Independent contractor sales-support services are not intermediary services where remuneration reflects a principal-to-principal arrangement.

A service provider engaged on an independent contractor, principal-to-principal basis for promotional and sales-support functions for an overseas associate was held not to be an intermediary. The commission structure, linked to product sales and unaccompanied by any arrangement showing mere facilitation of a third-party supply, meant the activity did not fall within the intermediary category under the Place of Provision of Services Rules, 2012. On that basis, denial of refund of unutilised accumulated CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 read with Notification No. 27/2012-CE(NT) was not sustainable.

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Issues: Whether the appellant was rendering intermediary services so as to deny refund of unutilised accumulated CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 read with Notification No. 27/2012-CE(NT) dated 18.06.2012.

Analysis: The dispute turned on the true nature of the agreement and the commission structure. The service provider was engaged for promotional and sales-support functions for an overseas associate on an independent contractor basis, and the agreement indicated a principal-to-principal arrangement rather than a salary-paid agency relationship. The commission was payable on sales of products and there was no other consideration suggesting that the appellant was merely arranging or facilitating a third party supply as an intermediary. In these circumstances, the activity did not fall within the intermediary category under the Place of Provision of Services Rules, 2012, and the earlier contrary view adopted in the refund denial could not be sustained.

Conclusion: The appellant was not an intermediary and the refund denial was unsustainable. The assessee succeeded.

Ratio Decidendi: Where the contractual arrangement shows independent contractor status and the remuneration is for promotional or sales-support services rendered on a principal-to-principal basis, the service provider is not an intermediary for purposes of refund denial under the service tax export regime.

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