The Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) Chandigarh has ruled that Information Technology Software Services ( ITSS ) and Business Support Services ( BSS ) provided to foreign clients qualify as export services and do not fall under intermediary services. The tribunal directed the refund of unutilized CENVAT credit, rejecting the Revenue Department’s claim that the services were intermediary in nature.
The case involved Saxo India Private Limited, which provides ITSS and BSS to foreign clients. The company had applied for a refund of unutilized CENVAT credit amounting to Rs.1,14,55,997(1.14 crore) under Notification No. 27/2012 for the period April 2015 to March 2016. The Adjudicating Authority partially allowed the refund, approving Rs.1,08,06,910(1.08 crore) for ITSS but rejecting Rs.6,49,068(6.5 lakh) for BSS, arguing that business support services fell under intermediary services and were ineligible for export benefits.
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The Commissioner (Appeals), CGST Gurugram, upheld the refund for ITSS but denied the claim for BSS, maintaining that the services were intermediary in nature. Both the company and the Revenue Department filed appeals before the CESTAT Chandigarh—the company challenging the rejection of its BSS refund and the Revenue opposing the approval of the ITSS refund.
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The CESTAT ruled that the company was not acting as an intermediary for either ITSS or BSS and was therefore eligible for a refund. The tribunal observed that the definition of intermediary services under Rule 9 of the Place of Provision of Services Rules, 2012, does not apply to a company directly providing services to a foreign client without facilitating transactions between two separate parties.
The tribunal noted that the Adjudicating Authority incorrectly classified ITSS as intermediary services, despite agreements showing that the company provided software development, coding, and testing services directly to a foreign bank, not to any third party. The tribunal ruled that such core IT functions are not intermediary activities.
For BSS, the tribunal found that the Commissioner (Appeals) misinterpreted the agreements by assuming that the company interacted with its foreign client’s customers. After reviewing the Service Level Agreement (SLA), the tribunal clarified that the term “customer” referred to the foreign bank itself, not its clients. It ruled that business support services, including corporate treasury, accounting, and data management, were provided directly to the foreign client and did not constitute intermediary functions.
The CESTAT also addressed the issue of Foreign Inward Remittance Certificates ( FIRC ), which were missing for a portion of the BSS refund. It directed the adjudicating authority to recalculate the eligible refund based on actual remittances received and allow the claim accordingly.
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In conclusion, the CESTAT Chandigarh Coram composed of S S Garg ( Judicial Member ) and P Anjani Kumar ( Technical Member ) ruled in favor of the appellant, holding that the IT and Business Support Services provided to foreign clients do not fall under intermediary services. The tribunal directed the refund of unutilized CENVAT credit, rejecting the Revenue’s claim that the company acted as an intermediary. The ruling emphasized that direct service providers, without a facilitation role between two parties, cannot be classified as intermediaries under Rule 9 of the Place of Provision of Services Rules, 2012.
Additionally, the tribunal instructed the adjudicating authority to recalculate the eligible refund based on Foreign Inward Remittance Certificates ( FIRC ) and allow the claim accordingly.
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