Microsoft India (R&D) Private Limited Vs Commissioner of Central Tax (CESTAT Banga-lore)
Conclusion: Online technical support services rendered by assessee-company to M/s. Microsoft Corp., USA and Microsoft Mobile, Finland by Microsoft India were considered as ‘Export of Service’ not under Intermediary services under Rule 2(f) of the Place of Provision of Services Rules, 2012 as services provided on one’s own account were not intermediary services and qualified as exports if other conditions, such as payment in convertible foreign currency, were met. Assessee was entitled to CENVAT Cash refund of Rs. 16.8 crores.
Held: Assessee-company was engaged in providing ‘Information Technology Software Services’ and ‘Business Auxiliary Services,’ filed for a cash refund of accumulated CENVAT credit on input services used in providing output services exported under Rule 5 of the CENVAT Credit Rules, 2004, read with Notification No.05/2006-CE (NT) dated 14.03.2006. Adjudicating Authority had rejected refund claims totaling ₹3.42 crore (October–December 2015) and ₹13.46 crore (April 2011–September 2013). CIT (Appeals) held that assessee qualified as an ‘intermediary,’ making the services rendered ineligible for classification as ‘Export of Services’ under the Service Tax Rules, 1994. Assessee contended that their services, provided under direct agreements with Microsoft Corporation, USA, and Microsoft Mobile, Finland, were principal-to-principal in nature, involving software development and customer support without interacting with Microsoft’s customers. Payments for these services were received in foreign exchange. Assessee argued that they did not meet the definition of ‘intermediary’ under Rule 2(f) of the Place of Provision of Services Rules, 2012, citing CBIC Circular No.159/15/2021/GST and supporting case law, including CCT vs. M/s. Informatica Business Solutions Pvt. Ltd. and their own earlier case reported in 2015 (38) STR 838 (Tri.-Bang.). Revenue rejected the refund claims of assessee on the ground that the services provided to Microsoft Corp, USA, were not considered “export of service” but instead classified as “intermediary services.” Consequently, assessee was deemed ineligible to claim a refund of accumulated credit. It was held that in the case of CCT vs. Informatica Business Solutions Pvt. Ltd., where it was held that services rendered under agreements between entities on a principal-to-principal basis did not qualify as “intermediary services” under Rule 9 of the Place of Provision of Services (POPS) Rules, 2012 instead, such services were governed by Rule 3, making them eligible for classification as export services. Further, Circular No. 159/15/2021-GST, clarified that “intermediary” involves facilitating or arranging services between two or more parties, which was not the case here. Services provided on one’s own account were not intermediary services and qualified as exports if other conditions, such as payment in convertible foreign currency, were met. Therefore, assessee provided services directly to Microsoft Corp, received payment in convertible foreign exchange, and met the conditions for “export of services.” Consequently, it was entitled to the refund of accumulated Cenvat credit.
