Refund Allowed – IT/Software Export Services Not Intermediary under GST

Case Details

• Case Name: M/s Atlan Technologies Pvt. Ltd. v. Assistant Commissioner, Commissionerate–South Delhi

• Court: High Court of Delhi

• Petition Number: W.P.(C) 7530/2024 & CM Appl. 57554/2024

• Date of Judgment: 30.09.2024

• Category of Dispute: Refund of unutilized Input Tax Credit (ITC)

• Relevant Sections:

  • Section 2(6), Section 2(13), Section 13 of the IGST Act, 2017

  • Section 168(1) of the CGST Act, 2017

  • Circular No. 159/15/2021-GST dated 20.09.2021

• Amount in Dispute: ₹46,05,196/-

Facts of the Case

(Ref: Paras 1–5 of Judgment)

• The petitioner, Atlan Technologies Pvt. Ltd., provided Software Development & Engineering Support Services (ITS) to its Singapore-based holding company under a Service Level Agreement.

• Refund applications of unutilized ITC of ₹46,05,196/- (Jun–Sep 2020) and ₹23,61,049/- (Oct–Dec 2020) were filed (Para 4).

• Refunds were rejected by Orders-in-Original (19.12.2022 & 13.03.2023), holding the petitioner as an “intermediary” and not an exporter of services (Para 4).

• Appeals failed and Order-in-Appeal dated 22.06.2023 also rejected claims (Para 1, 4).

Question(s) in Consideration

(Ref: Paras 6–9)

1. Whether services provided by the petitioner to its Singapore holding company qualify as export of services under Section 2(6) of the IGST Act?

2. Whether petitioner’s services fall within the ambit of “intermediary services” under Section 2(13) of the IGST Act?

3. Whether rejection of refund on the ground of “intermediary” classification is sustainable?

Observations of the Court

(Ref: Paras 8–16)

• On Intermediary Definition: An intermediary must facilitate supply between two distinct parties; petitioner supplied services directly to its parent company on a principal-to-principal basis. No third-party element was involved (Paras 13–14).

• On CBIC Circular 159/15/2021: Circular clarifies that an entity providing services on its own account cannot be treated as an intermediary. The arrangement here involved only two parties, not three (Paras 10–11, 15).

• On Service Agreement: The agreement confirmed petitioner was directly engaged in providing ITS, not merely arranging or facilitating services for others (Para 14).

• On Mark-up Issue: The presence of “mark-up” in service fees does not make the petitioner an intermediary; arm’s length pricing is permissible even with a related party (Para 16).

Judgment of the Court

(Ref: Para 17)

• Orders-in-Original (19.12.2022 & 13.03.2023) and Order-in-Appeal (22.06.2023) were quashed.

• Petitioner held entitled to refund of unutilized ITC along with applicable statutory interest.

• Court rejected intermediary classification and upheld that the services qualify as export of services under GST.

Between Fine Lines (Simplified Outcome in 5 Points)

1. Services provided to a foreign holding company were exports, not intermediary transactions.

2. Refund of ITC wrongly denied by treating petitioner as an intermediary.

3. CBIC Circular supports that service on own account cannot be intermediary.

4. Arm’s length “mark-up” in related party service agreements is valid.

5. Court ordered refund with statutory interest in favour of the petitioner.

Summary of Referred Cases