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2022 (12) TMI 469
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....d [SGIPL] and the appeal filed by the Revenue has been dismissed. 3. The order dated 05.07.2019 passed by the (Appeals) sets aside the order dated 23.10.2018 passed by the Assistant Commissioner by which the refund claim of Rs. 8,69,82,565/- filed by SGIPL was rejected and the appeal that was filed by the SGIPL has been allowed. 4. The order dated 31.10.2019 passed by the Commissioner (Appeals) sets aside the order dated 23.07.2019 passed by the Assistant Commissioner by which the refund claim of Rs. 3,30,37,934/- filed by the SGIPL was rejected and the appeal filed by the SGIPL has been allowed. 5. The issue involved in all these appeals is regarding the refund claimed by SGIPL under rule 5 of the CENVAT Credit Rules 2004 [the 2004 Credit Rules] read with the Place of Provision of Service Rules 2012 [the 2012 Rules] of the unutilized input service credit of input services used by SGIPL to export telecommunication services to Singapore Telecommunications Ltd. [SingTel] (located in Singapore) in terms of the contract dated 14.07.2011. The order passed by the Commissioner (Appeal's) while granting the refund, has primarily placed reliance upon the judgment of the Delhi High ....
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....e" means a service which is provided as per rule 6A of the Service Tax Rules, 1994." 9. Since "export service" means a service which is provided as per rule 6A of the Service Tax Rules 1994 [the 1994 Rules], the said rule is reproduced: "6A. Export of services.- (1) The provision of any service provided or agreed to be provided shall be treated as export of service when,- (a) the provider of service is located in the taxable territory, (b) the recipient of service is located outside India, (c) the service is not a service specified in the section 66D of the Act, (d) the place of provision of the service is outside India, (e) the payment for such service has been received by the provider of service in convertible foreign exchange, and (f) the provider of service and recipient of service are not merely establishments of a distinct person in accordance with item (b) of Explanation 3 of clause (44) of section 65B of the Act (2) Where any service is exported, the Central Government may, by notification, grant rebate of service tax or duty paid on input services or inputs, as the case may be, used in prov....
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....e whether SGIPL provides 'intermediary service'. 16. The concept of "intermediary" was introduced in the 2012 Rules. 'Intermediary' has been defined in rule 2(f) as follows: "2(f) '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) or a supply of goods, between two or more persons, but does not include a person who provides the main service or supplies the goods on his account." 17. The communication dated 16 March 2012 by the Department of Revenue (Tax Research Unit) dealing with the Union Budget 2012 deals with 'intermediary services' and is as follows: "3.7.7 What are "Intermediary Services"? An "intermediary" is a person who arranges or facilitates a supply of goods, or a provision of service, or both, between two persons, without material alteration or further processing. Thus, an 'intermediary' is involved with two supplies at any one time: (i) the supply between the principal and the third party; and (ii) the supply of his own service (agency service) to his principal, for which a fee or commission i....
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....ncipal, for which a fee or commission is usually charged. 19. The said communication also mentions that in order to determine whether a person is acting as an intermediary or not, three factors namely nature and value, separation of value and identity and title have to be examined. In regard to the "nature and value", it states that 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. Regarding "separation of value", it states that the value of service provided by an intermediary is invariably identifiable from the main supply of service that he is arranging. Generally, the amount charged by an agent from his principal is referred to as "commission". In regard to "identity and title", it provides that the service provided by the intermediary on behalf of the principal are clearly identifiable and example of a travel agent, a tour operator, stock broker, commission agent and a recovery agent have been given. 20. In order to appreciate the contentions advanced by Shri Ravi Kapoor learned authorized representative appear....
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....cure from SGIPL the Service in accordance with the terms and conditions of this Agreement. 3.2 SingTel shall place an order for such Services in the format mutually agreed by both parties from time to time. 4. Responsibilities of SGIPL 4.1 SGIPL shall provide or use its reasonable endeavors to procure Service in India as ordered by SingTel. 4.2 SGIPL shall provide the Services when SingTel's Customers require the services originating in Territories and terminating in India. 4.3 SGIPL shall provide at its own expense, all facilities and resources whatsoever necessary to enable SGIPL to provide the Services to SingTel. 4.4 SGIPL shall provide to SingTel customer care, customer support (including assistance to a Customer in matters relating telecommunications access, data entry and data retrieval to and from the Services provided hereunder) and other services as may be reasonably required by SingTel from time to time. 4.5 SGIPL shall maintain detailed records and other supporting documentation associated with the provision of the Services. 4.6 SGIPL shall provide the Services in accordance with the terms and condi....
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....SingTel agrees to pay the additional amounts including any applicable indirect taxes. Where such adjustments result in a lower price, SGIPL will refund the applicable amounts to SingTel. xxxxxxxx 19. Independent Contractor 19.1 The Relationship of the parties to this Agreement shall always and only be that of independent contractors and nothing in this Agreement shall create or be deemed to create a partnership or the relationship of principal and agent or employer and employee between the parties. (emphasis supplied) 22. According to the department, as SGIPL procured services from other service providers in India and supplied the same to SingTel without any alteration, SGIPL would be an 'intermediary' under rule 9(c) of the 2012 Rules and, therefore, the place of provision of service shall be the location of the service provider i.e. in India. According to SGIPL, the place of provision of services shall be the location of the recipient of the service as provided under rule 3 of the 2012 Rules. 23. In the present case, what transpires from the aforesaid Agreement dated 14.07.2011 is that SingTel is a licensed telecommunication service provider in....
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....dollars and SingTel has to make the payment within 30 days of the date of such monthly invoices. The Agreement also specifically provides that the relationship of the parties to the Agreement shall always and only be that of independent contractors and nothing shall create or be deemed to create a partnership or the relationship of principal and agent or employer and employee between the parties. The terms of the Agreement also perse do not create any relationship of principal and agent or employer and employee. An agent is a person employed to do any act for another or to represent another in dealing with third persons. The persons for whom such act is done, or who is so represented, is the principal. A broker is a middleman or an agent who, for a commission on the value of the transaction, negotiates for others the purchase or sale of stocks, bonds, commodities, or a property. These two situations do not arise in the present case. 25. An intermediary is a person who arranges or facilitates provision of the main service between two or more persons. SGIPL is not involved in the arrangement or facilitation of the supply of service. In fact, it has entered into two Agreements; one....
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....d invoices on Verizon India and Verizon India paid these service providers the requisite charges. Verizon India thereafter raised an invoice on Verizon US for the 'export of services' provided by it to Verizon US. Since the recipient of the service (Verizon US) was outside India, Verizon India treated it as an export of service and understood that it was exempted from service tax under the Export of Service Rules 2005. Verizon US, in turn, raised invoices on its customers in the US. The refund claims of Verizon India pertained to the period January 2011 to September 2014. The Delhi High Court pointed out that the 'recipient' of services is determined by the contract between the parties and this would depend on who has the contractual right to receive the services and who is responsible for the payment for the services provided to the service recipient; there was no privity of contract between Verizon India and the customers of Verizon US; such customers may be the 'users' of the services provided by Verizon India but were not its recipients; Verizon India may have been using the services of a local telecom operator but that would not mean that the services to Verizon US were being ....
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....ot pertain to provision of electronic data transfer service. It was wrongly applied by the Department. With its total repeal by the subsequent Circular dated 23rd August, 2007, there was no question of it applying to deny the refund for the period January, 2011 till September, 2014. (vi) Even for the period after 1st July, 2012 the provision of telecommunication service by Verizon India to Verizon US satisfied the conditions under Rule 6A(1)(a), (b), (d) and (e) of the ST Rules and was therefore an 'export of service'. The amount received for the export of service was not amenable to service tax." (emphasis supplied) 30. The aforesaid judgment of the Delhi High Court in Verizon Communication squarely applies to the facts of the present case. The Commissioner (Appeals) correctly appreciated the position in the impugned orders in holding that SGIPL was not intermediary and had provided export of service to SingTel. The relevant portion of the order passed by the Commissioner (Appeals) in the appeal filed by the department is reproduced below: "(ii) It is noted that the pleadings of appellant are based upon the fact that the respondent have procured services fr....
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....ills for the services provided on the basis of cost plus 11% mark-up. As the services have been provided by the appellant under contract with Verizon US, who are located outside India and have raised their invoices, for such services and have received the remittance in convertible foreign exchange, the appellant satisfies all the conditions, as specified under Rule 6A of Service Tax Rules, 1994, inserted w.e.f. 1-7-2012. xxxxxxxxxxxx 31. From perusal of the aforementioned ruling, it is evident that the services of the appellant to Verizon US do not merit classification under the category of 'intermediary services'. Further, the Hon'ble High Court has held in the appellant's own case (supra) that the agreement between the related parties does not have any impact on the export of services. Further, the findings of the Commissioner (Appeals) that the service provided by the appellant do not qualify as export, as such services provided to the customers, have been consumed in India, is directly in conflict with the ruling of this Tribunal in the case of Paul Merchants Ltd. (supra). Accordingly, we hold that the appellants have rendered services to Verizon US as principal servic....
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....n HLX systems and that too as a backend process. It is the specific case of the appellants that HLX does not have any clients in India. Maintenance, support or troubleshooting function, if any, the appellant is required to perform on requisition from HLX in order to ensure seamless access of services which means there is no requirement of any interaction, whatsoever with the clients of HLX and for performing all these services on behalf of HLX, the appellant receives a pre-agreed consideration from HLX in convertible foreign exchange. Commission is being paid to an intermediary not the transfer pricing, whereas the appellant herein was getting transfer pricing. There is nothing on record to show that the appellant is liasioning or acting as intermediary between the HLX and its clients. Therefore, the finding of the lower authorities that the appellant is an "intermediary" is misplaced. We are astonished to notice that although for earlier periods the then adjudicating authority allowed the refund claim of the appellant, but without looking into those orders and without giving any reason for not following the earlier orders, this time the concerned Authorities held otherwise by deny....
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.... been provided by the Channel Distribution Partner and not the claimant who has acted only to mediate the provision of service by the Channel Distribution Partner to GlobeCast. This service has in no manner been provided by the claimant to the GlobeCast. In our view the services of mediation of this nature are covered by the term "intermediary" as defined by Rule 2(f) of the Place Of Provision of Services Rules, 2012. Since these services are covered by the term intermediary, in term of Rule 9 ibid, the place of provision of these services will be the location of the service provider that is in India. Hence these services cannot be considered as export of service as per Rule 6A of Service Tax Rules, 1994." 34. The decision of the Tribunal in Lamhas Satellite Services was in the context of the agreement between Lamhas Satellite Services and Globecast Asia PTE Ltd. The appellant acted only to mediate the provision of service by the channel distribution partner to GlobeCast and the service was not provided by the appellant to GlobeCast. It is in such circumstances that the Tribunal observed that the service would an intermediary service. The decision of the Delhi High Court in Veri....