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

Outcome**

• W.P.No. 12116/2024, W.P.No. 3376/2023, and W.P.No. 3420/2023 (GST regime refund claims): Partly allowed.
  • The impugned orders rejecting the petitioner's refund claims on the ground that its services constitute 'intermediary services' are quashed. The Court held that the services provided qualify as 'export of services'.
  • The impugned orders rejecting refund claims on the ground of being time-barred under Section 54 of the CGST Act are set aside, holding that the claims are not barred by limitation in light of CBIC Notification No. 13/2022-Central Tax dated 05.07.2022.
  • Respondents are directed to grant/pay the refund with interest under Section 56 of the CGST Act, 2017, within three months.
  • All other contentions and issues, including rejection of other refund claims, are kept open for adjudication by appropriate authorities.
• W.P.No. 3486/2020 (erstwhile service tax demand): Partly allowed.
  • The impugned Order-in-Original dated 25.11.2019 confirming service tax demand, along with all subsequent demands, notices, orders, and proceedings, are quashed.

2. Core Issue

The core issue before the Karnataka High Court was whether the "Buying Support Services" provided by M/s. Columbia Sportswear India Sourcing Pvt. Ltd. to its overseas 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 analogous provisions of the erstwhile service tax regime. Consequently, this determined:
1. Whether these services qualified as "export of services" under Section 2(6) of the IGST Act.
2. The eligibility of the petitioner to claim a refund of unutilized Input Tax Credit (ITC).
3. The validity of the demand for service tax under the pre-GST regime.
4. Whether the refund claims under GST were barred by limitation.

3. Key Facts

• Petitioner: M/s. Columbia Sportswear India Sourcing Pvt. Ltd., an Indian company engaged in providing services, claiming them to be exports.
• Service Recipient: Columbia Sportswear Company, a corporation based in the United States of America.
• Nature of Agreement: The petitioner entered into "Buying Support Services Agreements" with the US-based company.
• Services Rendered: The petitioner provides various support services including:
  • Assisting in identifying potential sources for procurement of products.
  • Ensuring products comply with recipient's requirements (type, quality, delivery, financing, insurance).
  • Assisting vendors in arranging product delivery.
  • Coordinating communication between the recipient and suppliers.
  • Surveying markets, advising on fabrics/accessories, identifying factories, visiting factories for assessment.
  • Coordinating with suppliers for production schedules, updating Management Information Systems.
  • Monitoring factories for timeline and quality compliance, providing progress reports.
  • Expediting production and shipment, translating specifications, ensuring factory capability.
  • Tracking shipment status, assisting in legal review for importation.
• Crucial Clauses in Agreement:
  • The petitioner shall not have the authority to represent and bind the Recipient directly vis-à-vis manufacturers.
  • The Recipient would take all decisions related to purchases and place purchase orders directly on manufacturers.
  • Compensation is a "Service Fee" corresponding to the petitioner's Operating Cost plus a markup.
  • The relationship is defined as that of an "independent contractor," explicitly stating no principal/agent or employer/employee relationship.
• Dispute: The Revenue Department classified these services as 'intermediary services', leading to denial of ITC refunds under GST (place of supply considered in India) and demand of service tax under the prior regime. Revenue also contended some refund claims were time-barred.

4. Arguments (Taxpayer vs Revenue)

• Taxpayer (M/s. Columbia Sportswear India Sourcing Pvt. Ltd.):
  • The services are provided on a principal-to-principal basis, directly to the foreign client, on the petitioner's own account.
  • The petitioner does not "arrange or facilitate" a supply of goods or services between the foreign client and a third party (manufacturer), which is a key characteristic of an intermediary.
  • The contractual terms expressly deny an agency relationship and establish the petitioner as an independent contractor.
  • Therefore, the services do not fall under the definition of "intermediary services" in Section 2(13) of the IGST Act, and consequently, the place of supply is outside India, qualifying them as "export of services" under Section 2(6) of the IGST Act.
  • The petitioner is eligible for the refund of unutilized Input Tax Credit (ITC) for these export services.
  • The refund claims are not barred by limitation, as CBIC Notification No. 13/2022-Central Tax dated 05.07.2022 extends the period of limitation by excluding the period from 01.03.2020 to 28.02.2022.
• Revenue (Union of India, CBIC, Assistant Commissioner):
  • The "Buying Support Services" provided by the petitioner constitute "intermediary services" under Section 2(13) of the IGST Act (and analogous service tax rules).
  • As intermediary services, the place of supply is deemed to be the location of the service provider (India) as per Section 13(8)(b) of the IGST Act.
  • Since the place of supply is in India, the services do not meet the conditions for "export of services" under Section 2(6) of the IGST Act, making the petitioner ineligible for ITC refunds.
  • The demands for service tax under the pre-GST regime were justified based on the intermediary nature of the services.
  • Some of the refund claims filed by the petitioner were time-barred under Section 54 of the CGST Act.

5. Court’s Reasoning

The Court meticulously analyzed the definition of "intermediary" under Section 2(13) of the IGST Act, drawing heavily upon CBIC Circular No. 159/15/2021-GST dated 20.09.2021 and numerous judicial precedents.

1. Interpretation of "Intermediary Services":

   • The Court reiterated the five primary prerequisites for a service to be classified as 'intermediary services' as per the CBIC Circular: (i) minimum of three parties, (ii) two distinct supplies (main supply and ancillary facilitating supply), (iii) the intermediary acts as an agent/broker/similar, (iv) the intermediary does not supply the main goods/services on its own account, and (v) sub-contracting is not an intermediary service.
   • The Court emphasized that an intermediary's role is "subsidiary" and "supportive" – to "arrange or facilitate" another supply, not to provide the main supply itself.

2. Application to Petitioner's Services:

   • Absence of Triangular Relationship/Agency: The Court found that the agreements between the petitioner and the US company established a principal-to-principal relationship. The petitioner directly provides services to the foreign client. There is no evidence of the petitioner acting as an agent to facilitate a supply between the foreign client and a third-party manufacturer, as the foreign client itself takes all decisions and places direct orders. The explicit contractual terms denying agency and establishing an independent contractor relationship were crucial.
   • Services on "Own Account": The various "Buying Support Services" (e.g., market surveys, factory identification, quality monitoring, shipment tracking) are direct services rendered by the petitioner on its own account to the foreign company. These are comprehensive support services for the foreign client's procurement process, not merely arranging a transaction between the foreign client and another supplier. The payment structure (cost plus markup) further supported a principal-to-principal model, unlike a commission-based agency.
   • No Power to Bind Third Party: The agreement specifically stipulated that the petitioner had no authority to represent or bind the foreign recipient vis-à-vis manufacturers, which is a hallmark of a genuine agent.

3. Reliance on Precedents:

   • The Court noted its own prior ruling in M/s. Amazon Development Centre India Pvt. Ltd. vs. Additional Commissioner of Central Tax & Another, which dealt with similar "customer support services" and held them not to be intermediary services.
   • It cited numerous other High Court and CESTAT judgments (e.g., Genpact India, Singtel Global India, Xilinx India Technology, Ernst and Young, Ohmi Industries Asia, Cube Highways, Boks Business Services, Nokia Solutions) that consistently applied the same principles to similar IT/ITES/business support services, concluding they were not intermediary services where the Indian entity provided services on its own account to an overseas principal.
   • The Court also referred to Supreme Court judgments in Bharati Cellular Ltd vs ACIT and Union of India vs. Future Gaming Solutions Pvt.Ltd to differentiate between an agency relationship and an independent contractor relationship, highlighting the key characteristics of agency (legal power to alter principal's relations with third party, control, fiduciary duty, accountability). These judgments reinforced that the petitioner's services did not meet the criteria for agency.

4. Place of Supply and Export of Services: Since the services were not intermediary services, the default rule under Section 13(2) of the IGST Act applies, fixing the place of supply as the location of the recipient (outside India). This satisfies the conditions for "export of services" under Section 2(6) of the IGST Act, making the petitioner eligible for ITC refunds.

5. Limitation Period: The Court unequivocally held that CBIC Notification No. 13/2022-Central Tax dated 05.07.2022, which excludes the period from 01.03.2020 to 28.02.2022 for computing the limitation period under Section 54, was applicable. Based on the petitioner's detailed chart, the refund claims were found to be within the extended limitation period.

6. Statutory References

• Constitution of India: Articles 14, 19, 226, 227, 265, 101st Amendment Act, 2016
• Central Goods and Services Tax Act, 2017 (CGST Act): Sections 2(5), 49(6), 50, 54, 55, 56, 73(1), 73(9), 73(10), 168(1), 168A, 174
• Integrated Goods and Services Tax Act, 2017 (IGST Act): Sections 2(6), 2(13), 8 (Explanation 1), 13(1), 13(2), 13(3)(a), 13(3)(b), 13(4), 13(5), 13(6), 13(7), 13(8)(a), 13(8)(b), 13(8)(c), 13(9), 13(10), 13(11), 13(12), 13(13), 16(1)(a), 16(2), 16(3), 16(4), 20
• Central Goods and Services Tax Rules, 2017 (CGST Rules): Rule 36(4), 89(4)
• Finance Act, 1994 (Service Tax): Sections 11B, 65(105)(zzb), 73, 83
• Place of Provision of Services Rules, 2012: Rule 2(f), 3, 6A(1)(d), 9(C)
• Export of Services Rules, 2005: Rule 3(1)
• Indian Contract Act, 1872: Sections 182, 183, 184, 185, 186, 187, 188, 191, 222
• Companies Act, 1956 / 2013
• Reserve Bank of India Act, 1934: Sections 45A, 45-I
• Foreign Exchange Management Act, 1999 (FEMA): Section 50
• United Nations (Privileges and Immunities) Act, 1947
• CBIC Circulars:
  • No. 159/15/2021-GST dated 20.09.2021 (Clarification on scope of "Intermediary")
  • No. 135/05/2020-GST dated 31 March 2020
  • No. 13/2022-Central Tax dated 05.07.2022 (Extension of limitation for refund applications)
  • F. No. CBIC-20001/6/2024-GST dated 10th September, 2024 (Clarification on data hosting services)
  • Circular No. 230/24/2024-GST dated 10th September, 2024 (Clarification on advertising services)
  • Circular No. 183/15/2022-GST dated 27.12.2022
  • Circular No. 193/05/2023-GST dated 17.07.2023

7. Precedents Cited

1. 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)
2. Genpact India (P) Ltd. v. Union of India - 2023 G.S.T.L.3 (P&H) (Punjab & Haryana High Court)
3. Genpact India (P) Ltc., vs. Prl.Commissioner (GST) - 2023 SCC OnLine P & H 7161 (Punjab & Haryana High Court)
4. Blackberry India Pvt.Ltd v. Pr. Commissioner, Central Excise & CGST-Delhi South - 2022 VIL-921-CESTAT-DEL-ST affirmed in 2023-VIL-441-DEL-ST (CESTAT & Delhi High Court)
5. Chevron Philips Chemicals Ltd.V.Pr. Commissioner, Central Tax & Central excise, Navi Mumbai - 2022 (12) TMI 1489-CESTAT Mumbai affirmed in 2024 (2) TMI 21- SC ORDER (CESTAT & Supreme Court)
6. Commissioner of Central Tax.v. M/s Singtel Global India Pvt.Ltd., - 2023- VIL-606-DEL-ST (Delhi High Court)
7. SNQS International Socks Pvt.Ltd. v. Commissioner of G.S.T. & CE - 2023-VIL-1219-CESTAT-CHE-ST affirmed in 2024 (3) TMI 1045-SC ORDER (CESTAT & Supreme Court)
8. Vodafone Idea Ltd.v. Union of India - 2022 (66) G.S.T.L. 63 (Bom) (Bombay High Court)
9. M/s. Cube Highways and Transportation Assets Advisor Private Limited. Assistant Commissioner CGST Division & Ors., - 2023-VIL-547 DEL (Delhi High Court)
10. Boks Business Services Pvt Ltd., v. Commissioner of Central Goods and Services Tax Delhi South and Anr. - 2023-VIL-579-DEL (Delhi High Court)
11. Xilinx India Technology Services Pvt. Ltd., v. The Special Commissioner Zone VII & Anr., -2023-VIL-190-DEL (Delhi High Court)
12. M/s.Ernst and Young Limited vs.Additional Commissioner, CGST, Appeals-II, Delhi and Anr- 2023-VIL-190-DEL (Delhi High Court)
13. Ohmi Industries Asia Pvt.Ltd., v. Asst. Commissioner of GST - 2023-VIL-224-DEL (Delhi High Court)
14. Commissioner of GST, Gurgaon II vs. Orange Business Solutions Pvt.Ltd., - 2019(27) G.S.T.L. 523 (Tri-Chan.) (CESTAT, Chandigarh)
15. Evalueserve.com Pvt. Ltd. Vs. CST, Gurgaon - 2019(365) E.L.T. 546 (Tri- Chan) (CESTAT, Chandigarh)
16. Macquarie Global Services Pvt.Ltd v. CCE & ST, Gurgaon, 2021-TIOL-790-CESTAT-CHD (CESTAT, Chandigarh)
17. 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)
18. Bharati Cellular Ltd vs ACIT - (2024) 160 taxmann.com 12 (SC) (Supreme Court)
19. Union of India vs. Future Gaming Solutions Pvt.Ltd -2025 (2) TMI 483 (SC) (Supreme Court)
20. Bhopal Sugar Industries Ltd. v. Sales Tax Officer [1977] 3 SCC 147 (Supreme Court)
21. CIT v. Ahmedabad Stamp Vendors Association [2012] 25 taxman.com 201/210 Taxman 269/348 ITR 378/[2014] 16 SCC 114 (Supreme Court)
22. Ahmedabad Stamp Vendors Association v. Union of India[2002]124 Taxman 628/257 ITR 202 (Guj.) (Gujarat High Court)
23. Director, Prasar Bharati v. CIT [2018] 92 taxmann.com 11/255 Taxman 1/403 ITR 161/7 SCC 800 (Supreme Court)
24. Singapore Airlines Ltd. v. CIT [2022] 144 taxmann.com 221/[2023] 290 Taxman 139/449 ITR 203/[2023] 1 SCC 497 (Supreme Court)
25. Labreche v. Harasymiw [1992] 89 DLR (4th) 95 at 107 (Cited in Bharati Cellular Ltd.)
26. All India Federation of Tax Practitioners v. Union of India [2007] 293 ITR 406 (SC) ; (2007) 7 STR 625 (SC) (Supreme Court)
27. Verizon Communications India Ltd. v. Assistant Commissioner of ST, Delhi-III (2018) 8 GSTL 32 (Delhi) (Delhi High Court)
28. Black Rock Service India Private Ltd. v. Commissioner of CGST [2023] 111 GSTR 106 (CESTAT-Chand) (CESTAT, Chandigarh)
29. BSNL v. Union of India [BSNL v. Union of India, (2023) 4 HCC (Del) 394 : (2023) 115 GSTR 47] (Delhi High Court)
30. GAP International Sourcing (India) (P) Ltd. v. Commr. (CGST) [GAP International Sourcing (India) (P) Ltd. v. Commr. (CGST), (2023) 117 GSTR 107 : 2023 SCC OnLine Del 8443] (Delhi High Court)