2018 (5) TMI 1417 - AT - Service Tax

Tribunal rules in favor of appellant on service tax issue under POPS Rules, 2012

The Tribunal ruled in favor of the appellant, determining that they were not an intermediary under Rule 2(f) of POPS Rules, 2012. The services provided ... Definition of intermediary under POPS Rules, 2012 - Business Auxiliary Service - export of service - place of provision of service - extended period of limitation - Rule 6A of the POPS Rules, 2012 declared ultra viresDefinition of intermediary under POPS Rules, 2012 - Business Auxiliary Service - Whether the appellant is an intermediary in terms of Rule 2(f) of POPS Rules, 2012 - HELD THAT: - The definition of 'intermediary' in Rule 2(f) requires a person who arranges or facilitates provision of the 'main' service between two or more persons and excludes a person who provides the main service on his own account. The tribunal found that the appellant provided services to its clients (foreign colleges/universities and banks) by promoting their business and receiving commission/fees. The appellant did not itself arrange or facilitate the underlying education or loan as the 'main' service between the ultimate service recipient and the provider; rather it rendered promotional/marketing/business support to the clients. Reliance on AAR decisions showing that entities providing business support or marketing to clients on their own account are not intermediaries reinforces this conclusion. In view of these findings, the appellant cannot be characterised as an intermediary under Rule 2(f). [Paras 9, 10, 12]Appellant is not an intermediary and therefore not liable as an intermediary for the referral services.Export of service - place of provision of service - Whether the referral services rendered by the appellant amount to export of service - HELD THAT: - Having concluded that the appellant is not an intermediary but provides Business Auxiliary Service to clients located outside India, the tribunal held that those services qualify as export of service under the POPS Rules. The services were provided to foreign-located clients (banks/colleges/universities), and therefore the place of provision and the character of the service satisfy the export criteria in Rule 3 of the POPS Rules, 2012. [Paras 13]Referral services rendered by the appellant qualify as export of service and are not taxable as domestic intermediary services.Extended period of limitation - Rule 6A of the POPS Rules, 2012 declared ultra vires - Whether the extended period of limitation is invokable for the demands in question - HELD THAT: - The tribunal observed that the dispute requires interpretation of the POPS Rules, 2012, and noted that Rule 6A has been declared ultra vires by the Delhi High Court in Association of Tour Operators. Given that the core issue concerns statutory interpretation of the POPS Rules and the applicability of Rule 6A, the tribunal held that invocation of the extended period of limitation was not sustainable. Consequently, demands based on the extended period were unsupportable. [Paras 12, 14]Extended period of limitation is not invokable; demands framed for the extended period are unsustainable.Final Conclusion: The impugned order is modified: service tax liability on visa facilitation service post 01.07.2012 is sustained; the appellant is not liable to pay service tax on referral services (which qualify as export of service) and no penalty is imposable; demands based on the extended period of limitation are not sustainable. Issues:(A) Whether the appellant is intermediary in terms of Rule 2(f) of POPS Rules, 2012 or notRs.(B) Whether the referral service in question rendered by the appellant amount to export of service or notRs.(C) Whether the extended period of limitation is invokable or notRs.Analysis:(A) Intermediary Status:The appellant contended that they are not an intermediary as per Rule 2(f) of POPS Rules, 2012. They argued that they provide Business Auxiliary Service to clients like banks and universities, not facilitating the main services of education or loans. The Tribunal agreed, citing precedents where service providers acting on their account were not classified as intermediaries. Additionally, the High Court had declared Rule 6A of POPS Rules, 2012 ultra vires, further supporting the appellant's position. Thus, the Tribunal ruled in favor of the appellant on this issue.(B) Export of Service:Given the appellant's non-intermediary status, the Tribunal found that the services provided, namely Business Auxiliary Service to foreign clients, qualified as export of service under Rule 3 of POPS Rules, 2012. This determination aligned with the appellant's argument and led to a ruling in their favor on this issue as well.(C) Extended Period of Limitation:Since the issues primarily revolved around the interpretation of POPS Rules, 2012, the Tribunal concluded that the extended period of limitation was not applicable. Consequently, demands related to this extended period were deemed unsustainable.In conclusion, the Tribunal modified the impugned order, ruling that the appellant was liable to pay service tax on visa facilitation services post-July 2012 but not on referral services. No penalties were imposed on the appellant. The appeal was disposed of accordingly.