TaxTMI 
TaxTMI 
2023 (6) TMI 1084
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.... the appellant are engaged in providing design and product development, evaluation and vendor development, quality monitoring and other related services to its foreign client viz. M/s. Primark, P.O. Box No. 644, 47th Mary Street, Dublin, Ireland in procurement of goods and receives remuneration for the above services as a percentage of the value of merchandise exported to the client by the vendors developed. 2.2 The appellant have filed a refund claim for Service Tax amount of Rs.27,32,953/- erroneously paid by them under 'business auxiliary service' during the period from October 2014 to November 2014. During verification of their claim, it was found that they had facilitated procurement and supply of goods to M/s. Primark, Dublin, Ireland from various persons. While facilitating such supply of goods, they had provided their own support services and a fee had been charged by them, which is evident from the service invoice submitted in support of the refund claim. 2.3 The assertion of the Revenue is that the appellant had acted as an intermediary between M/s. Primark, Ireland and various suppliers for a certain consideration and as such, liable to pay Service Tax on the consi....
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....r 'procurement of goods for the client', but not the services of a 'commission agent', which is only limited to transactions relating to purchase or sale of goods and would not cover the broader business process of procurement. (iv) While the description of business auxiliary service describes certain activities of the appellant, it is submitted that they are also providing some other services that would fit into the description of "support services of business or commerce". 6.2 Thus, the appellant argued that its services are covered under the description of both business auxiliary service and support services of business or commerce, as explained above, but more appropriately, fall under "support services of business or commerce". 6.3.1 Reliance has been placed by the appellant on various judicial pronouncements in support, which are summarized below: - * Fifth Avenue v. Commissioner of Service Tax, Chennai [2009 (15) S.T.R. 387 (Tri. - Chennai)] : "4.1 We find that FA and FAWPL had rendered services to the companies in terms of their contracts with them. They assisted processing of purchase orders by the vendors. They monitored progress and timel....
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....ply that the service was rendered to the foreign buyer and not to the local vendors." * GECAS Services India Pvt. Ltd. v. Commr. of Service Tax, New Delhi [2014 (36) S.T.R. 556 (Tri. - Del.)]: "6. ...... ...... There is no dispute that the services provided by the appellant comprise of evaluation of prospective customers by the way of surveying the prospective customers, collecting information about their profile to enable GECAS, Ireland to design its products and pricing as per the aspiration of the target customer base, advising their holding company about the structuring of various transactions by analyzing data base of the customers, tracking of delivery schedules for supply of leased aircrafts, customer relationship management, customer care services, etc. There is no dispute that these services are business support services covered by Section 65(105)(zzzq) of the Finance Act, 1994 read with Section 65(104c) and payment for these services had been received by the appellant from M/s. GECAS, Ireland inconvertible foreign exchange. 6.3.2 Relying on the decision of the Tribunal in the case of M/s. Provincial Life Style Retail Services v. Commissioner ....
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....f Rule 6A of the Service Tax Rules would not be fulfilled in such cases, i.e., the place of provision of the service should be outside India. 7.2 The findings of the learned lower appellate authority are as under: - * The services rendered by the appellant are for the procurement of goods and therefore, prima facie can be called as services in relation to procurement of goods with auxiliary support services. * Remuneration is paid to the appellant in the form of a percentage of FOB value of the merchandise exported by the vendors developed by the appellant and so, prima facie, the services of the appellant can be categorised as that of a commission agent. * The words 'arranges' and 'facilitates', found in the definition of "intermediary", would cover within its ambit a host of marketing and sales promotion activities that are provided in relation to arrangement and/or facilitation of main service / supply of goods. Thus, the scope of work of the appellant will have elements of activities starting from general market research to contract/price negotiations with identified customers. The nature of activities admittedly carried out by the appellant do not....
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....Place of Provision of Services Rules, 2012, as given below: "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; (iv) In respect of the following services, the place of provision in terms of Rule 9 of the Place of Provision of Services Rules, 2012 shall be the location of the service provider: i. Services provided by a banking company, or a financial company, or a non-banking financial company to account holders; ii. Telecommunication services provided to subscribers; iii. Online information and database access or retrieval services; iv. Intermediary services; v. Service consisting of hiring of means of transport, up to a period of one month. (v) The appellant arranges or facilitates supply of goods by its various vendors, the remuneration is paid in the form of a percentage of the FOB value of the merchandise exported by the vendors develop....
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....t is rendering a comprehensive list of services relating to procurement of goods on behalf of the foreign client from the time the designs are conceptualized to finishing the manufacture of the goods and their export. 11.2.1 Section 65 (19) of the Finance Act, 1994 defines "business auxiliary service" as under: - "business auxiliary service" means any service in relation to, - (i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or (ii) promotion or marketing of service provided by the client; or [ * * * * ] (iii) any customer care service provided on behalf of the client; or (iv) procurement of goods or services, which are inputs for the client; or [Explanation. - For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, "inputs" means all goods or services intended for use by the client;] [(v) production or processing of goods for, or on behalf of, the client;] (vi) provision of service on behalf of the client; or (vii) a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as....
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....ere is no material change in the definitions of both "business auxiliary service" and "support services of business or commerce" having an implication for taking a decision in this appeal on the issue of classification of the services. 11.3 We find that the appropriate classification of these services would be "support services of business or commerce" rather than "business auxiliary service". Business auxiliary services are general in nature as compared to support services of business or commerce. The appellant's services are not limited to being a commission agent / buying agent since their services are not limited to only procurement and dispatch, but includes a wide range of services from the stage of designing to testing and quality monitoring and getting the goods manufactured till the final export is made, including assisting in the transportation and dispatch of the goods. 11.4.1 We find that the decision rendered in the case of M/s. Fifth Avenue v. Commissioner of Service Tax, Chennai [2009 (15) S.T.R. 387 (Tri. - Chennai)] is applicable wherein the appellant rendering services such as evaluation of prospective customers, processing of purchase orders, customer manag....
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.... to by Revenue above, has at paragraph 4.1, clearly found without ambiguity that the services rendered to the vendors and the companies by the appellants therein conformed to the statutory definition of SSBC and hence, the services rendered to the vendors and companies were classifiable under SSBC and not under BAS. Hence section 65A of the Finance Act, 1994 was not required to be discussed in the order." 12. The next issue that has to be analysed now is whether the appellant can be treated as an 'intermediary'. 12.1.1 An intermediary is generally meant to be a person who arranges or facilitates supply of goods or provision of service, or both, between two persons without any material alteration/processing. Paragraph 5.9.6 of the Education Guide issued by the C.B.E.C. dated 20.06.2012 has clarified as to intermediary services, as under: - "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 any one time: i) the supply between the principal and the third party; an....
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....dated 11.07.2014, a commission agent i.e., a buying or selling agent for supply of goods has also been included to be an intermediary. 12.2.1 "Intermediary", as defined under Rule 2(f) of the Place of Provision of Services Rules, 2012, means "a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a 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". "Commission agent" means "a person who causes sale or purchase of goods, on behalf of another person for a consideration, which is based on the quantum of such sale or purchase" (as defined in exemption Notification No. 13/2003-S.T. dated 20.06.2003). Subsequently, with effect from 16.05.2005, "commission agent" was defined in Section 65 (19) of the Finance Act, 1994 to mean "any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration, and includes any person who, while acting on behalf of another person (i) deals with goods or services or documents of title to such goods or services; or (ii) col....
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....receiving any consideration from the vendors developed by him and as such, the services could not be termed as falling under the category of "intermediary". 12.4 We find that the decision in the case of In Re: GoDaddy India Web Services Pvt. Ltd. [2016 (46) S.T.R. 806 (A.A.R.)] is relevant to understand the term 'intermediary' in its correct perspective, wherein it was observed as under: - "10. The definition of "intermediary" as envisaged under Rule 2(f) of POPS does not include a person who provides the main service on his own account. In the present case, applicant is providing main service, i.e., "business support services" to WWD US and on his own account. Therefore, applicant is not an "intermediary" and the service provided by him is not intermediary service. Further, during arguments, applicant drew our attention to one of the illustration given under Paragraph 5.9.6 of the Education Guide, 2012 issued by C.B.E. & C. Relevant portion is extracted as under; Similarly, persons such as call centers, who provide services to their clients by dealing with the customers of the client on the client's behalf, but actually provided these services on their own acc....
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....ed abroad/outside India. The services rendered are not specified in Section 66D of the Finance Act. The payment for the said services has also been received by the appellant in convertible foreign exchange. Therefore, the only condition that is required to be satisfied is whether the place of provision of service is outside India or not. 13.2.1 In terms of Rule 3 of the Place of Provision of Services Rules, 2012, the place of provision of service shall be the location of the recipient of service. In respect of intermediary service, in terms of Rule 9, the place of provision of service shall be the location of the service provider. Rules 3 and 9 of the Place of Provision of Services Rules, 2012 are extracted below: - "Rule 3. Place of 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. .... Rule 9. Place ....