TaxTMI 
TaxTMI 
2024 (9) TMI 1172
X X X X Extracts X X X X
X X X X Extracts X X X X
....iginal Authority on the grounds that an amount of Rs.26,25,042/- was wrongly refunded and in respect of order dated 15.11.2019, the entire refund was erroneously granted; Commissioner (Appeals) vide his order dated 21.04.2020 remanded both the orders back to the Adjudicating Authority with a direction to check whether the appellant was an intermediary between Airbnb, Ireland and their customers; in the remand proceedings, the Original Authority did not pass any order in respect of the refund for the period October 2016 to December 2016 in respect of refund, for the period January 2017 to March 2017, rejected the refund, saying that the appellant is an intermediary, vide order dated 26.03.2021; on an appeal filed by the appellant, learned Commissioner (Appeals) vide impugned order dated 26.03.2021 upheld the order passed by the Original Authority. Hence, the appellants filed Appeal No. ST/60117/2022. 2. Meanwhile, Department has issued another Show Cause Notice dated 21.10.2021 seeking the re-payment of refund of Rs.57,72,625/- (i.e. Rs.31,47,583/- + Rs.26,25,045/-) alleged to have been erroneously sanctioned to the appellants by the Original Authority vide orders dated 15.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... an intermediary; Clause 20.1 of the Agreement between the appellant and the PayU specifically mentions that the appellant is not an agent; Department cannot ignore these conditions. He further submits that the Department is not clear in its stand inasmuch as they have taken different stand in different orders; OIO dated 14.10.2019 and 15.11.2019 categorically holds that the appellant is not an intermediary, while the appeals against this order mention that the appellant might be an intermediary; while OIA dated 21.04.2020 and 26.03.2021 hold that the appellant is in an intermediary between Airbnb, Ireland and PayU, OIA dated 26.12.2021 holds that the appellant is an intermediary between Airbnb and their customers. 6. Learned Counsel submits that CBIC Circular dated 20.09.2021 clarifies the position of an intermediary and supports the claim of the appellants. He relies on the following cases: • Genpact India Pvt. Ltd. - CWP-6048-2021 (P&H) • Blackrock Services India Pvt. Ltd. - (ST/61877/2018) • Chevron Phillips Chemicals India Pvt. Ltd. - 2012 (12) TMI 1066-CESTAT Mumbai. (Civil Appeal filed by Department has been dismissed by Suprem....
X X X X Extracts X X X X
X X X X Extracts X X X X
....own account and have no role in provision of the said services and therefore, the appellants are an intermediary as per the inclusive Clause as well as exclusive Clause of the definition of an "Intermediary". He relies on Excelpoint Systems (India) Pvt. Ltd. - 2018 (10) GSTL 254 (Tri. Bang.) and Saber Travel Network India Pvt. Ltd. - 2019 (27) GSTL 754 (App. A.A.R. - GST) and submits that the Market/ Technical Support Services falling under BAS provided by the assessee to group company located outside India fall under the definition of "Intermediary" under Rule 2(f) of the Place of Provision of Service Rules, 2012; in terms of Rule 9 read with Rule 3, ibid, the place of provision of services shall be the location of service provider and therefore, services rendered by the appellant cannot be treated as export of services. 10. Heard both sides and perused the records of the case. The brief issue that requires to be decided in the instant appeals is as to whether the appellants are an intermediary and whether the appellant are eligible for refunds filed by them periodically and as to whether the demand of duty is sustainable. We find that it would be beneficial to have a look at s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r, 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;" 2.3 From the perusal of the definition of "intermediary" under IGST Act as well as under Service Tax law, it is evident that there is broadly no change in the scope of intermediary services in the GST regime vis-a-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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ply, 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 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 is not an intermediary. For instance, 'A' and 'B' have entered into a contract as per which 'A' needs to provide a service of, say, Annual Maintenance of tools and machinery to 'B'. 'A' sub-contracts a part or whole of it to 'C'. Accordingly, 'C' provides the service of annual maintenance to 'A' as part of such subcontract, by providing annual maintenance of tools and machinery to the customer of 'A', i.e. to 'B' on behalf of 'A'. Though 'C' is dealing with the customer of 'A', but 'C' is providing main supply of Annual Maintenance Service to 'A' on his own account, i.e. on p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ms processing service from other service providers in India. 'Q' contacts 'R', who is in business of providing such insurance claims processing service, and arranges supply of insurance claims processing service by 'R' to 'P'. 'Q' charges P a commission or service charge of 1% of the contract value of insurance claims processing service provided by 'R' to 'P'. In such a case, main supply of insurance claims processing service is between 'P' and 'R', while 'Q' is merely arranging or facilitating the supply of services between 'P' and 'R', and not himself providing the main supply of services. Accordingly, in this case, 'Q' acts as an intermediary as per definition of sub-section (13) of section 2 of the IGST Act. Illustration 4 'A' is a manufacturer and supplier of computers based in USA and supplies its goods all over the world. As a part of this supply, 'A' is also required to provide customer care service to its customers to address their queries and complains related to the said supply of computers. 'A' decides to outsource the task of providing customer care services to a BPO firm, 'B'. 'B' provides customer care service to 'A' by interacting with the cu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bnb Ireland and Service Provider to be added under the Agreement ("Services"). All Services should be described in detail on a statement or statements of work that are substantially in the form of the attached Exhibit A (each a "Statement of Work"). Each Statement of Work shall include a description, as applicable. of the Services to be performed and a schedule of payments related to such Services. Each Statement of Work shall be sequentially numbered and dated. Any changes to a Statement of Work shall be documented and agreed to in writing (each a "Change Order"). Each Change Order will identify any changes to the Statement of Work, including changes to scope of Services, associated deliverables, timelines and any increases or decreases in the compensation. 1.2. Airbnb Ireland Performance. This Agreement does not prohibit Airbnb Ireland from performing Services on its own behalf or obtaining Services from others. 1.4.... (d) Nothing in this Agreement or in the arrangements hereby contemplated shall constitute or be taken to mean that Service Provider acts as the agent of Airbnb Ireland or Member for any purpose whatsoever and Service Provider shall not h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The appellants get remuneration on cost plus markup basis in foreign exchange; once the visitors/ tourists originating in India pay, the appellants liaise with the banks to ensure that the owners of the accommodation received the payment once their accommodation is leased by Airbnb, Ireland to their customers; the appellants have outsourced the work to PayU platform. It is clear that the appellant and Airbnb, Ireland or for that matter the PayU work on principal-to-principal basis. Thus, the conclusion arrived by the impugned orders though inconsistent do not seem to flow from the work arrangement between the parties. As far as the customers or the property owners are concerned, the appellant is not privy to any contract by Airbnb, Ireland with them and they also do not have any agreement vis-à-vis the provision of service by Airbnb to their customers. The appellants can at best be described to perform certain services regarding the payments which are outsourced to them by Airbnb, Ireland. There is nothing in the agreements to indicate that the appellants are an intermediary. We find that in the instant case, the conditions laid down by Hon'ble Punjab & Haryana High Court in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....acilitates on behalf of his principal, although the principal may authorize to negotiate a different price; (d) The consideration for an intermediary 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; (e) 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; (f) The payment for such services is received by way of commission; (g) The Principal must know the exact value at which the service is supplied (or obtained) on his behalf. 11. From the agreement placed before us and arguments adduced before us, we find that the activity of computer networking is networking service which is an application running at the network application layer and above, that provides data storage, manipulation, presentation, communication or other capability which is often implemented using a client-server or peer-toarchitecture based on application layer network protocols. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d accordingly, it cannot be said that the appellant has provided intermediary service and should be governed under the provisions of Rule 9 of the rules." 15. We find that the Principal Bench of the Tribunal in the case of Verizon India Pvt. Ltd. (supra) held that: 30. We find that the said stand of Revenue is wholly mis-construed and erroneous. Firstly, no demand notice was issued on the appellant refusing or questioning the status of the export of service to Verizon US, as declared in their ST-3 Returns. 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 appellant has not been acting as intermediary between another service provider and Verizon US. This fact is also supported from the fact that the appellant has raised their bills for the services provided on the basis of cost plus 11% mark-up. As the services have been provided by the appellant und....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s in the definition of "intermediary" in the GST law. 38. We also find that in the impugned order dated 15-2-2021 (Annexure P-18) there has been a clear misreading of the ruling in the case of Infinera (supra) while observing that there has been a material change in the definition of "intermediary" under the GST regime. To the contrary a bare perusal of the ruling in the case of Infinera (supra) which stands reproduced by the Appellate Authority in the impugned order itself would show that the definition of the term "intermediary" had been noticed both under the pre-GST regime as also under the GST regime and it had been observed as under :- "From the above definitions, in essence, there does not seem to be any difference between the meaning of the term "intermediary" under the GST regime and pre-GST regime. In the pre-GST regime, an intermediary referred to a person who facilitates the provision of a main service between two or more person but did not include a person who provided the main service on his account. Similarly, in the GST regime, an intermediary refers to a person who facilitates the supply of goods or services or both between two or more persons but....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e uniformly held that res judicata does not apply in matters pertaining to tax for different assessment years because res judicata applies to debar Courts from entertaining issues on the same cause of action whereas the cause of action for each assessment year is distinct. The Courts will generally adopt an earlier pronouncement of the law or a conclusion of fact unless there is a new ground urged or a material change in the factual position. The reason why Courts have held parties to the opinion expressed in a decision in one assessment year to the same opinion in a subsequent year is not because of any principle of res judicata but because of the theory of precedent or the precedential value of the earlier pronouncement. Where facts and law in a subsequent assessment year are the same, no authority whether quasi-judicial or judicial can generally be permitted to take a different view. This mandate is subject only to the usual gateways of distinguishing the earlier decision or where the earlier decision is per incuriam. However, these are fetters only on a coordinate bench which, failing the possibility of availing of either of these gateways, may yet differ with the view expresse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of work and submit the deliverables directly to the third parties, either online or on-call or through e-mail using dedicated electronic networks and voice circuits. 43. Still further in Para 9 of the written statement it was clearly averred to the following effect :- "the test of agency must be satisfied between the principal and the agent i.e. the "intermediary" which is not the case in the present case" 44. The findings as regards the petitioner to be an agent is in contradistinction to the clear stand taken by the department in the previous round of litigation. 45. It is undisputed that the petitioner has an agreement only with the GI. 46. Pursuant to the sub-contracting arrangement as per MSA (Annexure P-1), the petitioner provides the main service directly to the overseas clients of GI but does not get any remuneration from such clients. Pursuant to the arrangement, it is GI which gets paid by its customers to whom the services are being provided directly by the petitioner. Nothing has been brought on record to show that the petitioner has a direct contract with the customers of GI. Still further there is nothing on record to show that pe....