CESTAT Bangalore Allows Refund Under Rule 5 of Cenvat Credit Rules: IT Services Not Intermediary, Nexus Objection Overruled

Case Overview

Informatica Business Solutions Pvt. Ltd. Vs Commissioner of Central Tax (CESTAT Bangalore)

The CESTAT Bangalore delivered a significant ruling in favour of Informatica Business Solutions Pvt. Ltd., allowing appeals that challenged the partial rejection of refund claims filed under Rule 5 of the Cenvat Credit Rules, 2004. The appellant, engaged in providing Information Technology Software Services, customer support services, and marketing and sales support services to an overseas group entity, had accumulated Cenvat credit on account of export of services and sought a refund of the same.

The Revenue authorities had partially denied these claims on three principal grounds:

  • The services rendered were classified as intermediary services
  • The Foreign Inward Remittance Certificates (FIRCs) were considered defective
  • Certain input services were alleged to have no nexus with the exported output services

The Tribunal systematically examined each ground and ruled substantially in favour of the assessee, remanding the matter only on the narrow issue of FIRC verification.

Background and Facts

The assessee filed multiple refund claims under Rule 5 of the Cenvat Credit Rules, 2004 read with Notification No. 27/2012-CE(NT) dated 18.06.2012. The original authority partially sanctioned these refunds but rejected a portion of the claims. On appeal, the Commissioner (Appeals) upheld the rejections vide Order-in-Appeal No. 277-280/2021 dated 02.11.2021.

The assessee, before the CESTAT, contended that:

  1. Its services — comprising software development, customer support, and marketing and sales support — were rendered directly to Informatica USA, an overseas entity
  2. These services were provided on the assessee's own account and did not constitute intermediary services
  3. Payment was received in convertible foreign exchange, thus satisfying the conditions under Rule 6A of the Service Tax Rules, 1994
  4. Denial of refund on grounds of nexus was legally unsustainable when the department had not disputed the credit availment under Rule 14 of the Cenvat Credit Rules, 2004

The Revenue reiterated the findings of the Commissioner (Appeals) without adding fresh grounds.

Issue I: Whether the Services Constituted Intermediary Services

Tribunal's Analysis

This was the primary issue before the Tribunal. The Commissioner (Appeals) had concluded, based on the service agreement dated 02.05.2003 (covering various periods), that the services rendered by the assessee fell within the definition of intermediary services and therefore could not qualify as export of services.

The CESTAT rejected this finding by placing reliance on its own earlier order in the assessee's case — Final Order No. 21125/2024 dated 18.11.2024 — wherein the Tribunal had already examined the same agreements and returned a contrary finding.

What Constitutes an Intermediary?

The Tribunal drew upon a well-settled legal framework in arriving at its conclusion. The Circular bearing No. 159/15/2021-GST dated 20.09.2021 issued by the Board had clarified the scope of the term "intermediary" in the GST context. This definition was borrowed from Rule 2(f) of the Place of Provision of Services Rules, 2012 (POPS Rules, 2012), which defined an intermediary as:

A broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (the 'main' service) or a supply of goods between two or more persons, but does not include a person who provides the main service on his own account.

The CESTAT observed that the fundamental requirement for a service to be classified as intermediary is the existence of at least three parties — the intermediary being the one who arranges or facilitates the main supply between the other parties, without himself being the provider of that main supply.

Illustration 4 of the said Circular was found directly applicable to the facts at hand: