Department cannot arbitrarily deny intermediary export refund

Department cannot arbitrarily deny intermediary export refund for an intervening period when granted previously and subsequently.

Issue

Whether the Department can classify an IT/ITeS provider as an “intermediary” and reject an unutilized Input Tax Credit (ITC) refund for a brief intervening period when identical services were accepted as zero-rated exports for preceding and succeeding periods.

Facts

Business Operations: The petitioner, an information technology and IT-enabled services (IT/ITeS) provider, rendered services to its overseas parent company in the USA under a service agreement.
Refund Claim: The petitioner filed a refund application for unutilized Input Tax Credit (ITC) on zero-rated supplies for the period from January 2019 to March 2019 under Section 54 of the CGST Act.
Consistency in Prior & Later Periods: For identical services under the same agreement, the Department had already granted ITC refunds treating the supplies as “export of services” for June 2018 to December 2018, April 2019 to December 2019, and January 2020 to March 2020. These refund orders remained unchallenged by the Revenue.
Rejection by Revenue: The Adjudicating Authority rejected the refund for the intervening period (January 2019 to March 2019) by reclassifying the petitioner as an “intermediary” under Section 2(13) of the IGST Act, and the Appellate Authority subsequently affirmed the rejection.

Decision

Principle of Consistency Applies: Once the Department accepted the petitioner’s services as export of services for both prior and subsequent periods, it could not arbitrarily withhold the benefit for a brief intervening period.
Absence of Differentiating Material: The Revenue failed to produce any evidence or material demonstrating that the nature of services rendered during the impugned period differed from the other periods.
Order Arbitrary & Illegal: The rejection of the refund was held to be illegal and unsustainable in law.
Outcome: The impugned appellate order was set aside, and the petition was allowed in favor of the assessee.

Key Takeaways

Binding Rule of Consistency: Tax authorities cannot adopt a inconsistent approach by treating identical services under the same contract as “export of services” in some periods and as “intermediary services” in an intervening period.
Burden of Proof on Revenue: To deviate from an established stance regarding the nature of a service, the Department must bring clear material on record showing a factual or contractual change.
Protection for IT/ITeS Exporters: Captive service providers operating under main service agreements for foreign entities cannot be routinely tagged as “intermediaries” when performing the core service directly.

HIGH COURT OF PUNJAB & HARYANA

Cvent India (P.) Ltd.

Assistant Commissioner of CGST

Ashwani Kumar Mishra, Actg. CJ.
and Rohit Kapoor, J.

CWP No. 22461 of 2023

JULY 21, 2026

Ms. Krati Singh, Ms. Samiksha Uniyal and Ms. Khushi Satviki, Advs. for the Petitioner. Sourabh Goel, Sr. Panel Counsel for the Respondent.

ORDER

1. The petitioner, who claims to be engaged in the business of export of information technology and other business support services, on the basis of an agreement with its overseas parent company, situated in United States of America, is aggrieved by the rejection of its claim for refund of the unutilized input tax credit (ITC) for the period from January 2019 to March 2019 (hereinafter referred to as the “period in question”) on account of supply of zero rated services/export of services, filed under Section 16(3) of the Integrated Goods and Services Tax Act, 2017, (IGST Act) read with Section 54(3) of the Central Goods and Services Act, 2017 (CGST).

2. The Appellate Authority, while dismissing the Appeal filed by the Petitioner vide the order impugned dated 16.12.2022 (Annexure P-1), upheld the order-in-original dated 24.06.2020 (Annexure P-7) and rejected the claim of the petitioner, on the ground that it falls in the category of an ‘intermediary’, as defined under Section 2 (13) of the IGST Act, and hence does not qualify for the refund keeping in view the provisions of Section 13 (8) (b) Section 2 (6) of the said Act.

3. Although various submissions have been advanced by the learned counsel for the petitioner, however, she has primarily assailed the order impugned on the short ground that the same violates the principle of consistency and is arbitrary, inasmuch as, that the department itself granted refund of unutilized credit for the same services, for the period of June 2018 to December 2018, April 2019 to December 2019 and January 2020 to March 2020. Our attention has been drawn to the material available on record in this regard. It is the categoric submission of the learned counsel for the petitioner that the department has failed to show that the services provided by the petitioner for the period between January 2019 to March 2019, were different from the services provided by it, both prior and subsequent thereto, for which the department has consistently regarded it as an exporter of services and not an intermediary. Reliance is placed upon the decision of a co-ordinate bench of this court in CWP-5527-2025 dated 13.05.2026 in Corning Technologies India (P.) Ltd. v. Commissioner of Central GST 116 GST 75 (Punjab & Haryana), wherein, in identical circumstances, it was held that where the same entity is treated differently as an exporter and intermediary, and when no reasons are forthcoming to distinguish the rendering of services, then such an approach would be held to be discriminatory.

4. Learned counsel appearing on behalf of the respondent, does not dispute the factual assertions made on behalf of the petitioner or the legal position as laid down in the case of Corning Technologies India (P.) Ltd. (supra) and concedes that the orders granting refund to the petitioner by treating it as an exporter, for absolutely identical services, have not been assailed before any fora.

5. In such circumstances, we are of the considered opinion that once the department itself has treated the petitioner as an exporter of services for the same nature of services and granted refund of unutilized ITC for periods, both prior to and after the period in question, it cannot withhold such benefit for a brief period falling in between, in the absence of any material to show that the services provided during such period, were distinct, so as to make the petitioner fall within the definition of the term ‘intermediary’. The rejection of the petitioner’s claim for refund, would therefore be illegal and arbitrary, and cannot sustain.

6. In view thereof, the instant petition succeeds and is allowed. The impugned order dated 16.12.2022 (Annexure P-1) is accordingly set aside. Since the order-in-original dated 24.06.2020 (Annexure P-7) stood merged with the order passed by the appellate authority dated 16.12.2022 (Annexure P-1), which stands quashed, we therefore direct that the refund amount along with applicable interest be released to the petitioner, within a period of four weeks from the date of uploading of this order.