TaxTMI 
TaxTMI 
2021 (12) TMI 481
X X X X Extracts X X X X
X X X X Extracts X X X X
.... new grounds to decide the issue at hand. This appeal also therefore needs to be remanded back to the adjudicating authority with direction to examine the issue afresh as per the directions contained in OIA No 302-306/ST/GST-Appeal-Gurugram/SG/2018-19 dated 29th March 2019. Order In view of the above discussions the appeal is disposed off in terms of the directions contained in para 6 above." 2.1 The appellant had filed the refund claims for the period as indicated below, in terms of Rule 5 of CENVAT Credit Rules, 2004 read with notification No.27/2012 dated 18.06.2012 for refund of unutilized CENVAT credit availed on input services used in providing taxable services i.e. Business Support Services, Information Technology Services and Management, Maintenance and Repair Services. Period Refund Application SCN Refund Amount Jan 2016 to Mar 2016 29.09.2016 24.08.2018 88,65,730/- Oct 2015 to Dec 2015 29.09.2016 24.08.2018 99,7B,019/- 2.2 The Deputy Commissioner, vide his Order-in-Original No. 141 & 142/Refund/GST/Div.-East-11/2018-19 dated 08.05.2019, rejected the refund by holding that the services provided are "Intermediary Service....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a) The Appellant provides certain corporate services, accounts payable, general accounting and financial accounting as required by overseas group entities (referred to as the AEs) in the Transfer Pricing Documentation. b) It further provides that ITeS are performed by the Appellant and such services are provided to group entities. c) It also records that certain expenses are incurred by group entities and recovered from the Appellant. d) Further it records that certain expenses are incurred by the Appellant and recovered at actuals from the group entities. • With respect to (a) and (b) above, it is submitted that these are business support services or ITeS services provided by the Appellant. These are provided by the Appellant on its own account to the group entities (referred to as AEs in the Transfer Pricing reports). There is no third party involved and these services do not involve arranging or facilitating or procuring of goods or services for the group entities by the Appellant. Wherever these group entities are located outside India and the consideration for these services is received in foreign exchange, these services would qualify a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ately Rs. 1.18 crores. Thus, in fact the total quantum of these recoveries for the above period is only 0.24% of the total export turnover reported by the Appellant. Please refer to Transfer Pricing documentation relied on by the Department in support of these numbers. • The services rendered under the main service agreements with the group entities are not disputed with respect to its eligibility as export of service. • The Appellant's claim of export is also supported by the ratio of the judgement of this Hon'ble Tribunal in the case of Commissioner of Goods and Service Tax, Gurgaon-II v/s. Orange Business Solutions Pvt. Ltd. reported in 2019 (27) GSTL 523 (Tri-Chan.). The nature of activities carried by Orange Business Solutions Pvt Ltd are similar to that carried out by the Appellant in the present case. Further the impugned order of the Ld. Commissioner Appeals which stood upheld by the Hon'ble Tribunal in the Orange Business case was passed within the same Commissionerate as that of the Appellant. • Further, in the Appellant's own case by earlier Orders-in-Original dated 29.02.16 (Page 85 of Appeal) (Apr 12 to Mar 15) and dated 08.09.16 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pellant on behalf of their group entities. In any case, Revenue has not issued any service tax demand with respect to these expenses if they want to deny the export status of these expense reimbursements. • In view of the above even assuming without admitting that remand is warranted, the Appellant submits that in the present case the manner in which the remand powers are exercised is unlawful and seeks to enhance the scope of adjudication which may cause unwarranted delay in disposal of the case. • 34. The Appellant prays that the order of the Ld. Commissioner (Appeals) be set aside and the appeals filed by the Appellant may please be allowed. Alternatively, the remand may be restricted only to verify the contention of the Appellant that they have not claimed the expenses as their export turnover and render the findings accordingly and not to examine any other issues which are not in dispute. 3.3 Arguing for the revenue learned authorized representative while reiterating the findings recorded in the impugned order submits that- • The Appellant has claimed to be engaged in providing Business Support Services, Information Technology Software....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pellant. • Any decision on merits by Commissioner (Appeals) In impugned proceedings would have made the OIA dated 29.03.2019 null and void. The Appellant had sought to bypass the adjudicating authority, and instead of supplying the relevant documents before the latter in remand proceedings arising out of OIA no. 302-306/ST/CGST-APPEAL-GURUGRAM/SG/2019 dated 29.03.2019, escalated the matter with the Commissioner(Appeal) in the impugned proceedings despite personal hearing almost 5 months after remand of the above order. • Reliance is placed on the following case laws wherein it has been specifically held that the matter cannot be decided on merits where the impugned order has not discussed the matter on merits: • Smithkline Beecham Co. Health C. Ltd. [2003 (157) ELT 497 (SC)] • Aashirwad Construction Co. [2017 (352) ELT 347 (All)] • Madhusudan Texturisers Pvt Ltd [2017 (345) ELT3(Guj)] • Shanti Exports Ltd. [2017 (345) ELT 65 (Guj)] • Wintac Ltd [2021-TIOL-1730-HC-KAR-IT] • Kasturba Health Society [2021-TIOL-1794-HC-MUM-GST] • Cipla Ltd [2017 (348) E.L.T. 579 (Tri. - ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ngly, the place of provision of services provided will be the location of service provider, i.e. the location of the party, which is within the taxable territory. Since the place of provision of services is in taxable territory, it may be construed that the services do not qualify as Export under Rule 6A of the Service Tax Rules, 1994." 4.3 Commissioner (Appeal) has while remanding the matter observed as follows: "The main ground of the appeal by the appellant is that they are not intermediary as has been held by the adjudicating authority and the benefit of export of services is therefore available to them. To understand the issue it would be relevant to properly abbreviate the term intermediary. Sub-rule (f) of Rule 2 of the place of Provisions of Services Rules, 2012, defines 'Intermediary' as "intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the 'main' service) between two or more persons, but does not include a person who provides the main service on his account;" 6. The Central Board of Excise and Customs in Service Tax: An Education....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p Services Australia Pvt Ltd wherein the scope of work has been laid down under statement of work No. 1 (for EOU) and No.2 (for SEZ) which is reproduced as under 1. Service Location The Service in the Statement of Work Will be provided by the Service Recipients from Level 1, DLF Building 9B, DLF Phase III, Cyber City, Gurugaon, Haryana 122002, India. 2. Services a) The Services in the nature of data processing, back office and IT enabled support services may include the following: (i) Accounts payable and procurement services including: 1) Voucher preparation; 2) Order placement; 3) Delivery receipts; 4) Maintenance of vendor data; 5) Expenses review; 6) Invoice review; 7) Invoice and expense payments; 8) Accounts reconciliation; 9) Query resolution; and 10) Any other account payable procurement related services; (ii) General accounting including 1) Journals 2) Reconciliation; 3) Query resolution; 4) Cash management; 5) Budgeting and forecasting; 6) Statutory and regulatory repo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... credit risk management; x. Preparation of response of Customer Audit Requests; xi. Cash, Stock, trade and Inter-system control reconciliations; xii. Administrative tasks relating to compliance, including; 1. General compliance administration and planning tasks; 2. Planning and coordination; 3. Compliance training and personnel management, including development of content, follow-up of training tasks allocated to personal; and 4. Data processing and communication to staff on compliance matters This includes, by way of example but without limitation, a. E-learning Development; b. b. Administration of External Directorships; c. My Compliance Level 1 Support; d. Compliance Training Administration; and e. Australian Continuing Professional Development (CPD) Training xlii. Tracking; General tasks including; 1) Answers requires relating to payment compliance 2) Provide guidance on message formatting 3) Provide training and user support for Romulus xiv. Real Time payment screening; 1) Screen outgoing and incoming SWIFT message ty....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m time to time, and where such services as are provided by the Service Provider are distributed to subsidiaries of Macquarie Group Limited (being the non operating holding company parent of the group) through direct agreements between such subsidiaries and the Service Provider or through direct agreements between such subsidiaries and the service recipient; those agreements themselves having been created under a outsourcing Master Services Agreement, On perusal of the above and the Analysis of Transaction for the year 2016-17 by EY as provided by the appellant it is observed that the appellant has provided services to around 30 Associated Entities whereas the appellant has only provided copy of scope of work entered with Macquarie Group Services Australia Pvt Ltd. The appellant has not disclosed the relationship and the agreement that it has with the various Associated Entities mentioned in the Analysis of Transaction for the year 2016-17 by EY. I also observe that there are other Indian Associated Entities of the same group which are providing various financial services to its Customers in India and I observe that their relationship with the appellant has also not been di....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g authority has not spelled out the provisions of law under which incurring of certain expenses on behalf of the associated enterprises would entail the complete rejection of the refund. I agree that transfer pricing is sometimes a means adopted by companies to reduce its tax liability. OECD in its report on Developing Capacity in BEPS and Transfer Pricing - TASK FORCE ON TAX & DEVELOPMENT WORK ON BEPS AND TRANSFER PRICING has stated that In Transfer pricing rules raise the question as to whether an "arm's length" price has been set between the producing, intermediary and selling companies. If not, the governments of either or both of the producing and selling companies may lose out on significant potential revenues. Most OECD and many non-OECD countries have introduced and are introducing transfer pricing and BEPS rules into their tax legislation. They have done this in order to ensure that the profits reported by MNEs in their jurisdictions are computed in line with internationally accepted principles, to counter only inappropriate or abusive transfer pricing by MNEs, and to avoid BEPS practices done by taxpayers. In most countries that have transfer pricing rules, the b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion of the Revenue is that the respondent provided intermediary service, therefore the benefit of export services is not available to them. 9. We find that C.B.E. & C. by Guidance Note on 20-6-2012 has the clarified the meaning of intermediary as under :- "Para 5.9.6 what are intermediary services? Generally, an "intermediary" is a person who arranges or facilitates a supply of goods, or a provision of service, or both, between persons, without material alteration or further processing. Thus, an intermediary is involved with two supplies at any one time : The supply between the principal and the third party; and The supply of his own service (agency service) to his principal, for which a fee or commission is usually charged." For the purpose of this Rule, an intermediary in respect of goods (such as commission agent i.e. buying or selling agent or a stockholder) is excluded by definition. Also excluded from this sub-rule is a person who arranges or facilitates a provision of a service (referred to in the Rule as "the main service"), but provides the main service on his own account. In order to determine whether a person is actin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....we find that the activity of computer networking is networking service which is an application running at the network application layer and above, that provides data storage, manipulation, presentation, communication or other capability which is often implemented using a client-server or peer-to-architecture based on application layer network protocols. 12. In view of the above, we do not find any arrangement or facilitation of the main service between two parties by a third person under the category of computer networking services. 13. We further find that the mandate from the group involves various companies more than two. So it is delivered to third entity on the direction of one M/s. Equant Network Services International Limited (ENSIL) and they act as intermediary. The appellant are 'processing equipment supply order's including liaison/coordination', so the liaison/coordination is also equivalent to solicitation and is more near to intermediary nature that the act of solicitation. Each mandate where there are two or more than two companies are involved would not automatically by termed as intermediary merely on the ground of involvement of two or more compan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....son who provides the main service or supplies the goods on his account;" 2.3 From the perusal of the definition of "intermediary" under IGST Act as well as under Service Tax law, it is evident that there is broadly no change in the scope of intermediary services in the GST regime vis-à-vis the Service Tax regime, except addition of supply of securities in the definition of intermediary in the GST Law. 3. Primary Requirements for intermediary services The concept of intermediary services, as defined above, requires some basic prerequisites, which are discussed below: 3.1 Minimum of Three Parties: By definition, an intermediary is someone who arranges or facilitates the supplies of goods or services or securities between two or more persons. It is thus a natural corollary that the arrangement requires a minimum of three parties, two of them transacting in the supply of goods or services or securities (the main supply) and one arranging or facilitating (the ancillary supply) the said main supply. An activity between only two parties can, therefore, NOT be considered as an intermediary service. An intermediary essentially "arranges or facilitates" anot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r of main service may decide to outsource the supply of the main service, either fully or partly, to one or more sub-contractors. Such sub-contractor provides the main supply, either fully or a part thereof, and does not merely arrange or facilitate the main supply between the principal supplier and his customers, and therefore, clearly is not an intermediary. For instance, '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, by providing annual maintenance of tools and machinery to the customer of 'A', i.e. to 'B' on behalf of 'A'. Though 'C' is dealing with the customer of 'A', but 'C' is providing main supply of Annual Maintenance Service to 'A' on his own account, i.e. on principal to principal basis. In this case, 'A' is providing supply of Annual Maintenance Service to 'B', whereas 'C' is supplying the same service to 'A'. Thus, supply of service by 'C' in this case will not be considered as an intermediary. 3.6 The specific provision o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ON BEPS AND TRANSFER PRICING has stated that In Transfer pricing rules raise the question as to whether an "arm's length" price has been set between the producing, intermediary and selling companies ....", however he too do not speaks of the relevance of this document for determination of the issue of "intermediary services" under consideration. 4.7 Issue under consideration is in respect of refund claim is in respect of refund claim under Rule 5 of CENVAT Credit Rules, in the decision of JFE steel India Ovt Ltd, supra, following was further held,- "10.The present issue is in respect of the refund claims filed in terms of Rule 5 of the Cenvat Credit Rules, 2004 as amended from time to time. The said rule provides for the refund of accumulated credit in the Cenvat account in respect of goods and services exported under bond or undertaking. This rule is very specific and lays down how to determine the quantum of admissible refund from the accumulated credit. It is not a proceeding for the denial of credit available in the Cenvat account of the claimant. Thus even if the refund is denied then also the amount continues to be in the Cenvat account of the claimant. ....