AI Drafter 
TaxTMI 
TaxTMI 
2023 (2) TMI 938
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....bed and para 11.5 of the said Circular wherein it has been prescribed that - In case different show cause notices have been issued on the same issue to same noticee(s) answerable to different adjudicating authorities, Show Cause Notices involving the same issue shall be adjudicated by the adjudicating authority competent to decide the case involving the highest amount of duty, In the instant case, the show cause notice no. 02/Pr.Commr/Ensim/DGP Audit/2019-20 dated 22.04.2019 involves the highest amount of duty and falls under the monetary limit of the undersigned and the other show cause notice is on the same issue for different period in respect of the same assessee. Accordingly, both the show cause notices are taken up for adjudication proceedings in a single order. 2.0 BRIEF FACTS OF THE CASE 2.1.1 Whereas it appears that M/s ENSIM INDIA PRIVATE LIMITED, Webel IT Park, Phase-Il, Palasdiha, Durgapur, West Bengal-713208, holder of Service Tax Registration No. AAACE7989BSD001 (hereinafter referred to as 'the said assessee') for providing taxable service in the category of Business Auxiliary Service and Information Technology Software Service have contravened the....
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....ce with item (b) of Explanation 2 of Clause 44 of section 65B of the Act. On perusal of the agreement made with Ensim Corporation, USA it appears that they have engaged M/s Ensim India Pvt. Ltd. as a developer on non-exclusive basis to perform such service on an as needed basis for the benefit of the service recipient as mentioned in Para 3.1 & 3.2 of the agreement. Further in para 3.2 of the agreement also provide that" the parties may specify the agreed scope of services with respect to any internal cloud marketplace, R&D project or third party customers through written or electronic development plans ......." From the above conditions of the agreements it transpires interalia that the services rendered by M/s Ensim India Pvt. Ltd. falls within the ambit of "intermediary services" as specified in Rule 2(f) of Place of Provision of services Rules 2012. In addition to that the place of provision for the services provided by them attracts the Rule 9 of Place of Provision of Services Rules 2012 wherein it interalia provides that:- Rule 9-The place of provision of following services shall be the location of the Service provider (a) ............... (b) online information and d....
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....of "intermediary services" as specified in Rule 2(f) of Place of Provision of services Rules 2012. In addition to that the place of provision for the services provided by the said assessee attracts the Rule 9 of Place of Provision of Services Rules 2012 wherein it interalia provides that:- Rule 9-The place of provision of following services shall be the location of the Service provider (a) .................... (b) online information and database accessor retrieval services (c) Intermediary services (d)............................ 2.1.5 From the above provision of Rule 9 it appears that the place of provision in the instant case is the location of service provider i.e. the taxable territory and thus services rendered by the said assessee appears not to be qualified as export of services as well as the place of provision is Not outside India but exclusively within the taxable territory of union of India. 2.1.6 Further it also transpires from the balance sheet submitted during audit that major share holding (99.46%) is with the M/s. Ensim Corporation, USA which is the only one service recipient from the said service provid....
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....entage of particulars costs comprising the Reimbursement amount (other than restructuring costs and similar types of expenses). 2.1.10 Taxes:- The reimbursement amount shall not include any income taxes or any Taxes, however designated except for non recoverable VAT/Service Tax. Any applicable taxes, except for non recoverable VAT, must appear instead as separate items, without markup, on the statement from Developer and will be paid to Developer by Service Recipient. 2.1.11 In the logic and technical explanation in Para 5.9.6 of the CBEC's Education Guide, specifies with reference to Rule 9 of POP Rules exclusively that:- 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 two persons, without material alteration or further processing. Thus, an intermediary is involved with two supplies at anyone 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. In order to determine whether a person is act....
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....ue at which the service is supplied (or obtained) on his behalf. 2.1.12 From the payment agreement as mentioned above it appears that the said assessee claimed their reimbursement amount/fee for services rendered to third party customer as mentioned in Para 3.2 of the agreement as directed by their parent company i.e. Ms. Ensim Corporation USA. Hence it appears that the said assessee acts like intermediary who arranges or facilitates a provision of service between M/s. Ensim Corporation USA and third party as per their agreement and in lieu of providing services the said assessee received reimbursement amount on cost basis which occurs in provision of the same within Indian taxable territory as per agreement. 2.1.13 The said assessee submitted their reply and contended that "from the factual matrix and documents on record i.e. agreement and invoices, it can be seen that they provide services to Ensim Corporation, USA on their own account and received the whole value of the services in convertible foreign exchange from Ensim Corporation, USA, hence they are excluded from the definition of "Intermediary". 2.1.14 The reply of the said assessee appears not tenable ....
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....g taxable service to any person shall pay service tax at the rate specified in Section 66 in such manner and within such period as may be prescribed. 2) Notwithstanding anything contained in sub-section (1), in respect of such taxable services as may be notified by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in Section 66 and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service. Provided that the Central Government may notify the service and the extent of service tax which shall be payable by such person and the provisions of this Chapter shall apply to such person to the extent so specified and the remaining part of the service tax shall be paid by the service provider. 2.2.3 Section 75 of the Finance Act,1994 - Interest on delayed payment of service tax: Every person, liable to pay the tax in accordance with the provisions of section 68 rules made thereunder, who fails to credit the tax or any part thereof to the account of the Central Go....
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....d also that in case of individuals and partnership firms whose aggregate value of taxable services provided from one or more premises is fifty lakh rupees or less in the previous financial year, the service provider shall have the option to pay tax on taxable services provided or agreed to be provided by him up to a total of rupees fifty lakhs in the current financial year, by the dates specified in this sub-rule with respect to the month or quarter, as the case may be, in which payment is received. 2.3 Applicability of Extended Period of Limitation: Such non-payment of service tax came to the notice of the department during audit and verification of documents for the period 2016-17. Had it not been detected and pointed out by the auditors during the scrutiny of documents, the payment of service tax would have been escaped. Thus in this case, the said notice willfully suppressed and misstated the facts by not reflecting such facts in their relevant documents and that was detected at the time of departmental audit. Hence, suppression of facts with intent to evade duty, is clearly established here and therefore, extended period of limitation is rightly in-vocable in this case. As ....
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....d Services Act, 2017, for willfully suppressing value of taxable service with the intent to evade payment of Service Tax and not taking registration of the said service thereof. 2.7 Subsequently, another Show Cause cum Demand Notice on the same issue was issued against the said assessee for the period from April, 2017 to June, 2017 wherein the said assessee was asked to show cause before the Joint Commissioner, Bolpur Commissionerate, CGST & Central Excise, NanoorChandidas Road, Sian, Bolpur, within 30 days from the date of receipt of the notice as to why: i) Service Tax of Rs.86,83,717/-(Rupees Eighty Six Lakh Eighty Three Thousand Seven Hundred and Seventeen only) (S. Tax Rs. 81,04,803/-, S. B.Cess Rs.2,89,457/- and K. K. Cess Rs.2,89,457/-) should not be demanded and recovered from them in terms of proviso to Section 73(1) of the Finance Act, 1994 read with Section 174(2) of the Central Goods and Services Act, 2017. ii) Interest at appropriate rate on the above amount shall not be charged and recovered from the 'said assessee' in terms of section 75 of Chapter V of Finance Act, 1994, read with Section 174(2) of the Central Goods and Services Ac....
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.... ........................................." A.3 Rule 2(f) of the POPS Rules contains the definition of the term 'intermediary' and reads as follows- "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; " A.4 From a reading of the definition of 'intermediary', it clearly emerges that the following conditions must be cumulatively satisfied for a service to qualify as an intermediary service: a) The intermediary must be a broker or an agent or similar person. b) The intermediary must facilitate or arrange a provision of service or supply of goods. c) Such facilitation or arranging provision of service/ supply of goods must be between two or more persons. d) The intermediary should not provide the main service on his own account. A.5 The first requirement under the definition is that the person must be a broker o....
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....f a genus. " A.10 On application of the aforementioned principle, it is submitted that, the words, ' any other person' used in Rule 2(f) of the POPS Rule has to be interpreted to refer to those persons who act in the capacity similar to that of an agent or broker. This is more so when the requirement of facilitating or arranging a provision of service between two or more persons, which are generally undertaken by brokers or agents, is inherent in Rule 2(f) of the POPS Rule. The legislative intent behind the use of the words l any other person' in Rule 2(f) of the POPS Rule is, thus, evident to confine it to those persons who act in the capacity similar to that of a broker or an agent. A.11 The Noticee humbly submits that they are not facilitating or arranging a provision of service or supply of goods, as a broker or agent or any similar person so as to be considered as an 'intermediary'. They are simply providing software and consulting services to the foreign company on their own account. A.12 The other conditions under Rule 2(f) of the POPS Rule that such 'person must facilitate or arrange a provision of supply of goods or serv....
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....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 is clearly identifiable. In accordance with the above guiding principles, services provided by the following persons will qualify as 'intermediary services (i)Travel Agent (any mode of travel) (ii) Tour Operator (iii) Commission agent for a service [an agent for buying or selling of goods is excluded] (iv) Recovery Agent Even in other cases, wherever a provider of any service acts as an intermediary for another person, as identified by the guiding principles outlined above, this rule will apply. Normally, it is expected that the intermediary or agent would have documentary evidence authorizing him to act on behalf of the provider of the 'main service' " . A.14 Thus, on the basis of the above clarification provided in the Education Guide, the following principles emerge: a) An intermediary is i....
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....ding of the said Article, it is clear that the Noticee is neither an agent nor broker of M/s Ensim Corporation. The mandate of the Noticee under the said Agreement is to provide customized software services, quality testing, other technical and support services and consulting services to Ensim Corporation. Thus, the main service provided by the Noticee is that of software development and other technical and consultancy services, on their own account to the foreign entity pursuant to the Agreement. The main service of Ensim Corporation, on the other hand, is to provide platform services including cloud and hosting services to their customers which the Noticee does not have any relation with. The Noticee, in no manner, facilitates the provision of these services by Ensim Corporation to its customers. The Noticee is not even in picture, during the negotiation of contracts between the Ensim Corporation with its customers. A.18 The obligations of the Noticee under the Agreement and the activities undertaken thereunder are completely independent of the supply of services between Ensim USA and its customer. The Noticee is, thus, providing services to Ensim Corporation only,....
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....greement. A.22 In the present case, it is reiterated that the obligation of the Noticee is to provide customized software services to Ensim Corporation, USA along with other support as required including technical and consulting services on their own account to Ensim Corporation and not to third parties on their behalf. All third-party transactions of Ensim Corporation, USA are independent of the transaction with the Noticee. The third party customers of Ensim Corporation, USA never approach the Noticee directly for any technological issue. The Noticee is under no obligation to facilitate the supply of services of Ensim Corporation, USA to their customers. Hence, in the absence of the specific obligation towards facilitation of supply of services to the customers of the foreign entity, the Noticee cannot be treated as an 'intermediary'. The Master Service Agreement should be read as a whole. A.23 The Noticee humbly submits that the present SCN has principally relied on the phrasing of clause 3.2 of the agreement wherein it is allegedly stated that "the parties may specify the agreed scope of services with respect to any internal cloud ....
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....read as a whole. A contract must be construed keeping in view the intention of the parties. No doubt, the applicability of the tax laws would depend upon the nature of the contract, but the same should not be construed keeping in view the taxing provisions." A.28 Reliance is also placed on the decision of the Hon'ble Tribunal in the case of M/s Vedanta Ltd. v. Commissioner of Central Excise, Tirunelveli, [2019- VIL-255-CESTAT-CHE-ST1, wherein the contention of the Department was that the 'Representation fees' payable by the Indian entity to M/S Vedanta Resources Plc. Inc., London, under an agreement to represent them in their dealings with lawyers, bankers, consultants of revenue and other authorities to extend their overseas operations and augment their financial resources, was chargeable to service tax under the head 'management consulting service'. They also contended that the clause in the contract whereby the overseas entity had agreed to provide technical and commercial materials to the appellant meant that management advice was being provided by them to the appellant. The Hon'ble Tribunal held that the very name of the agreement was &....
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....ties on behalf of their service recipient i.e. Ensim Corporation, USA. Thus, any other interpretation would result in infringement of the intention of the originating contract and the parties to it. A.30 The same can also be inferred from the manner of payment of consideration to the Noticee under the Agreement. Ensim Corporation, USA is obliged to pay the cost incurred by the Noticee along with an agreed margin for provision of the services under the agreement. However, it is to be noted that such payment is not in the nature of a commission and not attributable to specific tasks undertaken by the Noticee on behalf of the foreign entity. It is instead, calculated as a percentage of the 'operation cost' incurred by the Noticee for performing its obligations towards the agreement entered into with Ensim Corporation, USA. Hence, the Noticee submits that in light of the above submissions, it can be concluded that the services provided by the Noticee are entirely independent of the supply of services between Ensim Corporation, USA and its customers. A.31 Thus, where the department has alleged that from the bills raised by the Noticee being on a ....
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....they are not acting as an intermediary for the facilitation of services between Ensim Corporation, USA and their customers. A.33 It is submitted that where the supplier of services independently engages certain service providers in the course of its business, such service providers do not qualify as intermediary. Accordingly, the Noticee does not qualify as an 'intermediary' in terms of Rule 2(f) and the place of provision of its services cannot be determined under Rule 9(c) of POPS Rule. A.34 Reliance herein is placed on the order of Hon'ble Authority for Advance Ruling in Re: UniversaI Services India Private Limited, 2016 (42) STR 585 (AAR), where the applicant was to provide payment processing services to their foreign client, WWD US. WWD US through its website was engaged in the business of providing name registration, web hosting, designing and other services. The agreement proposed that the applicant was to assist the customers of the foreign company to make their payments. In terms of the agreement, the foreign company was the only client of the applicant and the services were provided directly by WWD US to their customers. The appli....
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....;, will not be categorized as intermediaries. Applicant relying on above paragraph submitted that call centers, by dealing with customers of their clients, on client's behalf, are providing service to their client on their own account. Similarly, applicant is providing business support service such as marketing and other allied services like oversight of quality of third party customer care centre operated in India and payment processing services, on behalf of GoDaddy US. Therefore, these services provided by the applicant to GoDaddy IJS cannot be categorized as intermediary or services, as intermediary service." A.37 The Noticee further relies of the recent decision of Hon'ble CESTAT in the case of Lubrizol Advanced Materials India Pvt. Ltd v. Commissioner of Central Excise, Belapur, [2019-VlL-38-CESTAT-MUM-ST). In this case, the department denied refund of Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004 in relation to the services claimed to be exported by the assessee, by holding that the activity was as 'intermediary services' under Rule 2(f) and the place of provision of the service was within taxable territory and therefo....
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.... has to be determined in terms of the general rule under Rule 3. The Rule is extracted below for ease of reference- "RULE 3. Place of provision generally. - The place of provision of a service shall be the location of the recipient of service:" Thus, the place of provision of services is generally to be determined in terms of the location of the recipient of such services. A.40 Since the service recipient in the present case is Ensim Corporation, USA, located outside the taxable territory of India, the place of provision of the services is also outside the territory of India. The services provided by the Noticee are, therefore, not chargeable to. A.41 In light of the above submissions, it is humbly submitted that the demand raised vide the present SCN is liable to be dropped on this ground alone. B. THE SERVICES PROVIDED BY THE NOTICEE, IN FACT. QUALIFY As 'EXPORT OF SERVICE' UNDER RULE 6A OF THE SERVICE TAX RULE, 1994. B.1 Rule 6A of the Service Tax Rules, 1994 prescribes the conditions to be fulfilled for a service to be considered as 'export of service'. The provision of the above Rule is ext....
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....e previous paragraphs, the services rendered by the Noticee do not qualify as 'intermediary services' since they are provided by the Noticee on their own account to Ensim Corporation, USA on principal to principal basis which can also be observed from the Master Service Agreement. The place of provision is determinable under Rule 3 of the POPS Rules, which is outside India in the present case. Hence, the services provided by the Noticee qualify as 'export of services' as laid down under Rule 6A of the Service Tax Rules, 1994. B.6 Reliance in this regard is placed on the decision of the Hon'ble Tribunal in the case of Autodesk India Pvt. Ltd. v. Commissioner of Service Tax, Delhi, [2019 (20) GSTL 581 (Tri-Del)], wherein the appellant was a wholly owned subsidiary of M/S Autodesk Inc. USA and was providing marketing and technical support for the products of M/s Autodesk Asia Pvt. Ltd., Singapore for which payment was received in foreign exchange. The above transaction was held to be an export of service under Rule 6A of the Service Tax Rules, 1994 and therefore, not chargeable to service tax. B.7 Reliance is also placed on the decision in t....
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....n is received by them in convertible foreign exchange and therefore, there is no doubt that the services rendered by them qualify as 'export of service' in terms of Rule 6A of the Rules. Accordingly, no service tax is leviable on the present transaction. The Noticee and Ensim Corporation. USA are distinct legal entities in the eves of law and not mere establishments of a distinct person. B.9 The SCN alleges that as per the Balance Sheet of the Noticee, Ensim Corporation, USA is the majority shareholder of the Noticee, who was also the only service recipient under the Master Service Agreement. From this, it has been alleged in the SCN that the Noticee was providing the services only on behalf of the parent company it} USA "which is just merely the distinct person". Therefore, the services provided by them do not qualify as export of service under Rule 6A in terms of clause (f) thereto. B.10 It has not been disputed by the Department that the service recipient is in non-taxable territory and the service provider is in taxable territory and that the consideration is received in convertible foreign exchange. The Department has ....
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....rvice tax in India. B.13 In light of the above also, the Noticee humbly submits that the demand proposed vide the present SCN is unsustainable and liable to be dropped. C. WITHOUT PREJUDICE TO THE ABOVE, GROSS AMOUNT RECEIVED BY THE NOTICEE SHOULD BE TREATED As CUM-TAX. C.1 Without prejudice to the above submissions, assuming without admitting, in the unlikely event of service tax becoming payable on the transaction, the amount received by the Noticee from Ensim Corporation, USA as alleged aforesaid, cannot be taken as the value of the taxable service as it should be treated as inclusive of the amount of service tax payable. C.2 In this regard, reliance is placed on the provisions of Section 67(2) of the Act, which reads as under: SECTION 67. Valuation of taxable services for charging service tax. (2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. C.3 The aforesaid provision has been reli....
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....tion provided during the course of the EA 2000 audit as has been stated in the SCN itself. All the relevant information has been duly recorded in the books of accounts of the Noticee as well as their ST-3 returns and was presented to the Department when called upon to do so during the course of the audit. The Noticee did not have any intention of suppression of material information as can be concluded from the above facts. D.4 In this regard, reliance is placed on the judgment of the Hon'ble Supreme Court in the case of M/s Anand Nishikawa Co Ltd v. Commissioner of Central Excise, Meerut" [2005 (188) ELT 149 (SC)], wherein the court held as under: "27. Relying on the aforesaid observations of this Court in the case of Pushpam Pharmaceutical Co. vs. Collector of Central Excise, Bombay, {1995 Suppl. (3) SCC, 462J, we find that "suppression of facts" can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty, when facts were known to both the parties, the omission by one to do what he might have done not that he must have done would not render it suppression. It is settled law that mere failure to declare does n....
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....d that for making the demand of duty sustainable beyond the period of six months, it has to be established that the duty was not levied or paid or short-levied or short-paid or erroneously refunded by reasons of either fraud or collusion or willful mis-statement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. The Hon'ble Court held that something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability, beyond the period of six months. D.8 Since no such positive act has been shown in the present SCN, against the Noticee, it is humbly submitted that the invocation of extended period of limitation under proviso to Section 73(1) is not legally sustainable. The Noticee was and still is under the bona fide belief that no service tax is payable on services rendered to Ensim Corporation, USA. D.9 It is submitted that the Noticee was and still is, of the bona-fide belief that no ....
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....has been demonstrated in the submissions made in the foregoing paragraphs. Therefore, no penalty is imposable under Section 78 of the Finance Act, 1994. Penalty is not imposable when demand is not sustainable E.3 It is respectfully submitted that the proposal for imposition of penalty is not sustainable since the service tax itself is not payable and the Noticee has not contravened any of the provisions of the Act. In the case of Collector of Central Excise v. H.M.M. Limited, 1995 (76) ELT 497 (SC), Hon'ble Supreme Court held that the question of penalty would arise only if the Department is able to sustain the demand. In the case of Commissioner of Central Excise, Aurangabad v. Balakrishna Industries, 2006 (201) ELT 325 (SC), Hon'ble Supreme Court held that penalty is not imposable when differential duty is not payable. Therefore, the proposal for imposition of penalty upon the Noticee is not sustainable in law. No penalty imposable when the Noticee has acted in good faith E.4 It is submitted that for imposing penalty, there should be an intention to evade payment of tax or there should be suppression or concealment. The penal provisions....
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....-mail id [email protected] to this office e-mail id [email protected] on 17.02.2021 in respect of above mentioned both the SCNs. 4.0. PERSONAL HEARING 4.1. Hon'ble Commissioner, CGST & Central Excise, Bolpur Commissionerate was pleased to grant a single hearing by clubbing the above-mentioned two SCNs for adjudication. Shri Aakash Agarwal, Chartered Accountant (M:9831092555) attended the Personal Hearing through video conferencing (Google Meet)on 19.05.2022at 13.30 hrs. on behalf of the assessee M/s Ensim India Private Limited, Webel IT Park, Phase-Il, Palasdiha, Durgapur, West Bengal-713208. He explained the case in detail and reiterated the contentions made in their defence reply dated 06.06.2019, 18.02.21and 19.05.2022 alongwith copies of relied upon documents/case laws in respect of above mentioned both the SCNs. He further requested that the case may be decided keeping in view their written submissions, oral submission, relevant case laws, judgment/pronouncements of judicial forum. 5.0 DISCUSSION AND FINDING 5.1 In terms of para 11.1 of CBEC Circular No. 1053/02/2017-CX dated 10th March, 2017 regarding Master Circular on show cause notice....
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.... been agreed to be provided. Intermediary Services: As per Sub-rule (f) of Rule 2 of the place of provisions of Services Rules, 2012, '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 2 or more persons but does not include a person who provides the main service" Rule 9 of The Place of Provision of Supply Rules, 2012, states that the place of provision of following services shall be the location of the service provider: (a) (b) online information and database access or retrieval services (c) Intermediary services (d) ..........." In terms of Rule 92 in case of intermediary, following conditions should be met - a. Should arrange or facilitate a service between two persons b. Does not include a person who himself provides the main service on his own account c. Two services get involved - i. main service by principal to customer (airlines, hotel, tour operator etc.) ....
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....diary' read with the aforementioned Guidance Note, the following points emerge: 1. An intermediary arranges or facilitates a provision of a 'main service' between two more persons; 2. 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; 3. An intermediary cannot alter the nature or value of service, the supply of which he facilitates on behalf of his principal, although the principal may authorize to negotiate a different price; 4. The consideration for an intermediary's service is separately identifiable from the main supply of service that he is arranging and is in the nature of fee or commission charged by him; 5. The test of agency must be satisfied between the principal and the agent, i.e., the intermediary. The Guidance note states that the intermediary or the agent must have documentary evidence authorizing him to act on behalf of the provider of the 'main service'; 6. The p....
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....ice Recipient and on the terms and conditions set forth in this Agreement ...................." 5.6.2 I also find that in the said Agreement at para 3.1 the following are stated: "Engagement as Non-Exclusive Independent Contractor. Service Recipient hereby engages Developer, on a non-exclusive basis, to perform Services, and Developer hereby agrees to perform such Services, on an as needed basis for the benefit of Service Recipient, with the scope of such Services to be agreed to and/or modified from time to time by the Parties as provided in Section 3.2, Nothing in this Agreement shall be construed to limit Service Recipient's ability to contract with any other Person for engineering, research or development or consulting services or to engage in engineering, research or development or consulting activities itself. The relationship of the Parties established by this Agreement is that of independent contractors. Nothing in this Agreement shall be construed to: (i) give either Party the power to direct and control the day-to-day activities of the other Party; or, (ii) constitute the Parties as partners, joint venturers, principal and agent, employer and employe....
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.... of such services remains the parent company who reimburses the Noticee, in terms of the said Agreement and no consideration is extended to the noticeee by any third party customers. I find no record or evidences suggesting that, the Noticee receives any work order or request for support from third party customers directly. Such third parties raise their technological issues with Ensim Corporation, which then, in terms of the said Agreement, requests the Noticee to provide technological support in relation to the software developed and supplied by the Noticee to Ensim Corporation, USA. 5.6.4.2 I find that the services provided by Ensim Corporation, USA to their clients and the services provided by the Noticee to them are two distinct identifiable services and represent the respective 'main services' provided by the two parties on their own account. I do not find any such reimbursement amount received by the Noticee for services rendered to third party customers directly as directed by the parent company, on their behalf. 5.6.4.3 In an intermediary transaction, there are three parties involved and all parties are aware of the respective roles to be played. The principa....
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....pient is Ensim Corporation, USA, which is located outside the taxable territory of India, accordingly, the place of provision of the services is also outside the territory of India. The services provided by the Noticee are, therefore, not chargeable to Service Tax since they are not provided in taxable territory. 5.8 I find that Rule 6A of the Service Tax Rules, 1994 prescribes the conditions to be fulfilled for a service to be considered as 'export of service'. The provision of the above Rule is reproduced below - "RULE 6A. Export of services. - (l) 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 recip....
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.... was received in foreign exchange. The above transaction was held to be an export of service under Rule 6A of the Service Tax Rules, 1994 and therefore, not chargeable to service tax. 5.8.4 I also find that the decision in the case of Verizon Communication India Pvt. Ltd. v. Assistant Commissioner, Service Tax, Delhi-Il', 2018 (8) GSTL 32 (Del.) is similar to the instant case, wherein Verizon India was providing connectivity by way for data transfer service in the form of local access, bandwidth and VPN facilities to the customers of Verizon USA in India. The contention of Verizon India was that the same amounted to export of services since the service recipient was Verizon, USA located in non-taxable territory whereas the Department's case was that the petitioner was providing 'telecommunication services' and that the recipient of the services was the Indian entity, which was the actual user of the services. It was argued by the petitioner's counsel that service tax is a 'destination-based consumption tax' and that there is a distinction between the 'user' of a service and the 'recipient' of a service which has to be determined strictly in ac....
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....eloper subcontracts with Contractors, whether Affiliates and/or Third Parties in absence of sufficient bandwidth to perform the required Services and performs the role of mere facilitator between Service Recipient and such sub-contractor without exercising any function and assuming any associated risk, the Costs so incurred by sub-contractor shall be recovered from Service Recipient without any element of mark-up. In relation to any expense that has been incurred by Developer on behalf of Service Recipient for sake of mere administrative convenience in the nature of travelling charges, boarding or lodging expenses etc., which otherwise would have been incurred by Service recipient, shall not form part of operating expenses. Such expenses shall be recovered by Developer at actual without any Cost Plus Fee. The Developer shall ensure that by the year end, i.e., 12 month period ending on 31st March, the Cost Plus Fee on operating cost for provision of Software Development Services shall be aligned with the arm's length requirements to comply with the Developer's statutory requirements. In case of any deficit or surplus from the agreed arm's length remuner....
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....case) rendered by an assessee as "Intermediary Service". 5.10.1 In the case between M/s Evalueserve.Com Pvt. Ltd. vs. CST, Gurgaon [2018 (3) TMI 1430 CESTAT Chandigarh] wherein it has been held that the appellant has themselves provided the services to their client as the main service provider on principal to principal basis, therefore, the activity undertaken by the appellant do not qualify as 'intermediary' as defined in Rule 2(f) of Place of Provision of Services Rules, 2012. The relevant extract of the said judicial pronouncement is as under: "11. Ongoing through the agreement placed before us, the appellants are themselves engaged in providing of services to their client and the facilitating their clients for providing those services by third party. In that circumstance, it is to be seen whether the provider of services is covered as intermediary or not. We have gone through the impugned order also. In the impugned order, the Commissioner (Appeals) has fell in error holding that the appellant provided services on behalf of Evalueserve Ltd., Bermuda. In fact, the appellant has provided the services to customers of their Client and having no direc....
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....r rule 6A of the Service Tax Rules, 1994 because the services recipient is located outside India and the place of provision of service is outside India and the consideration has also been received in convertible foreign for exchange. Further I find that the appellant's potential customers for the products of the foreign company are located abroad. Though the services are provided with respect to buyer in India, the benefit of the same accrued to the company abroad. Further the case laws relied upon by the appellant are applicable in the facts and circumstances of the case. Further I find that in the case of Lenovo India Pvt. Ltd. (supra), this Tribunal has held that promoting sale of goods of foreign client in India being BAS fulfills the conditions under Export of Service Rules, 2005 and qualifies as export of service." 5.10.3 In the case between M/s Analog Devices India Pvt. Ltd. vs. Commissioner of Central Tax, Bengaluru East, [2018 (4) TMI 301 - CESTAT Bangalore] wherein it has been held that the appellant are not rendering the intermediary service and they are rendering consulting engineer services and BAS and hence fall under definition of export. The relevant extract ....
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....y discussion above and the ratios of the case laws relied upon by the respondent, I do not find any infirmity in the impugned which is upheld by dismissing the appeal of the Revenue. Cross-objections are accordingly disposed of." 5.10.5 I also find the following orders of the Hon'ble Authority for Advance Rulings under Service tax regime in this regard which are relevant to the instant case: (i) M/s UniversaI Services India Private Limited, 2016 (42) STR 585 (AAR), where the applicant was to provide payment processing services to their foreign client, WWD US. WWD US through its website was engaged in the business of providing name registration, web hosting, designing and other services. The agreement proposed that the applicant was to assist the customers of the foreign company to make their payments. In terms of the agreement, the foreign company was the only client of the applicant and the services were provided directly by WWD US to their customers. The applicant was providing its services to the foreign company and receiving payments for the same from them. It was held that such service was being provided by the applicant on their own account to the foreign comp....