Overseas educational services not intermediary services under service tax law due to lack of three-party arrangement requirement

CESTAT Chandigarh held that appellant's services to overseas educational entity did not constitute intermediary services under service tax law. The tribunal found that the statutory requirement of three parties in intermediary service arrangements was absent, as only bilateral relationships existed between Australian universities and the overseas entity, and between the overseas entity and appellant. The appellant and overseas entity rendered the same primary service of assisting student admissions rather than distinct main and ancillary supplies. Since the appeal succeeded on merits, issues regarding extended limitation period and penalties became academic. Appeal allowed.

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Issues Involved:

1. Whether the services rendered by the appellants to M/s OCA constitute an export of service during the period 2009-10 to 2013-14.
2. Whether the services rendered post 01.07.2012 constitute Intermediary Service.
3. Whether the services qualify as services relating to admission to recognized courses and thus do not attract service tax.
4. Whether the impugned order was issued in violation of principles of natural justice.
5. Whether the extended period of limitation and penalties can be invoked.

Detailed Analysis:

1. Export of Service (2009-10 to 2013-14):

The appellants argued that the services provided to M/s OCA, Australia, constitute export of service. The services included marketing and promoting Australian educational institutions to Indian students. The Department contended that the services were rendered and consumed in India, thus not qualifying as export. The Tribunal found that the services were provided to M/s OCA, and the benefit accrued outside India. Citing the decision in Arcelor Mittal Stainless (I) P. Ltd., the Tribunal held that the services rendered by the appellants satisfied the conditions of Rule 3(2)(a) of Export of Service Rules, 2005, for the period 01.04.2009 to 26.02.2010. For the period 27.02.2010 to 30.06.2012, the only conditions were that the service receiver should be located outside India and the consideration should be received in foreign exchange, both of which were satisfied.

2. Intermediary Service (Post 01.07.2012):

The Department classified the appellant's services as intermediary services. The Tribunal examined the definition of "Intermediary" under Rule 2(f) of Place of Provision of Service Rules, 2012, which requires three parties and two distinct supplies. The Tribunal found that the appellants were subcontractors to M/s OCA and not intermediaries between the Indian students and Australian universities. The appellants provided the main service directly to M/s OCA, who in turn provided the main service to the universities. The Tribunal relied on the case of IDP Education India Pvt. Ltd., where similar facts were present, and it was held that the appellant was not an intermediary.

3. Services Relating to Admission to Recognized Courses:

The appellants contended that their services related to admission to recognized courses and thus did not attract service tax. The Tribunal did not delve deeply into this issue as the appeal succeeded on other grounds.

4. Violation of Principles of Natural Justice:

The appellants argued that the impugned order was issued without considering their submissions and copied word-to-word from the Show Cause Notice. The Tribunal noted these submissions but did not make a specific ruling on this ground as the appeal was allowed on merits.

5. Extended Period of Limitation and Penalties:

The appellants argued that the issue was interpretational in nature, and there was no suppression or collusion to evade duty. Hence, the extended period and penalties were not applicable. The Tribunal did not specifically address this issue since the appeal was allowed on the substantive grounds.

Conclusion:

The Tribunal allowed the appeal, holding that the services rendered by the appellants to M/s OCA during the period 2009-10 to 2013-14 constituted export of service and did not fall under the category of "Intermediary Services" post 01.07.2012. The appeal was allowed with consequential relief, if any, as per law.

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