The Court examined the terms of the agreement dated 12.05.2017 and found that the petitioner was contracted to provide the services (book-keeping, payroll, and accounts through cloud technology), making it the principal service provider.
* The Court clarified that for services to be "intermediary services," there must be three entities: one providing the principal service, one receiving it, and an intermediary acting as an agent or broker to facilitate or arrange such services for the recipient.
* The Court held that the petitioner was neither facilitating the provision of services by a third entity nor acting as a middleman for procuring services for its affiliate.
* Despite the agreement using the word "agent," the Court reasoned that the petitioner was not acting as an agent for procurement of services for the service recipient. Instead, it was directly providing the principal service.
* The Court explicitly stated that the fact that the services might ultimately be for the clients of the petitioner's affiliate (Boks Business Services Limited) did not transform the petitioner into an "intermediary."
* The Court found that the issue was squarely covered by its previous decisions on similar matters.

6. Statutory References
* Integrated Goods and Services Tax Act, 2017 (IGST Act)
* Section 2(6) (Definition of "export of services")
* Section 2(13) (Definition of "intermediary")
* Section 16 (Provisions for zero-rated supply and refund of unutilized ITC)

7. Precedents Cited
* M/s Ernst And Young Limited v. Additional Commissioner, CGST Appeals-II, Delhi And Anr.: 2023:DHC:2116-DB
* M/s Cube Highways and Transportation Assets Advisor Private Limited v. Assistant Commissioner CGST Division & Ors.: 2023:DHC:5822-DB