2023 (9) TMI 304 - HC - Service Tax

Appellant Not Intermediary; Telecommunication Services Classified as Export Under Rule 6(A) of ST Rules

The HC upheld the CESTAT's finding that the appellant was not providing intermediary services, as the agreement with the foreign entity was on a ... Refund of unutilised CENVAT - export of services - intermediary services or not - place of provision of services - location of the recipient of services or not - HELD THAT:- As per Rule 6(A), the provision of service shall be treated as export of service when the place of provision of service is outside India. As per Rule 3 of the POPS Rules, the place of provision of a service shall be the location of the recipient of service. However, vide Rule 9(c) of POPS Rules, the place of provision for “Intermediary services” would be the location of the service provider. On a careful perusal of the terms and conditions of the aforesaid Agreement dated 14 July 2011 between SingTel and SGIPL, there are no legal infirmity or irrational approach adopted by the learned CESTAT when it comes to conclude that SGIPL is not providing ‘intermediary services’. The plea that SGIPL is not providing any services on its own account is misplaced. It is manifest that there is no contract between SingTel and service providers in India like Airtel, Vodafone, Reliance etc., and the agreement between SGIPL and SingTel is on principal-to-principal basis - Clause 19 of the Agreement specifically stipulates that the relationship of the parties to the Agreement shall always and only be that of independent contractors and nothing in the Agreement shall create or be deemed to create a partnership or the relationship of principal and agent or employer and employee between the parties. Incidentally, the appellant has not even alleged that the aforesaid agreement is a camouflage, fraudulent or designed to get over the service tax dragnet. The issue that came to be was addressed by the Co-ordinate Bench was whether the telecommunication services provided by Verizon India for the period in question amounted to ‘export of services’ within the meaning of Rule 6(A) of the ST Rules - This was answered in the affirmative. It was held that since the recipient of the service Verizon US was outside India, Verizon India rightly treated it as an ‘export of service’ and accordingly it was exempted from the liability of paying service tax. The present appeals are bereft of any merit. Accordingly, the same are dismissed. Issues Involved:1. Whether the services provided by the respondent are covered under 'export of services'Rs.2. Whether the services provided by the respondent qualify as 'intermediary services'Rs.3. Whether the respondent is entitled to refund of unutilised CENVAT credit under Rule 5 of Cenvat Credit Rules 2004Rs.Summary:Issue 1: Export of ServicesThe court examined whether the services provided by SGIPL to SingTel qualify as 'export of services'. According to Rule 6A of the Service Tax Rules (ST Rules), services are considered exported if the provider is in a taxable territory, the recipient is outside India, the service is not specified in section 66D, the place of provision is outside India, payment is received in foreign exchange, and the provider and recipient are not merely distinct establishments of the same entity. The court found that SGIPL's services met these criteria since the recipient, SingTel, is located outside India, and the services are provided under an agreement on a principal-to-principal basis.Issue 2: Intermediary ServicesThe court analyzed whether SGIPL's services qualify as 'intermediary services' under Rule 2(f) of the Place of Provision of Service Rules (POPS Rules). An intermediary is defined as a broker, agent, or any person who arranges or facilitates a provision of a service or supply of goods between two or more persons but does not provide the main service on their own account. The court concluded that SGIPL is not an intermediary because it provides services on its own account and not merely as a facilitator between Indian telecom operators and SingTel. The agreement between SGIPL and SingTel explicitly states that SGIPL provides the necessary infrastructure and services independently, and there is no direct contract between SingTel and Indian telecom operators.Issue 3: Refund of Unutilised CENVAT CreditThe court addressed whether SGIPL is entitled to a refund of unutilised CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004. Given that SGIPL's services qualify as 'export of services' and not 'intermediary services', the court upheld the decision of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) allowing the refund of Rs. 13,32,91,031/- for the period July 2015 to June 2017.Analysis and Reasons for Decision:The court found the appeals by the appellant devoid of merit. It noted that the decision in Verizon Communications India Ltd. (2018) supports the view that services provided to a recipient outside India qualify as 'export of services'. The court also referenced the legal principles in Kunhayammed and Others v. State of Kerala (2000) regarding the impact of pending Special Leave Petitions (SLPs) and concluded that there was no stay order preventing the consideration of the issues raised.The court reiterated that SGIPL provides services independently and not as an intermediary, as evidenced by the agreement with SingTel and the nature of services provided. The court dismissed the appeals, affirming the entitlement of SGIPL to the refund of unutilised CENVAT credit.Conclusion:The appeals were dismissed, affirming that SGIPL's services qualify as 'export of services', do not constitute 'intermediary services', and entitle SGIPL to a refund of unutilised CENVAT credit.