2025 (2) TMI 10 - AT - Service Tax

Technical services and promotional activities for US clients in India constitute intermediary services under Notification 28/2012-ST, not export services.

Koch Chemicals Technology Group India Pvt Ltd. Versus C.C.E & S.T. – Vadodara-I

CESTAT Ahmedabad rejected the appeal regarding classification of after-sales services and promotion of goods for July 2012 to September 2014. The tribunal ... Classification of services - intermediary services or not - after sales services and promotion of goods - period involved is from July 2012 to September 2014 - extended period of limitation - HELD THAT:- In view of statutory provision the services having been provided in India to the customer of Koch Membrane, USA through the intermediary which in this case was the appellant, same as discussed by the Commissioner in order, cited above, cannot be treated as “Export of Services‟. Secondly, this court is also not impressed by the argument advanced by the appellants that they having provided technical services and technical promotional quality design installation, commissioning and testing services to clients of Koch Membrane Systems, USA in India, such services were not covered as intermediary services prior to amendment of 2014 in Section 2(f) as they prior to the period of Notification 14/2014 dated 01.10.2014 were only dealing with the goods and prior to amendment vide above notification for the impugned period i.e. July 2012 to September 2014 they were not providing service in relation to services but only in relation to the goods. The appellants were facilitating and arranging for the services between the buyers of Koch Membrane, and Koch Membrane Systems, USA who was otherwise required to provide such services in India. Such services were very much within the ambit of Notification No. 28/2012-ST dated 20.06.2012 even prior to the amendment carried out by Notification No. 14/2014-ST dated 11.07.2014 which only widened the scope to include even those intermediaries which arrange for supply of goods between two or more persons which term would include importing of goods on behalf of the main producer or client or between two or more persons and therefore, would include those intermediaries or brokers or agents who act from the point of importation to the point of consumption and supply of goods which is not the case in this instance as only installation and designing and such other services in India were provided were being provided in relation to and for Koch Membrane Systems, USA,which they would have been required to provide in India. Therefore, considering the scope of the contract, it becomes abundantly clear from the object clause itself that they were provisioning for services and arranging and facilitating provision of service in India which as per statutory provisions was always covered under the ambit of Place of Provisions Rules, 2012. The extended period for demand was justified due to non-disclosure of relevant information by the appellant. Concluion - i) The services provided by the appellant were intermediary services and subject to service tax. ii) The appellant's argument regarding the retrospective application of the amendment was rejected. iii) The services did not qualify as export of services and were not exempt from service tax. iv) The extended period for demand was justified due to non-disclosure of relevant information by the appellant. Appeal rejected. The case involves a dispute regarding the classification of services provided by the appellant to Koch Membrane INC. U.S.A. as intermediary services, which the department deemed taxable. The appellant argued that their services related to goods and should not be taxed as intermediary services during the period from July 2012 to September 2014. The appeal was rejected by the Commissioner (Appeals), and the appellant further contested the decision.Issues Presented and ConsideredThe core legal questions considered were: Whether the services provided by the appellant to Koch Membrane INC. U.S.A. qualify as intermediary services under the Place of Provision of Services Rules, 2012, and thus subject to service tax. Whether the amendment in the definition of 'intermediary' effective from 01.10.2014 could be applied retrospectively to the period in question. Whether the services provided could be considered as export of services, thus exempt from service tax. Whether the invocation of the extended period for demand of service tax was justified.Issue-wise Detailed AnalysisRelevant Legal Framework and PrecedentsThe legal framework revolves around the definition of 'intermediary' under Rule 2(f) of the Place of Provision of Services Rules, 2012, and its amendment in 2014. The appellant relied on prior case law to argue that services related to goods were not taxable as intermediary services before the amendment.Court's Interpretation and ReasoningThe Court interpreted the definition of 'intermediary' as it stood during the relevant period, noting that it applied to services facilitating provision between two or more persons. The Court found that the appellant acted as an intermediary by providing services in India on behalf of Koch Membrane INC. U.S.A.Key Evidence and FindingsThe agreement between the appellant and Koch Membrane INC. U.S.A. indicated that the appellant was appointed to provide services in India. The Court found that the services provided were not covered under the Negative List and were subject to service tax.Application of Law to FactsThe Court applied Rule 9 of the Place of Provision of Services Rules, 2012, which specifies that the place of provision for intermediary services is the location of the service provider. Since the appellant provided services in India, they were liable for service tax.Treatment of Competing ArgumentsThe appellant's argument that the services were related to goods and not taxable as intermediary services was rejected. The Court found that the services provided were intermediary in nature and taxable. The claim of export of services was also dismissed as the services were provided within India.ConclusionsThe Court concluded that the appellant's services were intermediary services subject to service tax. The amendment in 2014 did not affect the taxability of services during the period in question. The invocation of the extended period for demand was justified due to the appellant's failure to disclose relevant information.Significant HoldingsCore Principles Established The definition of 'intermediary' under the Place of Provision of Services Rules, 2012, includes services facilitating provision between two or more persons, regardless of whether they relate to goods or services. The place of provision for intermediary services is the location of the service provider, making such services taxable if provided in India. The amendment in 2014 did not have retrospective effect on the taxability of intermediary services.Final Determinations on Each Issue The services provided by the appellant were intermediary services and subject to service tax. The appellant's argument regarding the retrospective application of the amendment was rejected. The services did not qualify as export of services and were not exempt from service tax. The extended period for demand was justified due to non-disclosure of relevant information by the appellant.The Court upheld the decisions of the lower authorities, sustaining the order for the appellant to pay the service tax, interest, and penalty as determined. The appeal was rejected.