M/S. Columbia Sportswear India ... vs Union Of India on 26 April, 2025

Outcome**

The Karnataka High Court:
* Partly allowed Writ Petition Nos. 12116/2024, 3376/2023, and 3420/2023 filed by M/s. Columbia Sportswear India Sourcing Pvt. Ltd.
* Quashed the impugned Orders-in-Original and Orders-in-Appeal that rejected the petitioner's refund claims on the ground that its services constituted "intermediary services". The Court held that the petitioner's services do not fall under the definition of 'intermediary services' and qualify as export of services.
* Set aside the rejection of refund claims based on limitation under Section 54 of the CGST Act, clarifying that the claims were not barred by limitation in light of CBIC Notification No. 13/2022-Central Tax dated 05.07.2022.
* Directed the respondents to grant/pay the refunds together with interest under Section 56 of the CGST Act, 2017 within three months.
* Partly allowed Writ Petition No. 3486/2020, quashing the impugned Order-in-Original dated 25.11.2019 and all consequential demands for service tax, interest, and penalty, based on the same reasoning regarding intermediary services.
* Left open for future adjudication all other contentions and issues raised by the petitioner, including the constitutional validity of various statutory provisions and circulars, as these were not argued.

2. Core Issue

The core issues addressed by the Court were:
1. Whether the "Buying Support Services" provided by M/s. Columbia Sportswear India Sourcing Pvt. Ltd. (petitioner) to its foreign client (Columbia Sportswear Company, USA) fall within the definition of "intermediary services" under Section 2(13) of the Integrated Goods and Services Tax Act, 2017 (IGST Act) and the corresponding provisions of the erstwhile Service Tax regime.
2. Consequently, whether these services qualify as "export of services" under Section 2(6) of the IGST Act, entitling the petitioner to a refund of unutilized Input Tax Credit (ITC).
3. Whether the petitioner's refund claims were barred by the period of limitation prescribed under Section 54 of the Central Goods and Services Tax Act, 2017 (CGST Act).

3. Key Facts

• Petitioner: M/s. Columbia Sportswear India Sourcing Pvt. Ltd., an Indian company engaged in the export of services.
• Service Recipient: Columbia Sportswear Company, USA, a foreign corporation.
• Nature of Services: The petitioner provides "Buying Support Services" to its foreign client under a "Buying Support Services Agreement". These services include:
  • Assisting in identifying potential procurement sources and best suppliers.
  • Ensuring products meet client requirements (type, quality, delivery, financing, insurance).
  • Facilitating vendor arrangements for delivery.
  • Coordinating communication between the client and suppliers.
  • Surveying markets, identifying factories, visiting factories for assessment.
  • Monitoring production schedules, quality standards, and providing progress reports.
  • Tracking shipment status and providing documentation support.
• Agreement Terms: The agreement explicitly states that the petitioner:
  • Shall not have the authority to represent and bind the client directly vis-à-vis manufacturers.
  • Acts as an independent contractor, not as a principal/agent or employer/employee.
  • Receives a "Service Fee" calculated as operating cost plus a mark-up, not a commission on sales.
• Revenue's Stance: The tax authorities classified the petitioner's services as "intermediary services," leading to:
  • Rejection of refund claims for unutilized ITC under the GST regime.
  • Demand for service tax, interest, and penalties under the erstwhile Service Tax regime.
  • Rejection of some refund claims citing the expiration of the limitation period under Section 54 of the CGST Act.

4. Arguments (Taxpayer vs Revenue)

Taxpayer (M/s. Columbia Sportswear India Sourcing Pvt. Ltd.):
* Not an Intermediary: The petitioner contended that its "Buying Support Services" do not fall under the definition of "intermediary services" as per Section 2(13) of the IGST Act (and similar service tax provisions). There is no principal-agent relationship; the services are rendered on a principal-to-principal basis, on its own account, directly to the foreign client.
* Export of Services: The services provided qualify as "export of services" under Section 2(6) of the IGST Act because the supplier is in India, the recipient is outside India, the place of supply is outside India, payment is in convertible foreign exchange, and the parties are not merely establishments of a distinct person.
* Entitlement to Refund: As the services are exports, the petitioner is entitled to a refund of unutilized Input Tax Credit (ITC) under Section 54 of the CGST Act, along with interest under Section 56.
* No Limitation Bar: The refund claims are not barred by limitation, citing CBIC Notification No. 13/2022-Central Tax dated 05.07.2022, which extended the limitation period for filing refund applications.
* Reliance on Circulars & Precedents: Emphasized various CBIC Circulars (especially 159/15/2021-GST, and two new circulars dated 10.09.2024 for data hosting and advertising services) and High Court/Supreme Court judgments (e.g., Amazon Development Centre, Genpact India, Bharati Cellular) that distinguish between direct service provision/sub-contracting and intermediary services.

Revenue (Union of India, CBIC, Assistant Commissioner):
* Intermediary Services: The respondents maintained that the petitioner's services constitute "intermediary services" because they involve facilitating the supply of goods between the foreign client and various manufacturers/suppliers in India.
* Place of Supply in India: As intermediary services, the place of supply, as per Section 13(8)(b) of the IGST Act, would be the location of the supplier (India), thereby disqualifying them as "export of services."
* No Refund Entitlement: Consequently, the petitioner is not eligible for ITC refunds on such services.
* Service Tax Demand: Under the erstwhile regime, the services were similarly treated, leading to demands for service tax.
* Limitation Period: Some refund claims were rightly rejected as being time-barred under Section 54 of the CGST Act.

5. Court’s Reasoning

The High Court meticulously analyzed the definition of "intermediary" and relevant legal principles:

• Definition of 'Intermediary' (Section 2(13) IGST Act): The Court noted that an "intermediary" means a broker, agent, or any other person who arranges or facilitates the supply of goods or services between two or more persons, but does not include a person who supplies such goods or services on his own account.
• Prerequisites for Intermediary Services (CBIC Circular No. 159/15/2021-GST): The Court heavily relied on this circular, highlighting five key prerequisites:
  1. Minimum of Three Parties: An intermediary arrangement requires at least three parties: two transacting in the main supply and one arranging/facilitating that main supply. An activity between only two parties cannot be an intermediary service.
  2. Two Distinct Supplies: There must be a main supply (between two principals) and an ancillary supply (the intermediary service of facilitating the main supply). A person supplying the main service on a principal-to-principal basis is not an intermediary.
  3. Character of Agent/Broker: The intermediary's role is subsidiary and supportive; they arrange or facilitate a supply but do not provide the main supply themselves.
  4. Exclusion of Own Account Supply: A person supplying goods or services (fully or partly) on their own account is not an intermediary.
  5. Sub-contracting is not Intermediary: A sub-contractor provides the main supply (or part of it) on their own account and is not merely arranging or facilitating a supply between the principal supplier and its customers.
• Application to Petitioner's Case:
  • No Agency Relationship: The "Buying Support Services Agreement" explicitly negated an agency relationship, stating the petitioner cannot bind the foreign client. This contradicts the fundamental characteristic of an agent having the legal power to alter the principal's legal relationship with a third party.
  • Two-Party Relationship: The Court found that the petitioner directly provided "Buying Support Services" to its foreign client on a principal-to-principal basis. The client made the ultimate purchasing decisions and placed direct orders with manufacturers. There was no direct contractual relationship or privity between the petitioner and the manufacturers, or between the foreign client and the manufacturers that the petitioner was "facilitating." Therefore, the "minimum of three parties" test for intermediary services was not met.
  • Providing Main Service on Own Account: The services rendered by the petitioner (e.g., market survey, factory visits, quality control, logistics coordination) were the main supply of "buying support services" provided directly by the petitioner. They were not merely arranging or facilitating a separate main supply of goods between the foreign client and a third-party manufacturer. This squarely falls within the "sub-contracting is not an intermediary" principle.
  • Remuneration Structure: The payment structure (cost plus mark-up) reinforced the direct service provision model, unlike commission-based remuneration typical for agents.
• Reliance on Precedents: The Court extensively referred to several judgments, including its own decision in M/s.Amazon Development Centre India Pvt. Ltd. v. Additional Commissioner of Central Tax, and Delhi/Punjab & Haryana High Court judgments (Genpact India, Singtel Global India, Xilinx India Technology Services, Ernst and Young Limited, Ohmi Industries Asia, Cube Highways, Boks Business Services, Nokia Solutions) that adopted a similar interpretation, consistently holding that entities providing services on their own account on a principal-to-principal basis, even if supporting a foreign client's transactions with third parties, are not intermediaries. The Supreme Court's pronouncements on the characteristics of an "agency" (e.g., Bharati Cellular Ltd, Union of India v. Future Gaming Solutions Pvt.Ltd, Bhopal Sugar Industries Ltd.) were also cited to further distinguish agency from independent contractor relationships.
• New CBIC Circulars: The Court noted the two new CBIC Circulars dated 10.09.2024 concerning data hosting and advertising services, which reiterated the distinction that providing a main supply (even if outsourced or supporting a foreign client's interaction with end-users) on a principal-to-principal basis does not make the supplier an intermediary.
• Limitation Period: The Court explicitly addressed the limitation issue, stating that the respondents erred in rejecting refund claims on this ground. It referred to CBIC Notification No. 13/2022-Central Tax dated 05.07.2022, which excluded the period from March 1, 2020, to February 28, 2022, for computing the limitation period for refund applications under Section 54. Based on this, the petitioner's claims were deemed to be within time.

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 8: Explanation 1 (distinct person)
  • Section 13: Place of supply of services where location of supplier or recipient is outside India
  • Section 13(3)(a), 13(3)(b), 13(4), 13(5), 13(6), 13(7), 13(8)(b), 13(9), 13(10), 13(11), 13(12), 13(13)
  • Section 16: Zero-rated supply
• Central Goods and Services Tax Act, 2017 (CGST Act):
  • Section 2(5): Definition of "agent"
  • Section 2(93): Definition of "recipient of services"
  • Section 36(4): Conditions for Input Tax Credit
  • Section 54: Refund of tax
  • Section 56: Interest on delayed refunds
  • Section 73: Determination of tax not paid or short paid or erroneously refunded
  • Section 168(1): Power to issue instructions or directions
  • Section 168A: Power to extend time limit in special circumstances
  • Section 174: Repeal and saving
• Central Goods and Services Tax Rules, 2017 (CGST Rules):
  • Rule 89(4): Refund of unutilised Input Tax Credit
• Finance Act, 1994 (Service Tax Regime):
  • Section 65(105)(zzb)
  • Rule 2(f) of Place of Provision of Services Rules, 2012: Definition of "intermediary"
  • Rule 3(1) of Export of Services Rules, 2005
  • Rule 6A(1)(d) of Service Tax Rules
  • Section 174 of CGST Act (read with provisions of Finance Act, 1994)
• Indian Contract Act, 1872:
  • Sections 182-191, 222 (pertaining to "agent" and "principal")
• Foreign Exchange Management Act, 1999 (FEMA)
• Companies Act, 1956/2013
• Constitutional Provisions:
  • Articles 14, 19, 226, 227, 265 of the Constitution of India
  • Constitutional 101st Amendment Act, 2016

7. Precedents Cited

Supreme Court Judgments:
* Bharati Cellular Ltd vs ACIT - (2024) 160 taxmann.com 12 (SC)
* Union of India vs. Future Gaming Solutions Pvt.Ltd - 2025 (2) TMI 483 (SC)
* Bhopal Sugar Industries Ltd. v. Sales Tax Officer [1977] 3 SCC 147
* Bacha F. Guzdar v. Commissioner of Income-Tax, AIR 1955 SC 74
* All India Federation of Tax Practitioners v. Union of India [2007] 293 ITR 406 (SC)
* CIT v. Ahmedabad Stamp Vendors Association [2012] 25 taxman.com 201 (SC)
* Director, Prasar Bharati v. CIT [2018] 92 taxmann.com 11 (SC)
* Singapore Airlines Ltd. v. CIT [2022] 144 taxmann.com 221 (SC)
* Chevron Philips Chemicals Ltd. V. Pr. Commissioner, Central Tax & Central excise, Navi Mumbai - 2024 (2) TMI 21- SC ORDER (affirming CESTAT Mumbai)
* SNQS International Socks Pvt.Ltd. v. Commissioner of G.S.T. & CE - 2024 (3) TMI 1045-SC ORDER (affirming CESTAT Chennai)

High Court Judgments:
* M/s.Amazon Development Centre India Pvt. Ltd., vs. Additional Commissioner of Central Tax & Another - W.P.No.13007/2024 dated 17.09.2024 (Karnataka High Court)
* M/s.Nokia Solutions and Networks India Pvt. Ltd., vs. The Principal Commissioner of Central Tax & Anr. - W.P.No.14827/2022 dated 22.08.2024 (Karnataka High Court)
* Genpact India (P) Ltd. v. Union of India - 2023 G.S.T.L. 3 (P&H) (Punjab & Haryana High Court)
* Genpact India (P) Ltc., vs. Prl.Commissioner (GST) - 2023 SCC OnLine P & H 7161 (Punjab & Haryana High Court)
* Commissioner of Central Tax.v. M/s Singtel Global India Pvt.Ltd., - 2023-VIL-606-DEL-ST (Delhi High Court)
* Blackberry India Pvt.Ltd v. Pr. Commissioner, Central Excise & CGST-Delhi South - 2023-VIL-441-DEL-ST (Delhi High Court)
* Xilinx India Technology Services Pvt. Ltd., v. The Special Commissioner Zone VII & Anr., - 2023-VIL-190-DEL (Delhi High Court)
* M/s.Ernst and Young Limited vs.Additional Commissioner, CGST, Appeals-II, Delhi and Anr- 2023-VIL-190-DEL / (2023) 113 GSTR 252 (Delhi) (Delhi High Court)
* Ohmi Industries Asia Pvt.Ltd., v. Asst. Commissioner of GST - 2023-VIL-224-DEL / (2023) 116 GSTR 319 (Delhi) (Delhi High Court)
* M/s. Cube Highways and Transportation Assets Advisor Private Limited. Assistant Commissioner CGST Division & Ors., - 2023-VIL-547 DEL (Delhi High Court)
* Boks Business Services Pvt Ltd., v. Commissioner of Central Goods and Services Tax Delhi South and Anr. - 2023-VIL-579-DEL (Delhi High Court)
* Verizon Communications India Ltd. v. Assistant Commissioner of ST, Delhi-III (2018) 8 GSTL 32 (Delhi) (Delhi High Court)
* SingTel Global (India) Pvt. Ltd. v. Union of India [2023] 111 GSTR 156 (Delhi) (Delhi High Court)
* BSNL v. Union of India (2023) 4 HCC (Del) 394 (Delhi High Court)
* GAP International Sourcing (India) (P) Ltd. v. Commr. (CGST) (2023) 117 GSTR 107 (Delhi High Court)
* Ahmedabad Stamp Vendors Association v. Union of India [2002] 124 Taxman 628 (Guj.)

CESTAT/Tribunal Judgments:
* Black Rock Service India Private Ltd. v. Commissioner of CGST [2023] 111 GSTR 106 (CESTAT-Chand)
* Commissioner of GST, Gurgaon II vs. Orange Business Solutions Pvt.Ltd., - 2019(27) G.S.T.L. 523 (Tri-Chan.)
* Evalueserve.com Pvt. Ltd. Vs. CST, Gurgaon - 2019(365) E.L.T. 546 (Tri- Chan)
* Macquarie Global Services Pvt.Ltd v. CCE & ST, Gurgaon, 2021-TIOL-790-CESTAT-CHD

CBIC Circulars and Notifications:
* Circular No. 159/15/2021-GST dated 20.09.2021 (Clarification on doubts related to scope of "Intermediary")
* Circular No. 135/05/2020-GST dated 31.03.2020 (Petitioner sought to quash Para 5)
* F. No. CBIC-20001/6/2024-GST dated 10.09.2024 (Clarification on place of supply of data hosting services)
* Circular No. 230/24/2024-GST dated 10.09.2024 (Clarification in respect of advertising services provided to foreign clients)
* CBIC Notification No. 13/2022-Central Tax dated 05.07.2022 (Extension of limitation period for refund applications)
* Circular No. 183/15/2022-GST dated 27.12.2022 (referred as kept open for other contentions)
* Circular No. 193/05/2023-GST dated 17.07.2023 (referred as kept open for other contentions)
* Communication dated March 16, 2012 by Department of Revenue (Tax Research Unit) explaining "Intermediary" services (referred in Singtel case).