Facts of the Case

  • The petitioner, M/s Netgear Technologies India Pvt. Ltd., was engaged in providing marketing and sales support services to its overseas entity without payment of IGST.
  • It claimed refund of ITC amounting to ₹64,50,259 for the period April 2018 to March 2019 on the basis that services were zero-rated exports.
  • A show cause notice was issued alleging that the petitioner was acting as an intermediary, hence place of supply was in India.
  • The adjudicating authority rejected the refund claim, which was upheld in appeal.

Issues Involved

  1. Whether the petitioner qualifies as an intermediary under Section 2(13) of the IGST Act?
  2. Whether the services rendered qualify as export of services and zero-rated supply under Section 16?
  3. Whether ITC refund can be denied on the basis of classification as intermediary without proper analysis of actual work performed?

Petitioner’s Arguments

  • The petitioner contended that it is an independent service provider and not an intermediary.
  • Services were rendered on a cost-plus basis, not linked to sales or commission.
  • The agreement was misinterpreted by authorities by selectively reading clauses.
  • Relied on precedents including Lubrizol Advance Materials India Pvt. Ltd. case.

Respondent’s Arguments

  • The department argued that the petitioner was facilitating supply of goods/services of the foreign entity.
  • Based on agreement clauses, it was contended that the petitioner was procuring orders and promoting sales.
  • Thus, the petitioner fell within the definition of intermediary, making place of supply in India and disqualifying zero-rated benefit.

Court’s Findings / Order

  • The Court held that the authorities failed to properly examine the actual nature of services performed.
  • Mere reference to agreement clauses without empirical evidence linking remuneration to sales was insufficient.
  • Determination of intermediary status must be based on substance of activities, not selective contractual interpretation.
  • The impugned order and original order were set aside.
  • Matter was remanded back for fresh adjudication with proper examination of facts.

Important Clarifications by the Court

  • Intermediary classification requires analysis of actual work performed, not assumptions.
  • Cost-plus remuneration does not automatically imply intermediary relationship.
  • Authorities must consider relevant precedents including:
    • M/s Ernst and Young Limited v. Additional Commissioner, CGST Appeals-II, Delhi
    • M/s Ohmi Industries Asia Private Limited v. Assistant Commissioner, CGST

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/VIB18052023CW107042022_153645.pdf

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