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2023 (3) TMI 8
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.... 1,22,38,880/- and this appeal has been remanded by the Commissioner (Appeals) to the adjudicating authority for verification of the additional evidence supplied by the said respondent. The Commissioner (Appeals) has held that the respondent would be entitled to the refund Rs. 8,60,52,275/- for the reason that it is not an 'intermediary' as it provided services to M/s Ernst & Young Ltd., UK [E&Y, UK] on its own account. 2. The issue involved in this appeal is regarding the refund claimed by the respondent 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 the respondent to export 'Management or Business Consultant Service' to Ernst & Young located in UK under the contracts. 3. As the dispute relates to the refund claims filed by the respondent under rule 5 of the 2004 Credit Rules, the relevant portion of rule 5 is reproduced below: "5. Refund of CENVAT Credit: A manufacturer who clears a final product or an intermediate product for export without payment of duty under bond or letter of undertaking, or a s....
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.... 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." 6. It would be seen that in terms of rule 3 of the 2012 Rules, the place of provision of a service shall be the location of the recipient of service. 7. 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." 8. Under rule 9 (c) of the 201....
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.... his behalf, and any discounts that the 'intermediary' obtains must be passed back to the principal. Separation of value: The value of an intermediary's service is invariably identifiable 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 are 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) Stockbroker (iv) Commission agent [an agent for buying or selling of goods is excluded (v) Recovery Agent Even in other cases, wherever a provider of any service acts as an agent for another person, as identified by the guiding principles outlined above, this rule will apply." 13. Rule 2(f) of the 2012 Rules, as noticed above, defines an "intermediary" to mean a broker, an agent or any other p....
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..... 2. 07.05.2009 UK LLP UK LLP wishes to retain E&Y Limited to provide certain professional services in India... E&Y Limited agrees to provide the services ... UK LLP agrees to pay E&Y Limited an arm's length fee... 3. 20.12.2012 UK LLP UK LLP wishes to retain the Indian Branch of E&Y Limited to provide certain services ... E&Y Limited acting through its Indian Branch shall provide the services... 16. As per the service Agreements, "services" will be in the nature of, but not limited to the following activities: (i) business advisory services; (ii) technical assistance/ advice in relation to expatriate tax compliance services under the tax laws of the United Kingdom, including technical review and approval of UK income tax returns and other related work products; advice and technical assistance to the Global Shared Services (GSS) personnel with respect to the production of UK income tax returns and other related work products; knowledge transfer on agreement specific matters; (iii) technical assistance/advice in relation to business tax compliance services under the tax laws of the United Kingdom, including technical....
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....vice' but provided by the party on his own account and Rule 9 of the Place of Provisions of Service Rules, 2012 is not attracted in the instant case. Thus the place of provision of the service is outside India. (e) The claimant has also submitted copies of BRC/FIRCS for relevant invoices along with Corresponding Bank Statements evidencing that payment (as calculated in the subsequent paras) for provisioned services have been received by the provider of service i.e. the claimant in convertible foreign exchange, and I observe that except in some cases as discussed below in para 7 (D), amount in convertible foreign exchange have been received by the claimant excluding bank charges in few cases which may be ignored. (f) The service provider i.e. the claimant is in India whereas the service recipients are separate companies under the laws of their countries and so are not merely establishment of a distinct person in accordance with Explanation 3(b) of Section 65(B)(44) of the Finance Act, 1994. The party has submitted copies of ST-3 returns for the relevant periods wherein the provisioned export services have been described as Management or Business Consul....
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....ssue, therefore, that arose before the Delhi High Court was whether the telecommunication services provided by Verizon India during the period April 2011 to September 2014 to Verizon US would qualify as 'export of services'. The department believed that the said services would not qualify as 'export of services'. 21. The Delhi High Court noted that in the process of gathering the data from the entities in India for transmission to Verizon US, Verizon India availed services of Indian telecommunication service providers like Vodafone and Airtel. These service providers raised 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 t....
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....subscribers to the services of Verizon US may be 'users' of the services provided by Verizon India but under the Master Supply Agreement it was Verizon US that was the 'recipient' of such service and it was Verizon US that paid for such service. That Verizon India and Verizon US were 'related parties' was not a valid ground, in terms of the ESR or the Rule 6A of the ST Rules, to hold that there was no export of service or to deny the refund. (v) The Circular dated 3rd January, 2007 of the C.B.E. & C. had no application to the case on hand. It did not 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) ....
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....mers, 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 service provider and not as an intermediary. Accordingly, we hold that the appellants are entitled to refund under Rule 5 of the Cenvat Credit Rules, 2004 read with the notification. Thus, these appeals are also allowed with consequential benefit and the impugned orders are set aside." (emphasis supplied) 26. Learned counsel for the respondent also placed reliance upon a decision of the Chandigarh Bench of the Tribunal in Service Tax Appeal No. 61877 of 2018 decided on 08.08.2022 [M/s. BlackRock Service India Private Limited vs. Commissioner of CGST]. After reproducing the definition of 'intermediary', the Bench observed : "5. A plain reading of the aforesaid provision makes it clear that to attract the said definition there should be two or more persons besides the service provider. In other words an "intermediary" is someone who arranges or facilitates the supplies of goods or services or securities between two or more persons. It is th....
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.... 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 denying the credit." (emphasis supplied) 27. The aforesaid view also finds support from the decision of the Tribunal in Principal Commissioner, CGST Delhi South Commissionerate vs Comparex India Pvt. Ltd. [MANU/CE/0016/2020] and the decision of the Tribunal in Commissioner of Central Tax, Central Excise & Service Tax vs M/s Singtel Global India Private Limited [Service Tax Appeal No. 52609 of 2019 decided on December 07, 2022]. It needs to be noted that the Department had filed an appeal before the Supreme Court against the decision of the Tribunal rendered in Comparex India Pvt. Ltd. and the Civil Appeal was dismissed on February 08, 2021 on the ground of delay. 28. In this connection, it would also be useful to refer to the Circular dated September 20, 2021 issued by the Central Board of Indirect Taxes and Customs regarding the scope of 'intermediary' and the relevant portion is reproduced below : "2.3 From the perusal of th....
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....ry" suggests a subsidiary role for the intermediary. It must arrange or facilitate some other supply, which is the main supply, and does not himself provides the main supply. Thus, the role of intermediary is only supportive. 3.4 Does not include a person who supplies such goods or services or both or securities on his own account: The definition of intermediary services specifically mentions Circular No. 159/15/2021-GST 3 that intermediary "does not include a person who supplies such goods or services or both or securities on his own account". Use of word "such" in the definition with reference to supply of goods or services refers to the main supply of goods or services or both, or securities, between two or more persons, which are arranged or facilitated by the intermediary. It implies that in cases wherein the person supplies the main supply, either fully or partly, on principal to principal basis, the said supply cannot be covered under the scope of "intermediary". 3.5 Sub-contracting for a service is not an intermediary service: An important exclusion from intermediary is sub-contracting. The supplier of main service may decide to outsource the supply of the....