BPO service provided to overseas client was not an intermediary service

Genpact India Pvt. Ltd. Vs Principal Commissioner of GST And Cx (Punjab and Haryana High Court)

The Hon’ble Punjab and Haryana High Court in Genpact India Pvt. Ltd. v. Principal Commissioner of GST And Cx [C.W.P. No. 14151 of 2021 dated August 09, 2023] set aside the show cause notice and held that assessee was not ‘intermediary’ and therefore, the refund claim of unutilized Input Tax Credit (ITC) used in making zero rated supplies of services without payment of IGST was allowed.

Facts:

M/s. Genpact India Pvt. Ltd. (“the Petitioner”) was providing services to foreign entity and has invoiced the said services under LUT model and therefore, field refund application for claiming of unutilized ITC of such services. The Revenue Department (“the Respondent”) allowed the refund.

Subsequently, issued a Show cause Notice 47/GST/GGM/2020-21 dated March 30, 2021 (“the Impugned SCN”) raised the demand of service tax of INR 16,73,74,91,090/- on the ground that the services provided by the Petitioner are in the nature of “Intermediary Services” as per Section 2(13) of the Integrated Goods Services Tax Act, 2017 (“the IGST Act”) and do not qualify as “export of services”. The Impugned SCN also alleged to show cause why the extended period of limitation in terms of proviso to Section 73(1) of the Finance Act, 1994 read with Section 174 of the Central Goods & Services Tax Act, 2017 (“the CGST Act”) should not be invoked.

The Petitioner relied upon the Judgement of Genpact India Pvt. Ltd v. Union of India and others, [2022] 1 Centax 226 (P&H) dated November 11, 2022] wherein the Hon’ble Punjab and Haryana High Court held that the Petitioner was not “intermediary” and, therefore, the refund claim of unutilized ITC used in making zero rated supplies of services without payment of IGST was allowed.

Issue:

Whether the BPO Services provided by the assessee to overseas clients is an intermediary service?

Held:

The Hon’ble Punjab and Haryana High Court in C.W.P. No. 14151 of 2021 held as under:

• Relied upon the Judgement of Genpact India Pvt. Ltd v. Union of India and others, [2023 (68) G.S.T.L. 3 (P & H)] wherein the Hon’ble Punjab and Haryana High Court held that the Petitioner was not “intermediary” and, therefore, the refund claim of unutilized ITC used in making zero rated supplies of services without payment of IGST was allowed.
• Held that, the ratio of Genpact India Pvt. Ltd. case (supra) is directly applicable in this case.
• Set aside the Impugned SCN.

FULL TEXT OF THE JUDGMENT/ORDER OF PUNJAB AND HARYANA HIGH COURT

1. CM-6621-CWP-2022

Application is allowed and rejoinder to reply filed by the respondents is taken on record.

2. CWP-14151-2021

The petitioner is seeking writ of certiorari for quashing and setting aside Demand cum Show cause Notice No. 47/GST/GGM/2020-21 dated 30.03.2021 (‘impugned notice”) (Annexure P-29) issued by Principal Commissioner of GST & CX, Gurugram-respondent No.1 under Sections 73 of the Finance Act, 1994 (“Act, 1994”) read with Section 174 of Central Goods & Services Tax Act, 2017 (“CGST Act”) requiring the petitioner to explain why the extended period of limitation in terms of proviso to Section 73(1) of the Finance Act, 1994 should not be invoked for recovery of refund of Rs.2,64,92,41,846/- granted to the petitioner. The impugned notice further requires the petitioner to explain why service tax of Rs.16,73,74,91,090/- should not be demanded and recovered from the petitioner.

3. On 30.07.2021, when notice of motion was issued, reference was made to CWP-6048-2021 titled as Genpact India (P) Ltd. vs. Union of India and others, (2022) 1 Centax 226 (P&H), decided on 11.11.2022 in which notice had already been issued and was pending for consideration. In that writ petition, the petitioner had challenged order dated 15.02.2021 whereby refund claim of un-utilized Input Tax Credit (ITC) used in making zero rated supplies of services under GST regime had been rejected. The main ground of the petitioner in that writ petition was that refunds had been granted to the petitioner consistently for all financial years starting from 2005-06 under the service tax regime and, therefore, on the principle of consistency, refunds under the GST regime should also be granted.

4. Learned counsel for the petitioner had argued that impugned notice has been issued as a counterblast after filing of CWP-6048-2021, for recovery of Rs.26,34,61,625/-and the said amount should not be demanded from the petitioner.

5. Learned counsel for the petitioner has stated that the judgment dated 11.11.2022 passed in CWP-6048-2021 fully covers the case of the petitioner as in that case, this Court, vide detailed judgment, held that the petitioner was not “intermediary” and, therefore, the refund claim of un-utilized Input Tax Credit (ITC) used in making zero rated supplies of services without payment of IGST was allowed.

6. Learned counsel for the petitioner has further stated that the respondents have implemented the judgment dated 11.11.2022 passed in CWP-6048-2021 by detailed order and also decided to file SLP in the Hon’ble Supreme Court. Finally refund for an amount of Rs.21,98,06,002/- for the period April 2019 to June 2019 has been sanctioned by the Deputy Director Division East-II, Central Tax GST Gurugram. It is further stated therein that as per the letter dated 08.05.2023 issued by CBIC, the respondents have decided not to file SLP against the judgment dated 11.11.2022 passed in CWP-6048-2021.

7. Hence, this Court is of the view that since the respondents have taken conscious decision not to file SLP against the judgment dated 11.11.2022 passed in CWP-6048-2021, the ratio of Genpact India (P.) Ltd’s case (supra) is directly applicable in this case.

8. Writ petition is allowed and notice dated 30.03.2021 (Annexure P-29) is set aside.

 ******

(Author can be reached at [email protected])