2025 (9) TMI 125 - AT - Service Tax

Appellant classified as business support services, not intermediary; Rule 9 inapplicable, Rule 6A export refund allowed

M/s Polyplastics Marketing (India) Pvt. Ltd Versus Commissioner of CGST & Central Excise, Mumbai

M/s Polyplastics Marketing (India) Pvt. Ltd Versus Commissioner of CGST & Central Excise, Mumbai - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether the services rendered fall within the definition of 'support services of business or commerce' (business support services) under the Finance Act, 2006, as opposed to intermediary services. 2. Whether the appellant's activities qualify as 'intermediary' within the meaning of Rule 2(f) of the Place of Provision of Services Rules, 2012, and thereby attract the place-of-supply rule under Rule 9(3) (place of provision being location of service provider) applicable to intermediaries. 3. Whether, on the classification of services as business support services and on the place-of-provision analysis, the services are exports (place of provision outside India) eligible for refund of tax paid. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Classification: Business Support Services vs. Intermediary Legal framework: Sectional definition of 'support services of business or commerce' as introduced by the Finance Act, 2006 (sectional definition reproduced in the judgment) enumerating activities such as evaluation of prospective customers, telemarketing, operational assistance for marketing, customer relationship management, and other transaction-processing services. Precedent treatment: No prior judicial precedent was invoked or followed/distinguished in the impugned order; the Tribunal relied on statutory definitions and prior administrative orders in the departmental file. Interpretation and reasoning: The Tribunal analysed the contractual and factual matrix: (a) the service provider identified prospective customers, briefed them on product features, pricing and promotions, evaluated prospects and provided incidental support; (b) the service provider did not represent the client, sell the client's products, or decide contractual counterparties; (c) remuneration was by cost-plus margin (reimbursement plus markup), not commission tied to actual sales; and (d) the principal (manufacturer) entered into sales contracts directly with customers. On these facts the activities squarely fall within the statutory phraseology of business support services (evaluation of prospective customers, operational assistance for marketing etc.). Ratio vs. Obiter: Ratio - services of the appellant constitute 'business support services' as defined, not intermediary services. Obiter - observations regarding commercial practices and administrative acceptance for other periods to demonstrate consistency. Conclusion: The services are business support services under the Finance Act, 2006; they are not intermediary services by nature. Issue 2 - Whether the appellant is an 'Intermediary' under Rule 2(f) and subject to Rule 9 Legal framework: Rule 2(f) of the Place of Provision of Services Rules, 2012 defines 'intermediary' as a broker, agent or any person who arranges or facilitates provision of the main service or supply of goods between two or more persons but excludes a person who provides the main service on his account. Rule 9 prescribes that for intermediary services the place of provision shall be the location of the service provider. Precedent treatment: No judicial precedent was relied upon to modify the statutory test; the Tribunal applied the text of Rules 2(f) and 9 to the factual matrix. Interpretation and reasoning: The Tribunal applied the statutory criteria to the facts and found that: (a) the appellant did not 'arrange or facilitate' contractual supply between the principal and customers because the principal independently determined and concluded sales contracts; (b) the appellant did not provide or sell the main supply on its own account and did not act as agent or broker in concluding sales; (c) the appellant's consideration was unrelated to the price or occurrence of the principal's main supply (cost-plus margin not commission); and (d) the appellant's activities were independent business-support functions rather than facilitation of a main service/supply. Consequently, the appellant does not meet the statutory elements of an intermediary and Rule 9 is not attracted. Ratio vs. Obiter: Ratio - the statutory test for 'intermediary' requires active arranging/facilitating of the main supply and a linkage between the intermediary's remuneration/role and the main supply; absence of such features precludes classification as intermediary. Obiter - discussion of two-service involvement under Rule 9 as illustrative of intermediary constructs. Conclusion: The appellant is not an intermediary within the meaning of Rule 2(f); therefore Rule 9 governing intermediaries does not apply to the impugned services. Issue 3 - Place of Provision, Export of Services and Refund Entitlement Legal framework: Place of Provision of Services Rules (including Rule 6A referenced in the decision) govern determination of whether supply is provided outside India and therefore an export of service; statutory definition of business support services as taxable category; refund regime applicable to taxes paid on exported services. Precedent treatment: Administrative orders on other disputed periods were considered: earlier orders (Order-in-Original; Commissioner (Appeals)) had accepted that the appellant provided business support services and allowed refunds for certain periods; a subsequent revision order in the departmental file later confirmed refund entitlement for an earlier period. No conflicting judicial precedent was cited. Interpretation and reasoning: Having concluded that the services are business support services and not intermediary services, and on the facts that the service recipient/client is located outside India while the services (evaluation, briefing, marketing support) are rendered in relation to a foreign principal's business, the Tribunal treated the place of provision as outside India under the applicable rules (Rule 6A and related provisions). The Tribunal further observed that the appellant's remuneration structure and the absence of linkage to domestic supplies reinforce treatment as exported services. The Tribunal noted that earlier departmental and appellate decisions allowing refunds for earlier and later periods support consistency and finality of the classification for adjacent periods. Ratio vs. Obiter: Ratio - where services are correctly classified as exported business support services and place of provision is outside India, tax paid on such exported services is refundable subject to compliance with statutory refund procedures; prior administrative findings for adjacent periods lend persuasive weight to the conclusion. Obiter - procedural observations about pending revision applications at the time of an earlier appellate decision, now overtaken by subsequent revision orders. Conclusion: The services qualify as exported business support services (place of provision outside India) and the appellant is entitled to refund of tax paid for the disputed quarters, with consequential relief as per law. CROSS-REFERENCES AND FINAL HOLDING 1. The Tribunal's core holdings (cross-referenced to Issues 1-3): (a) statutory definition of business support services encompasses the appellant's activities; (b) the appellant does not satisfy the statutory criteria for 'intermediary' under Rule 2(f) and therefore Rule 9 is inapplicable; (c) on the above, the place of provision is outside India (export) and refund is allowable. 2. The Tribunal noted administrative consistency: earlier and subsequent departmental/appellate/revision decisions in favor of the appellant for other periods corroborate the classification and refund entitlement for the disputed period; earlier reliance by an appellate authority on a pending revision application is no longer a valid basis in light of the subsequent revision order allowing refund.