2022 (12) TMI 660
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.... marketing, administrative and support service to Blackberry Singapore in relation to Blackberry products. For this purpose, the appellant entered into an Agreement dated 03.09.2006 with Blackberry Singapore. It needs to be noted that 'Research in Motion India Private Limited' is now known as 'Blackberry India Private Limited' and 'Research in Motion Singapore Private Limited' is now known as 'Blackberry Singapore Private Limited'. 3. The relevant clauses of the Agreement dated 03.09.2006 are reproduced below:- "THIS AGREEMENT is effective as of the date specified in Schedule "A" (the "Effective Date"). BETWEEN: RESEARCH IN MOTION SINGAPORE PTE., a company organized under the laws of Singapore having its registered office at I International Business Park, # 02-11/12, The Synergy Building, Singapore, 609917 ("RIM") AND: RESEARCH IN MOTION INDIA PRIVATE LIMITED, a company registered in India and having its registered office at F-40, N.D.S.E Part 1, New Delhi, India, 110049 ("Service Provider") WHEREAS: A. RIM distributes certain products and services, including the BlackBerry solution, which includes handheld devices, accessories, softw....
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....specified in Schedule A (the "Cost Period") and, thereafter, in respect of each Cost Period, Service Provider will submit an invoice that sets forth the Cost Plus Fee that is due and payable for the Services that have been rendered in that Cost Period and will separately identify those Services which are subject to taxes (as defined in Section 4.4) and those which are not. RIM will pay the Cost Plus Fee and any applicable taxes to Service Provider within forty-five (45) days after receipt of such invoice. The Cost Plus Fee shall be reviewed by the parties on an annual or other basis as determined by the parties from time to time. xxxxxxxxxx 4.3 Charges for Assistance. RIM may submit a monthly invoice to Service Provider that sets forth the charges for the licenses, access, materials, training and assistance that RIM may have provided to Service Provider during the month then-ended in connection with the Services. Service Provider will pay each such invoice to RIM within forty-five (45) days after receipt thereof or, at RIM's request, Service Provider may offset against such amounts owing in respect of the Services. xxxxxxxxxx 8.3 Status of ....
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.... Total Refund Rs. 8,55,34,345 6. However, a show cause notice dated 22.01.2020 was issued to the appellant to show cause notice as to why the refund claims should not be rejected for the reason that the services provided by the appellant were intermediary services. The appellant filed a reply dated 24.01.2020 denying the allegations made in the show cause notice. The Assistant Commissioner, by order dated 31.08.2020, rejected the refunds claim primarily for the reason that the appellant provided intermediary service and, therefore, in terms of the rule 9 of the Place of Provision of Services Rule 2012[the 2012 Rules], the place of supply of services would be the location of the service provider i.e. in India and, therefore, appellant would not fulfill the condition set out in rule 6A of the Service Tax Rules 1994 [the 1994 Rules]. 7. Feeling aggrieved, the appellant filed an appeal before the Commissioner (Appeals). The appeal was rejected by order dated 19.08.2021. The order holds that the appellant facilitated the services between the Indian customer and foreign firms and, therefore, the activity performed by the appellant would be that of an 'intermediary'. The rel....
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....ign company. 9. Ms. Ashwini, learned counsel appearing for the appellant submitted that the Commissioner (Appeals) committed an illegality in rejecting the refund claim of the appellant. In this connection, learned counsel pointed out that for the period prior to 01.07.2012, Commissioner (Appeals) failed to appreciate that rule 3 of the 2005 Export Rules does not exclude BAS from the ambit of export and in regard to the period post 01.07.2012, learned counsel submitted that the appellant is not an 'intermediary'. In this connection learned counsel placed reliance upon the certain decisions to which reference shall be made at the appropriate stage. 10. Learned authorized representative appearing for the department however supported the impugned order. 11. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the department have been considered. 12. The dispute relates to the refund claims filed by the appellant under rule 5 of the 2004 Credit Rules. The relevant portion of rule 5 is, therefore, reproduced below: "5. Refund of CENVAT Credit: A manufacturer who clears a final product or an interme....
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....f 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 service receiver is not available in the ordinary course of business, the place of provision shall be the location of the provider of service." 15. It would be seen that in terms of the rule 3 of the 2012 Rules, the place of provision of a service shall be the location of the recipient of service. 16. Rule 9, however, deals with place of provision of specified services and is as follows: "9. Place of provision of specified services.- The place of provision of following services shall be the location of the service provider:- (a) Services provided by a banking company, or a financial institution, or a non-banking financial company, to account holders; (b) online information and database access or retrieval services; (c) Intermediary services; (d) Service consisting of hiring of all means of transport other than, - (i) aircrafts, and (ii) vessels except yachts, upto a period of one month." 17. In view of the provisions of....
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....lled 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." 25. 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 is usually charged. For the purpose of this rule, 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,....
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....e 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. 28. The Commissioner (Appeals) observed that since the appellant had arranged for a provision of service between Blackberry Singapore and its customers without making any alteration it would be acting as 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 the appellant, 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. 29. In the present case, what transpires from the Agreement is t....
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....ween Blackberry Singapore and its Customers. The Agreement is only between the appellant and Blackberry Singapore wherein the appellant is providing the aforesaid services to Blackberry Singapore. The customers of Blackberry Singapore are not a part of the contract and the appellant at no point in time is involved in providing any service to the customers of Blackberry Singapore. The appellant does not even have any knowledge about the final customers of Blackberry Singapore; (iv) The appellant receives consideration on a Cost-Plus basis. The consideration is not dependent on the sale made by the Blackberry Singapore to their customers; and (v) The appellant raises invoices on Blackberry Singapore for the services provided by it in US dollars and Blackberry Singapore has to make the payment within 45 days of the date of such monthly invoices. 31. The terms of the Agreement also per se 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....
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.... 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 rendered in India; and the place of provision of such service to Verizon US remains outside India. 35. In this connection, the Circular dated 24.02.2009 was relied upon which is as follows: "For the services that fall under category III [Rule 3(1)(iii)], the rel....
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....d 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) 37. It would also be appropriate, to refer to the decision of the Tribunal in Verizon India Pvt. Ltd. versus Commissioner of Service Tax, Delhi [2021 (45) G.S.T.L. 275 (Tri.-Del.)] . The Tribunal held that as the appellant had provided services under a contract to Verizon US which was located outside India and had raised invoices for such services and received remittance in foreign exchange, the appellant would satisfy the conditions set out in rule 6A of the 1994 Rules. The relevant portion of the decision is reproduced below: "30. xxxxxxxxxx Further, we find that the Hon'ble Delhi High Court has held, that its findings applied to post-Negative List also i.e. from July, 2012 onwards, as held by the Hon'ble High Court in its aforementioned judgment particularly in para-54 (supra). Further, admitted facts are that the appellants have provided output serv....
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.... that the arrangement requires a minimum of three parties, two of them transacting in the supply of goods or services or securities (main supply) and one arranging or facilitating the said main supply. Therefore, an activity between only two parties cannot be considered as an intermediary service. An intermediary essentially arranges or facilitates the main supply between two or more persons and does not provide the main supply himself. The intermediary does not include the person who supplies such goods or services or both on his own account. Therefore there is no doubt that in cases wherein the person supplies the main supply either fully or partly, on principal to principal basis, the said supply cannot come within the ambit of "intermediary". Sub-contracting for a service is also not an intermediary service. The supplier of main service may decide to outsource the supply of 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 not an intermediary. xxxxxxxxxxx....