Grant Thornton India's brand development services to London office qualify as export of services, not intermediary services

CESTAT Delhi held that services provided by Grant Thornton India to Grant Thornton London for developing the Grant Thornton brand name in India constituted export of services, not intermediary services. The tribunal found that Grant Thornton India provided services on its own account rather than acting as an intermediary. Under applicable rules, the place of provision was the recipient's location (London), payment was received in convertible foreign currency, and conditions for export of services were satisfied. The appeal was dismissed, upholding the Commissioner's order dropping proceedings against the respondent.

---

---

Issues Involved:
1. Classification of services under "Business Auxiliary Services" (BAS) for the period up to 30.06.2012.
2. Qualification of services as "export of services" under the Export of Service Rules, 2005 for the period up to 30.06.2012.
3. Classification of services as "Intermediary Services" for the period from 01.07.2012.
4. Qualification of services as "export of services" under the Place of Provision of Service Rules, 2012 for the period from 01.07.2012.

Detailed Analysis:

1. Classification of Services under "Business Auxiliary Services" (BAS) for the Period up to 30.06.2012:
The Commissioner examined Clause 2 of the Cost Reimbursement Agreement, which detailed the activities undertaken by the Assessee for the development of the "Grant Thornton" brand name in India. The Commissioner found that these activities, which included increasing market support capacities and building brand awareness, were developmental and promotional in nature. The Commissioner concluded that these activities did not fall under sub-clauses (i) & (vi) of section 65(19) of the Finance Act, which defines BAS. The Commissioner stated, "As the production of any goods is not involved in the instant case, the question of coverage of the above activities under the said clause (i) is not tenable."

2. Qualification of Services as "Export of Services" under the Export of Service Rules, 2005 for the Period up to 30.06.2012:
The Commissioner noted that BAS was a category (iii) service, which required that services be provided in relation to business or commerce to a recipient outside India and payment for such services be received in convertible foreign currency. The Commissioner observed that the condition "and used outside India" was omitted from the Export of Services Rules effective 27.02.2010, which resolved previous litigations. The Commissioner affirmed that the payment was received in foreign currency, satisfying the conditions for export of services, stating, "Thus, I find that the conditions necessary for claiming export have been satisfied in the instant case."

3. Classification of Services as "Intermediary Services" for the Period from 01.07.2012:
The Commissioner analyzed the definition of "intermediary" under the Place of Provision of Service Rules, 2012, which includes a broker or agent who arranges or facilitates the provision of a service between two or more persons but excludes a person who provides the main service on his account. The Commissioner found no indication in the agreement that the Assessee was to act as an intermediary. The Commissioner stated, "Since the Noticee has to provide the service on its own account, I find that they are not covered under the definition of intermediary."

4. Qualification of Services as "Export of Services" under the Place of Provision of Service Rules, 2012 for the Period from 01.07.2012:
The Commissioner applied Rule 3 of the Place of Provision of Service Rules, 2012, which states that the place of provision of service shall be the location of the service recipient. The Commissioner noted that Grant Thornton, London, the recipient of the service, was located outside India, and the payment was received in convertible foreign currency. The Commissioner concluded that the services provided by the Assessee qualified as export of services, stating, "Accordingly, I find the all the conditions required under Rule 6A of the Service Tax Rules, 1994 are satisfied in this case."

Tribunal's Analysis and Conclusion:
The Tribunal upheld the Commissioner's order, rejecting the department's contention that the services rendered post 01.07.2012 were intermediary services. The Tribunal referenced multiple judicial precedents, including Sunrise Immigration Consultants Private Limited vs. Commissioner of Central Excise and Service Tax, Chandigarh and Genpact India Pvt. Ltd. vs. Union of India, which clarified the definition and scope of intermediary services. The Tribunal concluded that Grant Thornton, India was not an intermediary and that the services provided were export of services, stating, "The services provided by it to Grant Thornton, London are 'export of services'."

Final Order:
The Tribunal dismissed the department's appeal and upheld the Commissioner's order dated 29.03.2018, which dropped the proceedings initiated against Grant Thornton, India. The cross-objection filed by the respondent was disposed of accordingly.

---