TaxTMI 
TaxTMI 
TaxTMI 
2023 (3) TMI 9
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of August 2015, October 2015 and December 2015. The Commissioner (Appeals) has held that the respondent would be entitled to the refund for the reason that it is not an 'intermediary' as it had provided services to M/s Jindal Films America LLC [Jindal LLC] on its own account. 2. The issue involved in these two appeals 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 information technology software service to Jindal LLC located in New York, USA under the contracts. The order passed by the Commissioner (Appeals), while granting the refund, has primarily placed reliance upon the judgment of the Delhi High Court in Verizon Communication India Pvt. Ltd. vs Asstt. Commr. S. T., Delhi-III [2018 (8) G.S.T.L. 32 (Del.)]. 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion 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 2012 Rules, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 person, by whatever name called, who arranges or facilitates a provision of a service to be called the main service or a supply of goods, betwe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ements, resources and dates as well as the relevant remuneration may be subject to change via the change Request Procedure, including if Jindal Films responsibilities and assumptions are not performed in a timely and appropriate manner and/or if the Project resources are not provided by Jindal Films. JPFL shall provide the service as per the agreed statement of Work. JPFL is responsible for implementation, scope, costs, resources, and targeted solutions. Jindal Films shall designate a Project Manager to work with the JPFL Project Manager. It is mutually understood that if business requirements, resources and dated change, Jindal Films shall be entitled for revising the estimated project plans and requesting changes to the requirements for JPFL Services which shall be reasonably considered by JPFL. Jindal Films agrees to provide appropriate project resources, including but not limited to equipment, data, information, workspace and appropriate and cooperative personnel, to facilitate the performance of the services." 16. The Commissioner (Appeals), in the impugned order, has recorded the following findings : 4.(i) I have carefully gone through the facts of the case and conside....
X X X X Extracts X X X X
X X X X Extracts X X X X
....foreign based Service receiver is Jindal Poly Films LLC situated in USA. The agreement entered into by the respondent with the foreign based service receiver clearly shows that the respondent are the service provider whereas the foreign based entity is the Service receiver. As per one of the impugned orders viz. order no. 17/2017-R, the respondent have used input services valuing more than Rs. 99.64 Crores. These input services have been used for the export of services valuing more than Rs. 139.74 Crores. The whole of the payment against the export of service has been received by the respondent. The full payment against the input services have been made by the respondent, and the full payment of output service has also been received by them from the foreign based service receiver. Thus, in the facts of the case, I find nothing to show that the service provided by the respondent falls under intermediary service. Accordingly, both the appeals are liable to be dismissed." [emphasis supplied] 17. As noted above, an intermediary is a person who arranges or facilitates provision of the main service between two or more persons. The respondent is not involved in the arrangement or facili....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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. 20. 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 relevant factor is the location of the service receiver and not the place of performance. In this context, the phrase 'used outside India' is to be interpreted to mean that the benefit of the service should accrue outside India. Thus, for Category III service [Rule 3(1)(iii)], it is possible that export of service may take place even when all the relevant ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ourt in Verizon Communication squarely applies to the facts of the present case. The Commissioner (Appeals) correctly appreciated the position in the impugned order in holding that the respondent was not an intermediary and was involved in export of service to Jindal LLC. 23. 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 services and raised invoices on principal to principal basis. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....em 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 6. What we have gathered from the perusal of the agreement as wel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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" another supply (the "main supply") between two or more other persons and, does not himself provide the main supply. 3.2 Two distinct supplies: As discussed above, there are two distinct supplies in case of provision of interme....