TaxTMI 
TaxTMI 
2021 (12) TMI 117
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....ontract with SPG Prints Austria GMBH (herein after referred as 'SPA') to provide particular services to customers of SPA in India, as per SPA's instruction. Such services shall include installation / up-gradation of machines sold by SPA, training at SPA's customers' site etc. The relevant extract from the contract relating to scope of service is as under: "Services Stovec has agreed that it shall on behalf of and as per the instruction from SPA shall provide services with respect to: a) Installation and/or upgrades of machines sold by SPA and shall also give training at SPA's customer site in co-ordination with SPA b) Machines sold by SPA in India and which are under warranty period c) Machines which are under service contracts with SPA d) Machines which are not having warranty and/or service contracts" Apart from the above mentioned scope of services, Stovec (applicant) will also receive commission for service contracts sold in India from SPA. 2.1 The applicant shall raise the invoice to SPA for services mentioned under Clause (a) to (c). In the case of service at (d), they shall raise the invoice to Indian Customer for s....
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.... Ans. Negative as per the above discussion. 4. Aggrieved by the aforesaid advance ruling, the appellant has filed the present appeal on 03.11.2020. During the course of personal hearing held on 22.01.2021, the appellant reiterated the submissions made in the appeal. 5. The appellant in the ground of appeal has submitted that the advance ruling issued by GAAR has failed to appreciate the facts, legal provisions and rules of interpretation of law. The appellant has put forth their argument on each and every question of Ruling passed by the Advance Ruling of Authority. The brief of the grounds of appeal in respect of each question of the appellant are as under: Submission against qualification of the specified transaction as 'composite supply' 6.1 The appellant has submitted that the GAAR has observed the conditions specified for composite supply in Section 2(30) of the CGST Act are fulfilled in the present case. The appellant has reiterate the conditions specified under Section 2(30) along with the observations of GAAR as under : There should be more than two supplies of goods or services or both 6.2 The Appellant has submitted that they would provide....
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....other service like 'travelling hours' and 'overtime hour' are naturally bundled service to the main service. As discussed above, they would provide independent services and therefore, the question of principal supply does not arise. Further, the services to be rendered by the Appellant would be as per the requirement of each of the customers and would be offered independently. Since the activities are individual, there is no principal supply as predominant element. The Appellant has submitted that considering the above discussion present supplies are individual / independent supplies and there is no composite supply. Submission against contemplation of Indian customer as service recipient for the present transaction 7.1 The Appellant has submitted that GAAR has failed to understand the definition of 'recipient' completely and the punctuations used in definition are ignored. The definition of 'recipient' has been defined in Section 2(93) of CGST Act which is read as under : "(93) "recipient" of supply of goods or services or both, means- (a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that c....
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....upon the decision of the following cases: * Paul Merchants Limited Vs. Commissioner of C. Ex., Chandigarh [2013 (29) STR 257 (Tri.-Del.)] * GAP International Sourcing (India) Pvt. Ltd. vs. Commr. of S.T., Delhi 2015 (37) S.T.R. 757 (Tri. - Del.) * Universal Services India Private Limited [2016 (5) TMI 750] The appellant has submitted that based on above discussion, it could be stated that a person would qualify as recipient of supply if the following ingredients are satisfied: Ingredients / attributes Present set of facts On whose instructions the services are provided SPA Who would pay for the services so provided SPA Whose needs would be satisfied as a reason of provision of service SPA 7.5 The appellant has relied upon the Appellate Authority of Advance Ruling, Karnataka order in case of M/s. VOLVO-EICHER COMMERCIAL VEHICLES LTD. The appellate authority has observed that the person who is required to make a payment for getting the job done is the recipient of service. Accordingly, the recipient of service supplied by the Distributor during the warranty period will be Volvo Sweden as it is at their behest that the Distribut....
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....eneral wording is usually restricted things of the same type as the listed items. The rule of Ejusdem Generis is applied in the following cases : * The statute enumerates the specific words; * The subjects of enumeration constitute a class or category; * That class or category is not exhausted by the enumeration; * The general terms following the enumeration; and * There is no indication of a different legislative intent. The appellant has placed reliance on the following case laws: * CIT v. Rani Tara Devi [2013] 355 ITR 457 (P & H) * Commissioner of Income Tax, Udaipur v. Mcdowell& Co. Ltd. In civil Appeal 3471/ 2007 8.3 The appellant has submitted that applying the principle laid down by the Hon'ble Supreme Court(supra), and the interpretative rule of Ejusdem Generis, the phrase; 'by whatever name called' will include a person in the same genus as that of a broker or an agent. In other words, the phrase 'by whatever name called', will mean a person who is also appointed in a representative capacity. The Appellant is thus clearly neither appointed to act as a broker or an agent nor in any manner similar to that o....
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....tion or facilitation with the feature of supply of the (main) service and the 'intermediary' should have a role in the main supply of goods or services being rendered by the service recipient to its customer in India. 8.8 The appellant has submitted that in the present case, there is no performance of service by SPA and actual services are performed by the Appellant itself. To mean, there is no facilitation but actual doing / undertaking of activity on their own. Moreover, the Appellant does not arrange the supply by organizing or making plans but as discussed, the Appellant actually indulges itself into doing the act on their own. Thus, it is clear that there is no facilitation or arrangement of supply of goods or services by the Appellant in present case. Arguments in favour that the Appellant supplies services on their own account 8.9 The appellant has submitted that the definition of the term 'intermediary' contains exclusion in as much as any person (including a broker, agent or any other person) who provides the main supply on his own account, would be outside the purview of the definition of intermediary. The importance of this condition has been explained in the Ed....
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....the services to be provided by the Appellant to SPA under the present agreement fulfils the parameters of intermediary or not. S.No. Nature of service/activity Criteria to qualify as intermediary Applicability in case of the Appellant Nature and Value 1 Relation of principal and agent Yes Not fulfilled - Relationship between the Appellant and SPA is that of independent contractors or principal to principal basis and not of principal and agent 2 Power to make contract on behalf of other party which will bind the other party Yes Not fulfilled - The Appellant shall not have any right to sign any document in the name of or on behalf of SPA 3 Power to alter the nature or value of the service No Not applicable - the services provided by the Appellant to SPA are independent of the transaction between SPA and their customers in India 4 Power of negotiation on behalf of principal Yes Not fulfilled - SPA can only negotiate the terms with customers in India 5 Arrangement or facilitation of supply of service Yes Not fulfilled - as explained above in the facts that the Appellant's role is to actu....
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....t nexus with main supply. In case, the main supply does not take place then there is no income of commission. This is clear case of arranging or facilitating supply. However, in present case, there is no connection of consideration received by Appellant and the consideration received by SPA and they are completely independent. This helps in determining that the Appellant is not involved in arrangement or facilitation of supply. 8.14 The appellant has submitted that in case of principal & agent arrangement, the agent has certain authority one of which is to negotiation the price with third party. This is also one of the factors to determine intermediary. However, in the present case, the Appellant is not involved in any kind of negotiation or to say the Appellant does not have any authority to deal with customer except to provide service as agreed with SPA. This also substantiates that the Appellant is not agent, facilitating supply of service. 8.15 The appellant has further submitted that observation of GAAR that the Appellant is receiving commission from SPA and have stated that the claim of the Appellant is false and misleading. The appellant has submitted that the GAAR has....
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.... The Appellant refutes the contention of AAR qua conditions as under: * The recipient of service is located outside India As discussed above, the definition of service recipient is crystal clear and according to definition, the person who pays the consideration would be contemplated as service recipient. Since, SPA located outside India is paying consideration, the Appellant submits that the service recipient is located outside India and thus, condition is fulfilled. * The place of supply of service is outside India Section 13 of the IGST Act, 2017 is applicable in case where location of supplier or location of recipient is outside India. Further, as per Section 13(2), the place of supply shall be the location of recipient of services provided the services are not covered in sub-section (3) to (13). As discussed above, the Appellant does not qualify as intermediary at all and therefore, Section 13(8), relied upon in impugned order, is not applicable in the present scenario. Therefore, the Appellant submits that Section 13(2) would be applicable and hence, the place of supply of services shall be the location of the recipient of services i.e. loca....
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....letter dated 27.01.2021 wherein it is stated that determining the place of consumption is a complex task on account of intangible nature of services and the different modes by which a service can be provided and can be consumed i.e. used by the recipient to satisfy his needs. The place of consumption and the location i.e. permanent address of the service recipient may be different. A uniform criteria for determining the place of consumption/receipt for different categories of services like, services in relation to immovable property, services in relation to business, performance based services, transport services, etc., cannot be adopted. 9.5 Accordingly, the appellant has taken shelter of Export of Services Rules, 2005 ('EOSR') framed by the Central Government in the erstwhile Service Tax regime under Section 94(1)(f) of the Finance Act, 1994 in support of their argument. The appellant has submitted that these Rules follow the general principle that a taxable service provided by a person in India will be subject to tax only when it has been consumed in India and would not be taxed in case it has been consumed outside India. 9.6 The appellant has submitted that the services w....
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....is a principal supply'. 12.2 In view of the above definition a composite supply would mean a supply consisting of two or more taxable supplies of goods or services or both or any combination thereof which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. We have examined the contention of the appellant in light of the definition of composite supply and find that the appellant is providing service of installation / up-gradation of machine or training to the customers of SPA in respect of machines. The consideration agreed with SPA is based on hourly rate for activities such as travelling, regular work or overtime hours and based on the time spent for each of the activities. Accordingly, they are providing more than two services i.e. installation or up-gradation of service, training to the customer for the operation of machine and other activities like overtime service. The contention of the appellant that charges for travelling, working hours or overtime are not separate activities and these are the benchmarks or methodology based on which consideration for actual service such as installation ....
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....rtime hour" are naturally bundled service to the main service. The appellant has not put forth any argument that without travelling to the place of customer and without performing overtime to complete the work of customer how would they complete/ finish the service . Thus, the above argument of the appellant that they are offering independent service does not find support in view of the above discussion. Hence we hold that the appellant services get covered under the definition of "composite supply". Second Ruling : Indian customer as service recipient for the present transaction 13.1 The Appellant has submitted that GAAR has failed to understand the definition of 'recipient' completely and the punctuations used in definition are ignored. The definition of 'recipient' has been defined in Section 2(93) of CGST Act which is read as under : "(93) "recipient" of supply of goods or services or both, means- (a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration ; (b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made ava....
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....nt of latter part of definition and therefore, when the consideration is payable in any transaction, the service recipient would be the person who is liable to pay consideration. We find force in their argument and in present case SPA is paying consideration to the appellant for the service provided to the Indian customer. Therefore, we hold that in present case SPA is recipient of supply of service in terms of the consideration paid to the appellant and not Indian customer. Third Ruling: Submission on qualification of Applicant to be an 'intermediary' 14.1 The appellant has contended that the GAAR, in the impugned order, has held that the Appellant qualifies to be an intermediary as defined under the Act. They negate the basis for the conclusion reached in impugned order. 14.2 The appellant has make an argument that there is no difference in the terms 'broker' or 'agent' and both are one & the same and both the term are having representational feature or doing activity on behalf of other with third party. The appellant has submitted that the rule of Ejusdem Generis would also be applicable in present case. The application of this Rule is necessitated because of the use of....
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....om SPA, shall provide services with respect to :" In para 4 of the agreement "Customer Contact/Service Process" it is mentioned that if customer directly contact to the appellant (Stovec) then appellant has to be informed SPA and SPA's instruction action be initiated by the appellant. The said clause of agreement is reproduced as under : In case of service request for any machine, customer can directly contact either SPA or Stovec. In case the customer contact Stovec first then SPA has to be informed and as per SPA's instruction action to be initiated from Stovec. 14.5 The appellant vide their letter dated 21.09.2021 made additional submission wherein they referred to Circular No. 159/15/2021-GST dated 20.09.2021. In the said circular it has been stated that sub-contracting of service cannot be included within the purview of intermediary services. The circular states an illustration that, 'A' and 'B' have entered into a contract as per which 'A' needs to provide a service of, say, Annual Maintenance of tools and machinery to 'B', 'A' subcontracts a part or whole of it to 'C'. Accordingly 'C' provides the service of annual maintenance to 'A' as part of such sub-contract,....
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.... fall under exclusion part of the definition of 'intermediary' as provided under Section 2(13) of the IGST Act, 2017. Fourth Ruling: Submission on non-qualification of the specified transaction as 'export of service' 15.1 The appellant has contested the ruling of the GAAR that the specified transaction do not qualify as export because 3 out of the 5 conditions are not fulfilled which are specified under Section 2(6) of IGST Act, 2017. 2(6) 'export of services' means the supply of any service when,'' (i) the supplier of service is located in India; (ii) the recipient of service is located outside India; (iii) the place of supply of service is outside India; (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; and (v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8; 15.2 The GAAR has ruled that the recipient of service is located in India, therefore, second condition is not fulfilled. We find that as per definitions given in Section 2(93) and 2(31)....
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.... export of service states that the two entities should not be distinct persons merely because of above referred explanation. The Appellant has submitted that they and SPA are not branch, representational office or agency of each other. Both are separate legal entities and even they are not holding & subsidiary companies as well. As per CBIC Circular No. 161/17/2021-GST dated 20.09.2021 it has been clarified "that a company incorporated in India and a body corporate incorporated by or under the laws of a country outside India, which is also referred to as foreign company under Companies Act, are separate persons under CGST Act, and thus are separate legal entities. Accordingly, these two separate persons would not be considered as 'merely establishments of a distinct person in accordance with Explanation 1 in section 8". In view of the same it is held that SPG Prints B.V. holding and foreign company of Stovec Industries Ltd. (i.e. is appellant) are two separate legal person and are not merely establishments of distinct person in accordance with Explanation 1 in Section 8 of IGST Act. 16. The appellant has contended that there service is not performance based and not recipient bas....