TaxTMI 
TaxTMI 
2020 (1) TMI 429
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.... similar claims filed by M/s Comparex India Limited, New Delhi(the respondent) amounting to Rs. 36.67 crores for refund of the unutilized CENVAT Credit of input services used for output services. Out of the aforesaid six refund claims, five refund claims were allowed by the Assistant Commissioner, Service Tax, New Delhi [Assistant Commissioner], by five separate orders passed by a particular officer, but the sixth refund claim was rejected by a separate order passed by a different officer. The Revenue felt aggrieved by the five orders allowing the refund claims and filed two appeals bearing No's. 233 of 2017 and 240 of 2017. These two appeals were dismissed by order dated 11 January 2018 bearing no. 118 passed by the Commissioner (Appeals). The respondent also filed an appeal to assail the sixth order passed by the Assistant Commissioner rejecting the refund claim. This Appeal was allowed by the Commissioner by order dated 19 September 2018 bearing no. 265. Feeling aggrieved by the aforesaid two orders, the Revenue filed two appeals before this Tribunal, being Appeal No. 51144 of 2018 (against the order dated 19 September 2018 bearing No. 265) and Appeal No. 51279 of 2018 (against ....
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.... 1,2,3 and 4 of the aforesaid chart and one appeal to assail the order at serial no. 5 of the aforesaid chart. The respondent had filed an appeal to assail the order of serial no. 6. 5. It would be appropriate to note the reasons given by the Assistant Commissioner for allowing the five refund claims filed by the respondent and the reasons for disallowing the sixth refund claim of the respondent. 6. REASONS FOR ALLOWING THE FIVE REFUND CLAIMS: (i) The assessee had filed the quarterly refund claims under Rule 5 of CENVAT Credit Rules 20044 read with [the Cenvat Rules 2004]. the Cenvat Rules 2004 the notification dated 18 June 2012 within time and before the correct jurisdictional authority; (ii) The assessee had procured the software through input service and paid service tax. As the assessee had made substantial amount of exports, CENVAT Credit remained unutilized since service tax is not required to be paid on exports. It is this unutilized CENVAT Credit for which the refund has been claimed; (iii) The assessee purchased the software from the Microsoft and sold it to customers on the basis of purchase orders received from them; (iv) The as....
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....becomes the licensor; (iii) Most of the software purchased by the assessee are licensed to end customers which is evident from the invoices issued by M/s Microsoft India Pvt Ltd. to M/s Comparex, wherein end user is also mentioned separately besides M/s Comparex India Ltd; (iv) The nature of provision of service would, therefore, be "intermediary" and the place of provision of service would the place of service provider, which is in India. The service would, therefore, not qualify as 'export' of service; (v) The assessee is also providing the service to its own overseas branch offices. The branches are in a non-taxable territory, while the office of the assessee is in a taxable territory. For this reason also, the services provided are not 'export' of service; (vi) In regard to the orders passed on the previous refund claims filed by the assessee, the Department has filed an appeal before the Tribunal; and (vii) The refund claim, therefore, deserves to be rejected. 7. The Commissioner (Appeals) has dismissed the two appeals filed by the Revenue and allowed the Appeal filed by the respondent by order dated 12 March 2019 for the f....
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....y'. (iv) In the agreement entered into by the assessee with Microsoft, there is nothing which may indicate that the assessee has provided any service to Microsoft as an 'intermediary'. Instead, a perusal of the agreement reveals that it has provided service on its own account. The payment to Microsoft in respect of said service is made by it, and the same is not relatable to the receipt of payment from customers. (v) In the light of these findings, it is evident that the service provided by the assessee does not fall under 'intermediary' category service and so, the place of provision of service under Rule 3 of 2012 Rules would be out of India. (vi) Regarding the second issue, it has been observed that there is nothing in the Order which shows that service receivers are the Branch Offices of the assessee. A perusal of the list of service receivers annexed by the assessee with the appeal memo, shows that all the companies mentioned therein are separate legal entities and none of them is a Branch Office of the assessee. Thus, the Service receivers of the assessee are not Branch Offices and the rejection of refund claim on this ground is based merely on pres....
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....t independently negotiates the sale price with the overseas customers, which price is not controlled by Microsoft India. In fact, it takes substantial risks as payment made to Microsoft India is independent of the payment made to the respondent by the overseas customers. The service rendered by the respondent qualifies as "export" of service; (ii) The Commissioner (Appeals) has taken into consideration the contentions advanced by the Revenue and it is incorrect to suggest that the contentions/ evidence have not been taken into consideration; and (iii) The respondent do not have any Branch Office or other establishment outside India, which fact has been duly recorded by the Assistant Commissioner after examination of the record. No evidence, whatsoever, has been produced by the Revenue to substantiate its claim that the respondent has any Branch Office or other establishment outside India. 10. The submissions advanced by the learned Authorised Representative of the Department and the learned counsel appearing for the respondent have been considered. 11. The dispute relates to the refund claims made by the respondent under Rule 5 of the CENVAT Rules 2004. The ....
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....l Government may, by notification, grant rebate of service tax or duty paid on input services or inputs, as the case may be, used in providing such service and the rebate shall be allowed subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification." 13. Item (b) of Explanation 3 of clause (44) of Section 65B of the Act is reproduced below: "(b) an establishment of a person in the taxable territory and any of his other establishment in a non-taxable territory shall be treated as establishments of distinct persons." 14. As noticed above Rule 6A of the 1994 Rules deals with export of services and sub-clause (d) of Rule (1) provides that the place of provision of service should be outside India. The place of provision of service is determined under the 2012 Rules. Rule 3 deals with provision of place generally. It is as follows: "3. Place of provision generally.- The place of provision of a service shall be the location of the recipient of service: Provided that in case of services other than online information and database access or retrieval services, where the location of the servic....
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....an 'intermediary' in respect of goods (commission agent i.e a buying or selling agent) is excluded by definition. In order to determine whether a person is acting as an intermediary or not, the following factors need to be considered:- Nature and value: An 'intermediary' cannot alter the nature or value of the service, the supply of which he facilitates on behalf of his principal, although the principal may authorize the 'intermediary' to negotiate a different price. Also, the principal must know the exact value at which the service is supplied (or obtained) on his behalf, and any discounts that the 'intermediary' obtains must be passed back to the principal. Separation of value: The value of an intermediary's service is invariably identifiable from the main supply of service that he is arranging. It can be based on an agreed percentage of the sale or purchase price. Generally, the amount charged by an agent from his principal is referred to as "commission". Identity and title: The service provided by the intermediary on behalf of the principal are clearly identifiable. In accordance with the above guiding principles, services provid....
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....spondent would fall in the category "intermediary" service. The respondent is referred to as the 'company' in the said agreement and the relevant portion is reproduced below: " Microsoft Channel Agreement Framework Terms and Conditions for Resellers 1. Scope. This Agreement gives Company the non-exclusive right to participate in certain licensing programs and provide certain Licensed Software Service, Documentation Components and Software Assurance to Customers. Company is entering into this Agreement for business purposes only. ----- 4. Program Designation Forms, Customer Orders and Limitations, Generally. ------ b. Customer Order and Territory. Company is only authorized to resell, distribute, market, or otherwise dispose of Licensed Offerings within its designated Territory. Company may not collect orders or receive payments for Licensed Offerings from any Customer located outside of the Territory. Company may, however, collect orders and receive payments for Licensed Offerings from a Customer's Affiliates who are located outside the Territory provided that a) those Affiliates are purchasing as an Affiliate of the Customer l....
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....essary to perform its obligations; (ii) use commercially reasonable efforts to service and support its Customers; (iii) inform Microsoft of any difficulties it encounters in servicing its Customers and; (iv) promptly tell Microsoft about any known or suspected violations of the terms and conditions of a Customer Agreement by a Customer. b. Negotiation of Pricing and Payment Terms with Customers. Company has complete discretion to negotiate and set pricing and payment terms and conditions with its Customers. Company's negotiation of those terms will not be subject to Microsoft's review or approval in any way. 8. Payment. Each Program Guide specifies the reporting and payment requirements for the Licensed Offerings. a. Payment Due Date. Payments are due on the date and in the currency stated in the applicable Program Guide. If Company does not receive an invoice within ten (10) days after placing its order, it must promptly notify Microsoft and Microsoft will promptly send a new invoice. Company must manage its own credit risk. Company's payment to Microsoft is not dependent on receipt of payments from Customers even in the case of Customers insolvency.....
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....mer situated in Neitherlands. It also needs to be noticed that no commission was paid by Microsoft to the respondent and in fact the respondent independently sold the license to the overseas customers, after purchasing them from Microsoft. Thus, the goods were supplied on its own account. 23. In this connection it may be pertain to refer to the decision of the Supreme Court in Gordon Woodroffe & Co. Vs. M.A Majid & Co. [AIR 1967 SC 181]. In this case both the parties may have considered their business as an agency, but in fact N did not sell the goods as an agent of T & Co., but on his own account and the money he received was, therefore, his own money which T& Co. had no right to follow. It was held that the agreement was one of vendor and purchaser and not one of principal and agent. The term 'agent' was used in the agreement, but the substance of the transaction was that the manufacturer sold the bricks to the so-called agent who in turn sold them on their responsibility to the customer. The manufacturer had no concern at what rate the goods were sold by the agent. There was, therefore, no privity of contract between the manufacturer and the ultimate purchaser. It was further....
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....the merchants for breach of the agreement. It was hold by the Court of Appeal that the effect of the agreement was to confer on the plaintiffs the sole right of selling the goods manufactured by the defendants at their works, so that neither the defendants themselves nor any agent appointed by them, other than the plaintiffs, should have the right of selling such goods. It was also held that the agreement was one of vendor and purchaser and not one of principal and agent. Though the term 'agent' was used in the agreement, the Court of Appeal considered that the substance of the transaction was that the manufacturers sold their bricks to the so-called agent who in turn sold them on their own responsibility to customers. The price charged by the manufacturers to the sole selling agents was the ruling market price and the sole selling agents were allowed a deduction of 10 per cent by way of commission on that price. The manufacturers had no concern at what rate the sole selling agents sold the goods to customers. It was clear from these facts that the sale by the selling agents to customers was a transaction in which the manufacturers were not interested and there was no privi....
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....om the balance sheet and so the respondent has provided service on its own account and would not be an "intermediary" as defined in Rule 2(f) of the 2012 Rules. The Commissioner (Appeals) has also recorded a finding that even the Channel Agreement with Microsoft would reveal that the respondent had provided services on its own account since payment to Microsoft was made by the respondent and it was not relatable to the payment received from the customer. 26. The Assistant Commissioner, while rejecting the refund claim, of the respondent has, however, observed that nature of provision of service of the repondent is arranging and facilitating procuring main services and transmitting the same to their overseas customers and so it would be in the nature of "intermediary" service. In coming to this conclusion, the Assistant Commissioner noticed that the purchase orders received by the respondent from the overseas customers were being passed on to the Microsoft and that the invoices issued by the Microsoft reveal that they have mentioned the name of the end-user customer in the specific column provided for the purpose. 27. The conclusions drawn by the Assistant Commissioner are not....
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....s been placed on the findings recorded by the Assistant Commissioner in the order dated 27 July 2018 rejecting the sixth refund claim filed by the respondent. 33. It is not possible to accept this contention. In the first instance, only a general statement has been made by the Assistant Commissioner in the order dated 27 July 2018 that the provision of service by the respondent is to their own overseas Branch Offices. Even the name of the Branch Office has not been mentioned, though a specific finding has been recorded after examining the complete records including the invoices by the Assistant Commissioner in the order allowing the five refund claims of the respondent that the respondent does not have any Branch Office outside India. 34. Thus, for all the reasons stated above the provision of service provided by the respondent has to be treated as "export of service" under Rule 6A of the 1994 Rules. The two reasons pressed by the Appellant for not treating it as export of service cannot be accepted. Rule 9(c) provides that in the case of 'intermediary services', the place of provision shall be the location of the service provider. This Rule would not be applicable as the res....