M/S Waters India Pvt Ltd vs Union Of India on 26 April, 2025

1. Outcome
The Karnataka High Court partly allowed all four writ petitions (W.P. No. 12116/2024, W.P. No. 3486/2020, W.P. No. 3376/2023, and W.P. No. 3420/2023).
- The impugned orders-in-original and orders-in-appeal, which rejected the petitioner's refund claims of Input Tax Credit (ITC) on the grounds of providing "intermediary services" or being time-barred, were quashed.
- The impugned Order-in-Original in W.P. No. 3486/2020, confirming a service tax demand (along with interest and penalty) under erstwhile provisions based on a similar classification, was also quashed.
- The Court held that the services provided by the petitioner do not fall under the definition of "intermediary services" and qualify as "export of services."
- It was further held that the refund claims were not barred by limitation, citing CBIC Notification No. 13/2022-Central Tax.
- The respondents were directed to grant/pay the refund amounts with interest under Section 56 of the CGST Act, 2017, within three months.
- All other contentions and issues related to other refund claims were kept open for future adjudication by appropriate authorities.

2. Core Issue
The core issue was two-fold:
a) Whether the "Buying Support Services" provided by M/s. Columbia Sportswear India Sourcing Pvt. Ltd. (the petitioner) to its foreign client (Columbia Sportswear Company, USA) constitute "intermediary services" under Section 2(13) of the Integrated Goods and Services Tax Act, 2017 (IGST Act) (or analogous provisions under the erstwhile Service Tax regime), or if they qualify as "export of services" under Section 2(6) of the IGST Act, thereby entitling the petitioner to a refund of unutilized Input Tax Credit (ITC).
b) Whether the petitioner's refund claims were time-barred under Section 54 of the Central Goods and Services Tax Act, 2017 (CGST Act).

3. Key Facts
- The petitioner, M/s. Columbia Sportswear India Sourcing Pvt. Ltd., is an Indian company engaged in the export of services.
- The petitioner entered into "Buying Support Services Agreements" with Columbia Sportswear Company, USA (a foreign entity), to provide various support services.
- These services include identifying potential procurement sources, ensuring product quality and delivery, coordinating communication between the foreign client and suppliers, market surveys, identifying and visiting factories, monitoring production timelines and quality, tracking shipments, and providing documentation support.
- The agreements explicitly define the relationship as an "independent contractor" and state that the petitioner does not have the authority to represent or bind the foreign client directly with manufacturers.
- The petitioner is compensated on a "cost plus markup" basis, rather than a commission.
- The revenue authorities rejected the petitioner's refund claims for unutilized ITC (and raised service tax demands in the pre-GST period) by classifying these services as "intermediary services," making the place of supply in India and thus not eligible for export benefits.
- Some refund claims were additionally rejected on the grounds of being time-barred.

4. Arguments (Taxpayer vs Revenue)
Taxpayer (M/s. Columbia Sportswear India Sourcing Pvt. Ltd.):
- Argued that its services are "export of services" under Section 2(6) of the IGST Act, as all conditions (supplier in India, recipient outside India, place of supply outside India, payment in foreign exchange, and parties not merely distinct establishments) are met.
- Contended that it is not an "intermediary" as defined in Section 2(13) of the IGST Act (or Rule 2(f) of the Place of Provision of Services Rules, 2012), as it provides services on its own account on a principal-to-principal basis, and does not merely "arrange or facilitate" supplies between two other distinct parties.
- Highlighted that the agreements expressly preclude an agency relationship, and the remuneration model is cost-plus, not commission-based.
- Submitted that its refund claims were not time-barred, relying on CBIC Notification No. 13/2022-Central Tax, which extended the limitation period by excluding the COVID-19 pandemic period.

Revenue (Union of India, CBIC, Assistant Commissioner):
- Argued that the petitioner's services fall within the definition of "intermediary services" under Section 2(13) of the IGST Act.
- Consequently, the place of supply for such services would be the location of the service provider (India) as per Section 13(8)(b) of the IGST Act, thus not qualifying as "export of services" and denying ITC refunds.
- Maintained that the refund claims were barred by limitation under Section 54 of the CGST Act.
- For the pre-GST period, similar arguments were advanced to levy service tax.

5. Court’s Reasoning
The Court meticulously analyzed the definition of "intermediary" under Section 2(13) of the IGST Act (and its Service Tax precursor), and crucially relied on CBIC Circular No. 159/15/2021-GST (and subsequent circulars dated 10.09.2024 clarifying data hosting and advertising services) which delineates the primary requirements for intermediary services:
1. Minimum of three parties: An intermediary arranges or facilitates supply between two or more other persons. The Court found only two parties in the petitioner's agreement (petitioner and foreign client).
2. Two distinct supplies: One main supply between two principals and an ancillary supply of facilitating/arranging the main supply by the intermediary. The Court held that the petitioner provides the main "Buying Support Services" on its own account, directly to the foreign client, not facilitating a separate supply between the foreign client and a third party.
3. Character of an agent, broker, or similar person: The definition implies a subsidiary, supportive role. The petitioner, as an independent contractor, performed the services itself.
4. Exclusion of own account supply: The definition explicitly excludes persons supplying goods or services on their own account. The Court found the petitioner provided services on a principal-to-principal basis.
5. Sub-contracting is not intermediary service: The Court noted that outsourcing part or whole of a service does not make the sub-contractor an intermediary if they provide the main supply themselves.
The Court found that the petitioner's services were akin to "business support services" enabling efficient procurement, rather than facilitating or arranging supplies between the foreign client and third-party manufacturers. The compensation model (cost-plus markup) further indicated a principal-to-principal relationship, not agency. The Court emphasized that the definition of "intermediary" is more restricted than "agent" and requires the agent to primarily affect the principal's legal relations with a third party.

On the limitation issue, the Court referred to CBIC Notification No. 13/2022-Central Tax dated 05.07.2022, which extended the period of limitation by excluding the period from 01.03.2020 to 28.02.2022. Based on this, it concluded that the petitioner's refund claims were filed within the extended period and were not time-barred.

6. Statutory References
- Constitution of India: Articles 14, 19, 226, 227, 265
- Central Goods and Services Tax Act, 2017 (CGST Act): Sections 2(5), 54, 56, 73, 168(1), 168A
- Integrated Goods and Services Tax Act, 2017 (IGST Act): Sections 2(6), 2(13), 8 (Explanation 1), 13(3)(a), 13(4), 13(8)(b), 16
- Central Goods and Services Tax Rules, 2017 (CGST Rules): Rule 89(4)
- Finance Act, 1994 (Service Tax): Section 73(1), Section 174
- Place of Provision of Services Rules, 2012 (Service Tax): Rule 2(f)
- Indian Contract Act, 1872: Sections 182, 183, 184, 185, 186, 187, 188, 191, 222
- CBIC Circulars: No. 159/15/2021-GST dated 20.09.2021, No. 135/05/2020-GST dated 31.03.2020 (to extent of Para 5 challenged), Circulars No. 183/15/2022-GST dated 27.12.2022, No. 193/05/2023-GST dated 17.07.2023, No. CBIC-20001/6/2024-GST and No. 230/24/2024-GST (both dated 10.09.2024).
- CBIC Notification: No. 13/2022-Central Tax dated 05.07.2022.

7. Precedents Cited
- M/s. Amazon Development Centre India Pvt. Ltd., vs. Additional Commissioner of Central Tax & Another (Karnataka High Court, W.P.No.13007/2024 dated 17.09.2024)
- Genpact India (P) Ltd. v. Union of India (Punjab & Haryana High Court, 2023 G.S.T.L.3 & 2023 SCC OnLine P & H 7161)
- Blackberry India Pvt.Ltd v. Pr. Commissioner, Central Excise & CGST-Delhi South (Delhi High Court, 2023-VIL-441-DEL-ST affirming 2022 VIL-921-CESTAT-DEL-ST)
- Commissioner of Central Tax. v. M/s Singtel Global India Pvt.Ltd., (Delhi High Court, 2023-VIL-606-DEL-ST)
- Xilinx India Technology Services Pvt. Ltd. v. The Special Commissioner Zone VII & Anr., (Delhi High Court, 2023-VIL-190-DEL)
- M/s. Ernst and Young Limited vs. Additional Commissioner, CGST, Appeals-II, Delhi and Anr (Delhi High Court, 2023-VIL-190-DEL)
- Ohmi Industries Asia Pvt.Ltd., v. Asst. Commissioner of GST (Delhi High Court, 2023-VIL-224-DEL)
- M/s. Cube Highways and Transportation Assets Advisor Private Limited. Assistant Commissioner CGST Division & Ors., (Delhi High Court, 2023-VIL-547 DEL)
- Boks Business Services Pvt Ltd., v. Commissioner of Central Goods and Services Tax Delhi South and Anr. (Delhi High Court, 2023-VIL-579-DEL)
- M/s.Nokia Solutions and Networks India Pvt. Ltd., vs. The Principal Commissioner of Central Tax & Anr. (Karnataka High Court, W.P.No.14827/2022 dated 22.08.2024)
- Bharati Cellular Ltd vs ACIT (Supreme Court, (2024) 160 taxmann.com 12 (SC))
- Union of India vs. Future Gaming Solutions Pvt.Ltd (Supreme Court, 2025 (2) TMI 483)
- Bhopal Sugar Industries Ltd. v. Sales Tax Officer (Supreme Court, [1977] 3 SCC 147)
- Bacha F. Guzdar v. Commissioner of Income-Tax (Supreme Court, AIR 1955 SC 74)
- Other cases cited included Chevron Philips Chemicals Ltd.V.Pr. Commissioner, SNQS International Socks Pvt.Ltd. v. Commissioner of G.S.T. & CE, Vodafone Idea Ltd.v. Union of India, Commissioner of GST, Gurgaon II vs. Orange Business Solutions Pvt.Ltd., Evalueserve.com Pvt. Ltd. Vs. CST, Gurgaon, Macquarie Global Services Pvt.Ltd v. CCE & ST, Gurgaon, All India Federation of Tax Practitioners v. Union of India, CIT v. Ahmedabad Stamp Vendors Association, Director, Prasar Bharati v. CIT, Singapore Airlines Ltd. v. CIT, and Labreche v. Harasymiw.