HC: No change-in-law relating to Intermediary taxation; Genpact BPO not an “Intermediary”; Applies ‘consistency principle’

Genpact India Pvt. Ltd. vs. UOI & Ors.

Punjab & Haryana (P&H) HC sets-aside rejection of refund claim categorically holding that Business Process Outsourcing (BPO) unit of assessee (Genpact India Pvt. Ltd.) is not an “Intermediary” in the prevailing GST regime upon finding that, Assessee is involved by a foreign entity, Genpact International (GI) for actual performance of BPO services and information technology services to the customers of GI; HC deems Revenue’s stance that assessee is in a principal-agent relationship with GI as “without any basis” and “clearly erroneous”; Assessee filed claim for refund of un-utilized ITC amounting to Rs.27 crores (approx..) on account of zero rated supplies of services without payment of IGST under Letter of Undertaking but Rs. 26 crores (approx.) got sanctioned vide order-in-original and remaining amount came to be rejected; Revenue took a view that the services provided by the assessee are in the nature of “intermediary services” as per Section 2 (13) and do not qualify as “export of services” in terms of Section 2 (6); Previously, issue was litigated whereby HC set aside rejection of refund while remanding the matter back to appellate authority for a decision afresh; Upon remand, refund claim of assessee came to be rejected again; Before all else, P&H HC rejects the deviation by Revenue from order-in-original on the ostensible basis that there has been a material change in definition of “Intermediary” w.e.f. July 01, 2017 i.e. with the onset of the GST regime as “wholly mis-conceived”; In this connection, HC observes that “there is no change in the legal position i.e. with regard to the scope and ambit of “intermediary” services under the service tax regime vis-a-vis the GST regime….the department cannot take a different view for different periods.”; Applying the principal of consistency as outlined in Apex Court dicta in Radhasoami and BSNL, HC upholds order-in-original stating that “holding the petitioner to be not an “intermediary” under the MSA, should prevail even under the GST regime”; On the nature of services rendered by assessee, HC points out that assessee against ‘receiving fee/charges’ is providing the BPO services which have been sub contracted to it by GI to GI’s overseas clients/customers for which GI gets paid by its customers; HC notices that clauses of Master Services Sub-Contracting Agreement (MSA) do not reflect that assessee was required to arrange/facilitate a 3rd party to render the main service (Business Process Outsourcing/BPO) which has actually been rendered by the assessee; HC culls out that assessee would be held responsible for all risk related to performance of services “which would be akin to services provided on “its own account”; To Court’s mind, recitals of MSA with GI, various clauses of MSA as well as triple conditions for a person to qualify as an “Intermediary” “do not in any manner indicate that petitioner is acting as an “intermediary” so as to fall within the scope and ambit of the definition of “intermediary” under Section 2 (13) of the IGST Act”; HC deduces that,“Such clauses cannot also be interpreted to conclude that the petitioner has facilitated the services” as same “are in relation to the modalities of how the actual work would be carried out”; Accordingly, HC restores order-in-original granting refund of Rs. 26 crores in favour of assessee with a direction that “the benefit of this order shall enure to the petitioner for grant of subsequent refunds as well” and allows writ