In a recent ruling, the Bangalore bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) has ruled that the online technical support rendered to M/s. Microsoft Corp., USA and Microsoft Mobile, Finland by Microsoft India are ‘Export of Service’ not Intermediary. It allowed CENVAT Cash refund of Rs. 16.8 crores.
The appellant, Microsoft India is 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.
Refund claims totaling ₹3.42 crore (October–December 2015) and ₹13.46 crore (April 2011–September 2013) were rejected by the adjudicating authority and subsequently by the Commissioner (Appeals).
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The Commissioner (Appeals) held that the appellant qualified as an ‘intermediary,’ making the services rendered ineligible for classification as ‘Export of Services’ under the Service Tax Rules, 1994.
The appellants 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.
The appellants 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.).
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The Revenue rejected the refund claims of the appellant on the grounds that the services provided to Microsoft Corp, USA, were not considered “export of service” but instead classified as “intermediary services.” Consequently, the appellant was deemed ineligible to claim a refund of accumulated credit.
Considering the matter, the Tribunal noted that the appellant entered into an agreement with Microsoft Corp to provide after-sales and warranty support services. These services were directly rendered by the appellant to Microsoft Corp, with no direct interaction with Microsoft’s customers.
The Tribunal referred to a similar case, CCT vs. Informatica Business Solutions Pvt. Ltd., where it was held that services rendered under agreements between entities on a principal-to-principal basis do not qualify as “intermediary services” under Rule 9 of the Place of Provision of Services (POPS) Rules, 2012. Instead, such services are governed by Rule 3, making them eligible for classification as export services.
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Further, the tribunal relied on Circular No. 159/15/2021-GST, clarifying that “intermediary” involves facilitating or arranging services between two or more parties, which was not the case here. Precedents such as Grant Thornton Advisory Pvt. Ltd. and Genpact India Pvt. Ltd. emphasized that services provided on one’s own account are not intermediary services and qualify as exports if other conditions, such as payment in convertible foreign currency, are met.
Thus the two-member bench of D M Misra (Judicial) and Bhagya Devi ( Technical ) of the tribunal concluded that the appellant provided services directly to Microsoft Corp, received payment in convertible foreign exchange, and met the conditions for “export of services.” Consequently, the appellant is entitled to the refund of accumulated cenvat credit.
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