Facts of the Case

The petitioner, M/s Ohmi Industries Asia Private Limited, is an Indian company providing services to its foreign affiliate, OHMI Industries Ltd., Japan. The petitioner entered into two agreements for:

  • Business Support Services
  • Market Research Services

The petitioner filed a refund application dated 29.11.2018 seeking refund of Integrated Goods and Services Tax (IGST) paid on zero-rated supplies relating to export of services. The refund claim arose from invoices dated 20.07.2018.

The Adjudicating Authority rejected the refund claim on the ground that the petitioner was acting as an “intermediary”, thereby disqualifying the services from being treated as zero-rated supplies.

Subsequently, the appellate authority upheld the rejection without properly appreciating that the petitioner had confined its appeal only to refund relating to Market Research Services. 

Issues Involved

  1. Whether Market Research Services provided by the petitioner qualify as “intermediary services” under GST law.
  2. Whether denial of IGST refund on export of services was justified.
  3. Whether services rendered directly to a foreign entity can be treated as zero-rated supplies.

Petitioner’s Arguments

  • The petitioner contended that it provided Market Research Services on its own account and not as an intermediary.
  • It argued that there were only two parties involved, i.e., the petitioner and OHMI Japan, hence intermediary provisions were not applicable.
  • Reliance was placed on the Delhi High Court decision in M/s Ernst and Young Ltd. vs Additional Commissioner, CGST Appeals-II.

Respondent’s Arguments

  • The department argued that the petitioner facilitated services between OHMI Japan and its customers in India.
  • Therefore, the petitioner qualified as an intermediary under Section 2(13) of the IGST Act.
  • Consequently, the place of supply was in India, and refund of IGST was not admissible.

Court’s Findings / Order

  • The Court held that the appellate authority failed to apply its mind properly and overlooked the limited scope of the appeal.
  • It clarified that intermediary services require a minimum of three parties, which was absent in the present case.
  • The petitioner was found to be providing services on a principal-to-principal basis and not facilitating any third-party supply.
  • Market Research Services rendered directly to OHMI Japan cannot be classified as intermediary services.
  • The Court set aside the impugned order and allowed the refund of ₹3,71,767 along with applicable interest.

Important Clarifications by the Court

  • Intermediary services must involve three distinct parties.
  • Services rendered on own account are excluded from the definition of intermediary.
  • Activities such as research, analysis, and reporting do not automatically constitute facilitation.
  • Export of services cannot be denied zero-rated benefit merely on presumptive classification as intermediary.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/VIB29032023CW68382022_125518.pdf

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