Facts of the Case

The petitioner, Wind River Systems International Inc. (India Branch Office), had entered into a Market Development Services Agreement with its US parent, Wind River Systems Inc. (WRUSA), for supplying market development and R&D services. For the period April 2020 to March 2021, its refund application dated 22.03.2022 for unutilised Input Tax Credit was allowed by the Department vide order dated 31.05.2022. The Department subsequently issued a show cause notice dated 30.05.2025 proposing to recover Rs. 23,66,957/-, alleging the earlier refund of ITC had been erroneously sanctioned, on the footing that the petitioner's services were 'intermediary services' rather than a qualifying export. Three other connected petitions of the same group involving similar refund and demand issues under Section 2(13) of the IGST Act, 2017 were heard together.

Issues Involved

  1. Whether the petitioner qualifies as an 'intermediary' under Section 2(13) of the IGST Act in respect of services rendered to its overseas group company, WRUSA.
  2. Whether the impugned show cause notice, premised on treating the earlier refund sanction as erroneous, was sustainable.

Petitioner's Arguments

  • The services supplied by the petitioner to WRUSA under the Market Development Services Agreement qualify as export of services, i.e., zero-rated supplies, and consequently are not liable to GST.
  • The issue was identical to, and covered by, the Court's earlier ruling in M/s. Athene Technologies India LLP vs. State of Karnataka (WP No. 23286 of 2023), which itself relied on M/s. Columbia Sportswear India Sourcing Pvt. Ltd. vs. Union of India.

Respondent's Arguments

  • The Department's counsel appeared and contested the petitions on the basis that the earlier refund had been erroneously sanctioned, treating the petitioner's arrangement as intermediary services rather than an independent, principal-to-principal export arrangement.

Court Order / Findings

  • The Court reproduced the detailed legal test from Athene Technologies India LLP vs. State of Karnataka, which in turn followed Columbia Sportswear: an intermediary requires a minimum of three parties, two distinct supplies, and a facilitation role without supplying on one's own account — features entirely absent in a two-party, principal-to-principal service agreement.
  • Applying this test, the Court held the petitioner is not an 'intermediary' under Section 2(13) of the IGST Act; it renders services on its own account to an overseas recipient without enabling any supply between that recipient and third parties.
  • Since the demand rested entirely on the (rejected) premise of intermediary status, the impugned show cause notice dated 30.05.2025 demanding CGST, SGST, and IGST along with interest and penalty was quashed.

Important Clarification

  • Under Section 2(13) of the IGST Act, 'intermediary' status requires at least three parties, two distinct supplies, and a facilitation/agency role — a service provider rendering services on its own account to a single overseas recipient, even a group company, does not become an intermediary merely by that corporate relationship.
  • Where a refund of unutilised ITC/IGST was earlier sanctioned after examination, an erroneous-refund recovery demand premised on re-characterising the underlying supply as intermediary services must independently satisfy the settled legal test for intermediary status, or fail.

Sections Involved

  • Section 2(13), IGST Act, 2017 — definition of 'intermediary'.
  • Section 2(6), IGST Act, 2017 — definition of 'export of services'.
  • Section 54, CGST Act, 2017 — refund of tax, including unutilised ITC on export of services.

Decision – In Favour of

Assessee. The erroneous-refund recovery show cause notice was quashed, holding the petitioner not to be an intermediary.

Case Details

Court: High Court of Karnataka at Bengaluru
Case No.: Writ Petition No. 28609 of 2025 (T-RES) C/W WP Nos. 14081/2022, 2721/2023 and 23939/2025
Neutral Citation: NC: 2025:KHC:44367
Coram: Hon'ble Mr. Justice S.R. Krishna Kumar
Date of Order: 04.11.2025

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