2023 (7) TMI 719 - HC - Service Tax

Court affirms CESTAT ruling on service tax refund eligibility for BlackBerry India

Pr. Commissioner, Central Excise And CGST-Delhi South Versus Blackberry India Private Limited

The Court upheld the CESTAT's decision in a case concerning the eligibility for a refund of service tax on services provided by BlackBerry India to ... Refund of unutilised CENVAT Credit - intermediary services or not - POPOS Rules - export of services - rejection of refund on the ground that the place of provisions of service appeared to be in India as the services rendered by BlackBerry India were as an intermediary - HELD THAT:- It is apparent from the definition of intermediary that an intermediary merely arranges or facilitates provision of services. In the present case, the services rendered by BlackBerry India to BlackBerry Singapore under the Agreement, were not in the nature of facilitating services from another supplier. BlackBerry India, as an independent service provider, was required to render the promotional and marketing services; technical marketing assistance; and other related services. BlackBerry India did not arrange or facilitate these services from another supplier. It is clear from the Circular dated 20.09.2021 that BlackBerry India cannot be considered as an intermediary in the context of the services rendered by it under the Agreement. This Court had also considered a similar question albeit in the context of refund of input tax credit under the Integrated Goods and Services Tax Act, 2017 in M/S. ERNST AND YOUNG LIMITED VERSUS ADDITIONAL COMMISSIONER, CGST APPEALS -II, DELHI AND ANR. [2023 (3) TMI 1117 - DELHI HIGH COURT] where it was held that There is no dispute that the recipient of Services – that is EY Entities – are located outside India. Thus, indisputably, the Services provided by the petitioner would fall within the scope of the definition of the term ‘export of service’ under Section 2(6) of the IGST Act. The conclusion of the Adjudicating Authority that the services covered under Section 165(105)(zzb) of the Act were excluded from the scope of Export of Taxable Services under Rule 3(1) of the Export of Service Rules, 2005 is, plainly, erroneous. The learned CESTAT has rightly concluded that all services except those specifically mentioned in Rule 3(1) of the Export of Services Rules, 2005 are covered within the scope of Export of Taxable Services. The Adjudicating Authority had clearly misread the said Rule. The present petition does not raise any substantial question of law - Appeal dismissed. Issues Involved: 1. Whether the services provided by the Respondent to RIM Singapore constitute intermediary service.2. Whether the Respondent is eligible for refund of service tax on services provided by it to RIM Singapore.Summary:Issue 1: Intermediary ServiceThe Revenue filed an appeal under Section 35G of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994, challenging the CESTAT's order which allowed BlackBerry India's appeal for refund of unutilised CENVAT Credit. The Adjudicating Authority had issued a Show Cause Notice proposing to reject BlackBerry India's claim on the ground that the services rendered appeared to be in India as an intermediary. BlackBerry India contended that it had entered into an agreement with BlackBerry Singapore for providing Marketing Administration and Support Services, which included promotional and marketing services. The Adjudicating Authority, however, found that these services were intermediary services as defined in Rule 2(f) of the Place of Provision of Services Rules, 2012.The learned CESTAT, after examining the Agreement, concluded that BlackBerry India was not an intermediary within the meaning of Rule 2(f). It held that BlackBerry India was an independent contractor providing services directly to BlackBerry Singapore and not facilitating services from another supplier. The services provided were promotional and marketing services, technical marketing assistance, and other related services, all rendered independently by BlackBerry India.The Court upheld the CESTAT's findings, noting that the definition of 'intermediary' under Rule 2(f) requires the intermediary to arrange or facilitate the provision of services between two or more persons. In this case, BlackBerry India provided the services on its own account and did not facilitate services from another supplier, thus not fitting the definition of an intermediary.Issue 2: Eligibility for Refund of Service TaxThe second issue was whether the services rendered by BlackBerry India were covered within the scope of export of services under Rule 3 of the Export of Taxable Service Rules, 2005. The learned CESTAT did not accept the Adjudicating Authority's finding that services covered under Section 65(105)(zzb) of the Act were excluded from the scope of Export of Taxable Services. The CESTAT concluded that all services except those specifically mentioned in Rule 3(1) of the Export of Services Rules, 2005, are covered within the scope of Export of Taxable Services.The Court found no infirmity in the CESTAT's conclusion and noted that the Adjudicating Authority had misread the Rule. The Court referenced similar cases, including M/s Ernst and Young Limited and M/s Ohmi Industries Asia Private Limited, which supported the CESTAT's interpretation.Consequently, the Court dismissed the Revenue's appeal, finding that it did not raise any substantial question of law, and upheld the CESTAT's decision to allow BlackBerry India's refund claim.