Vodafone Idea Limited vs Union Of India & Ors. on 9 October, 2023

Outcome**
The petition filed by Vodafone Idea Limited was allowed. The Delhi High Court directed the respondents (Union of India & Ors.) to refund the Integrated Goods and Service Tax (IGST) amounts claimed by the petitioner.

2. Core Issue
The core issues before the Court were:
a. Whether the telecommunication services (International Inbound Roaming Services (IIR) and International Long Distance Services (ILD)) provided by Vodafone Idea Limited to inbound subscribers of Foreign Telecom Operators (FTOs) constitute 'export of services' within the meaning of Section 2(6) of the Integrated Goods and Services Tax Act, 2017 (IGST Act).
b. Whether the refund claims filed by the petitioner were barred by limitation under Section 54(1) of the Central Goods and Services Tax Act, 2017 (CGST Act).

3. Key Facts
* Vodafone Idea Limited (the petitioner) holds a telecom license in India and provides IIR and ILD services to inbound subscribers of FTOs.
* These services are provided under International Roaming Agreements between the petitioner and FTOs, with consideration paid by FTOs to the petitioner. The end subscribers pay the FTOs.
* The petitioner filed four applications seeking a total refund of Rs. 7,12,38,724/- of IGST, treating these services as 'export of services'.
* The Adjudicating Authority rejected the claims, which was upheld by the Appellate Authority.
* The grounds for rejection primarily were: (i) the services did not qualify as 'export of services' because the recipient roamers were physically present in India and consumed services domestically, (ii) the refund claims were time-barred, and (iii) the petitioner was not licensed to serve FTOs under the Indian Telegraph Act, 1885.
* The refund claims covered various periods from September 2018 to October 2020, and applications were filed between September 2020 and May 2021.

4. Arguments (Taxpayer vs Revenue)

• Taxpayer (Vodafone Idea Limited):

  • The services qualify as 'export of services' as they are rendered to FTOs, which are located outside India. The place of supply is outside India as per Section 13 of the IGST Act.
  • The refund claims were within the limitation period of two years from the 'relevant date' as defined under Section 54(1) read with Explanation 2(c) of the CGST Act. The petitioner contended that payments were received after the invoices were issued, making the date of payment receipt the relevant date.
  • The show cause notices issued by the Adjudicating Authority were challenged for lacking date and Document Identification Number (DIN).

• Revenue (Union of India & Ors.):

  • The services do not qualify as 'export of services' because the actual recipients of the services (inbound roamers/subscribers of FTOs) were physically present in India and consumed the services in India. Therefore, the place of supply is in India under Section 13(3)(a) of the IGST Act.
  • The refund claims were time-barred under Section 54, Explanation (2)(c) of the CGST Act, as the Adjudicating Authority believed some payments were received in advance of invoice issuance.
  • The petitioner, as an Indian telecom operator, is bound by the Indian Telegraph Act, 1885, and is not licensed to provide services to foreign-situated FTOs.

5. Court’s Reasoning

• On Limitation:

  • The Court acknowledged the petitioner's argument that payments were received post-invoice, making the date of payment receipt the 'relevant date'. However, the Court deemed it unnecessary to resolve this specific factual dispute.
  • It noted that the Central Board of Indirect Taxes and Customs (CBIC) had issued Notification No. 13/2022-Central Tax dated 05.07.2022, which excluded the period from 01.03.2020 to 28.02.2022 for computing the period of limitation under Section 54(1) of the CGST Act. This relaxation rendered the limitation controversy no longer contentious.

• On 'Export of Services':

  • The Court held that the issue of whether the services constitute 'export of services' is squarely covered by its own Co-ordinate Bench decision in Verizon Communication India Pvt. Ltd. v. Assistant Commissioner of Service Tax, Delhi-III (2018).
  • It found that the provisions for determining the place of supply of services under Rule 6A of the Service Tax Rules, 1994 (relevant for the Verizon case) were substantially similar to Section 2(6) of the IGST Act and Rule 3 of the Export of Services Rules, 2005. The conditions for 'export of services' (provider in taxable territory, recipient outside India, place of provision outside India) were comparable.
  • The Court further noted that the Customs Excise and Service Tax Appellate Tribunal (CESTAT) had consistently followed the Verizon precedent, allowing appeals by the petitioner (and its predecessor) on this very question and directing refunds.
  • It was also highlighted that while the Revenue's appeal against a CESTAT decision involving the petitioner's predecessor was admitted by the Supreme Court, there was no stay on the direction to grant refunds, and in some instances, the Revenue had already granted refunds.

6. Statutory References
* Central Goods and Services Tax Act, 2017 (CGST Act) – Sections 54(1), 54 Explanation (2), 54 Explanation (2)(c), 107
* Integrated Goods and Services Tax Act, 2017 (IGST Act) – Sections 2(6), 13, 13(3)(a), 16(3)
* Indian Telegraph Act, 1885
* Finance Act, 1994 (Service Tax context)
* Service Tax Rules, 1994 – Rule 6A(1)
* Export of Services Rules, 2005 – Rule 3
* CBIC Notification No. 13/2022-Central Tax dated 05.07.2022

7. Precedents Cited
* Verizon Communication India Pvt. Ltd. v. Assistant Commissioner of Service Tax, Delhi-III: 2018 (8) GSTL 32 (Delhi High Court)
* Customs Excise and Service Tax Appellate Tribunal (CESTAT) Final Order No. A/1381-1385/2014-WZB/C-I(CSTB) dated 21.08.2014 (involving Vodafone India Ltd.)