Nokia Solutions And Networks India Pvt Ltd. Vs Principal (Karnataka High Court)
Karnataka High Court has overturned an order by the Goods and Services Tax (GST) appellate authority that denied a refund of unutilized Input Tax Credit (ITC) to Nokia Solutions and Networks India Pvt Ltd. The court’s decision, which also quashed subsequent show-cause notices for recovery, underscored several procedural missteps by the revenue authorities and challenged their interpretation of “export of services” and “intermediary services” under GST laws.
Case Origin
Nokia Solutions and Networks India Pvt Ltd. (hereafter, “the petitioner”) operates in the information and technology software and related support services sector, catering to both domestic and international clients. The company is registered with the Karnataka GST Authorities. According to the petitioner, it provides software and support services to its overseas related entities on a principal-to-principal basis, substantiated by contracts from 2016 and 2018.
In March 2020, the petitioner filed four applications seeking a refund of unutilized ITC on input services for export services spanning April 2018 to March 2020. The Assistant Commissioner of Central Tax (Respondent No. 3) partially sanctioned these refunds through four orders issued between April and October 2020.
Revenue’s Challenge and Subsequent Actions
The revenue authorities subsequently appealed these refund orders to the Joint Commissioner of Central Tax (Appeals) (Respondent No. 2), citing several grounds for disallowance. Key among their contentions were:
- Lack of Documentation: The petitioner allegedly failed to submit Bank Realisation Certificates (BRCs) or Foreign Inward Remittance Certificates (FIRCs) as proof of foreign exchange receipt.
- Discrepancies in FIRAs: Foreign Inward Remittance Advices (FIRAs) submitted by the petitioner indicated Gurgaon as the beneficiary’s location, rather than Bengaluru, and described the remittance purpose as “against intercompany receipt” instead of “zero-rated supply.”
- Account Number Variance: Invoices showed payments to a New Delhi bank account (No. 36574019), while FIRAs referenced a Bengaluru account (No. 36574085).
- “Intermediary Services” Classification: The revenue argued that the services provided by the petitioner were “intermediary services” under Section 2(13) of the IGST Act, thereby disqualifying them from refund.
During the pendency of the appeal, a show-cause notice (SCN) dated September 6, 2021, was issued by the Assistant Commissioner (Respondent No. 4) for the recovery of the sanctioned refund. The petitioner responded to this SCN and also filed written submissions and cross-objections with the appellate authority.
