TaxTMI 
TaxTMI 
2025 (11) TMI 1698
X X X X Extracts X X X X
X X X X Extracts X X X X
...."the impugned order") passed by the Commissioner (Appeals), Service Tax-II, Mumbai. 2.1 The brief facts of the case are that the appellants herein are engaged inter alia, in the business of promoting and distributing of the products of Wacker group entities located outside India. For the purpose of payment of service tax on taxable output services and for compliance with the Service Tax statute, they are registered with the jurisdictional Commissionerate under service tax registration No. AAACW7502MST0021. The appellants avail CENVAT credit of service tax paid on input services and utilise the same as provided for under the CENVAT Credit Rules, 2004. 2.2 The appellants had entered into three different agreements for providing services to M/s Wacker Chemie AG, Munich, Germany (referred to as 'Wacker Germany' for short). These are (i) 'Technical Service' agreement dated 01.01.2012, providing for promoting, demonstrating of Wacker products to prospective customers; testing of materials provided by Indian customers of Wacker Germany to ascertain the quantum and method of use, further improvement in the products, attending the queries of customers in relati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....esting of material, demonstration of machinery were actually performed by the appellants in India; recipient of the service and appellants, being provider of services, both situated in India; and the appellants acting as agent of the foreign entity M/s Wacker Chemie AG, Germany, the provisions of Rule 4, 8 an 9 of the Place of Provision of Service Rules, 2012 (POPS) are attracted and therefore, by setting aside the original orders, he had allowed the appeals filed by the department. Feeling aggrieved with the impugned order, appellants have preferred these appeals before the Tribunal. 3.1 Learned Advocate appearing for the appellants submitted that in terms of all the three agreements viz., 'Technical Service' agreement, 'Sales Manager' agreement and 'Corporate Key Account Management' agreement, the objective of the appellants was marketing and promoting of the goods of Wacker Germany, by securing orders from the customers located in India and forwarding the leads to Wacker Germany; advising the Indian customers on the quantum, formula and method of use of the products of Wacker Germany in order to achieve higher sales; demonstrating the process of application ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ii) Commissioner of Central Tax, Bangaluru Vs. Medgenome Labs. - 2023 (73) G.S.T.L. 586 (Kar.) Thus, it is contended by the learned Advocate that the impugned order rejecting the refund claims sanctioned by original authority, cannot be sustained and prayed that their appeals be allowed. 4. On the other hand, learned AR appearing for the Revenue reiterated the findings recorded in the impugned order. He further stated that the appellants had carried out testing of materials like sand, cement, water etc., provided in India to promote the products of Wacker Germany, such services would be covered under Rule 4(a) of POPS Rules, 2012. He further stated that in case of the provision of service is determinable in terms of more than one rule, then the rules occurs later i.e., Rule 9 ibid would apply in as much as the appellants have acted as an agent providing services on behalf of their foreign client Wacker Germany, and thus it would be regarded as their services were provided by the appellants in India, and the liability to pay service tax is on the appellants. 5. Heard both sides and perused the case records. 6. We have examined the three agreements viz., Techn....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m the various clauses in the agreements, it is clearly proved that there is no involvement of three persons and further there is no element of separate 'main supply' and 'ancillary supply' involved in provision of services by the appellants. Therefore, the conclusion arrived at paragraph 12 of the impugned order that Rule 9 of POPS would apply to claim that the appellants have provided the intermediary services in India, in the case of services provided by the appellants to foreign entity i.e., Wacker Germany, and it shall not qualify as export of service are incorrect and contrary to the clarification issued by CBIC. Further, on careful reading of the clauses in the agreements vis-àvis the statutory provisions, it is abundantly clear that the services rendered by the appellants has been provided to the overseas entity M/s Wacker Chemie AG, Munich, Germany, who is located outside India; and thus such services having been delivered out of India shall qualify as export in terms of Rule 6A of the Service Tax Rules, 1994 read with Rule 3 of the Place of Provision of Services Rules, 2012. 8.1 In this regard, we find that the Co-ordinate Bench of this Tribunal have held i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....which in the present case is country of appellant's clients. To qualify export of services, Rule 6A of Service Tax Rules, 1994 has provided certain conditions. The said Rule 6A is reproduced below:- Applying the above Rule in the fact of the present case, the provider of service i.e. the appellant is located in India which is the taxable territory, recipient of service i.e. client of the appellant is located outside India. The service is not specified in Section 66 of the Finance Act. As per the discussion made hereinabove, the place of provision of service is clearly outside India. There is no dispute that the payment of such services has been received by the appellant as a service provider in convertible foreign exchange. In view of the above, the appellant have clearly satisfied the conditions required for treating the service as export of service. Therefore, the appellant's service, being export of service, cannot be chargeable to service tax." 8.2 Against the above order, the department had preferred an appeal before the Hon'ble High Court of Karnataka. In the judgement delivered on 14.03.2023, the Hon'ble High Court by upholding the order of the Tribunal and has h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e overseas entity and their customers in India. To qualify as an intermediary, service as per the statutory provision, the essential element for consideration is that the parties to the contract should act as principal-agent and that the agent shall be in a position to represent and bind the principal. On reading of the clauses in the agreement vis-à-vis the statutory provisions, it is abundantly clear that the services provided by the appellant to the overseas entity qualify as export in terms of rule 6A of the Service Tax Rules, 1994 read with rule 3 of the Place of Provision of Services Rules, 2012. 8. We find that by reading the contents of the said agreement dated 14-9-2009 entered into between the appellant herein and the self same overseas entity, this Tribunal in the case of the appellant itself, vide Final Order No. A/87373-87378/2019 dated 20-12-2019 has held that the appellant cannot be termed as an intermediary. The relevant paragraph in the said order is extracted herein below:- "17. For the period after 1-10-2014, on merit also, the appellant cannot be called as an 'intermediary'. On a simple reading of the agreement analyzed as above,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he main service rendered by the appellant and consequently, rigors Rule 9 vis-à-vis Rule 2 (f) are not applicable. In view of the above, I am of the considered opinion that Rule 3 of POPS Rules would only apply and therefore the appellant cannot be fastened with tax liability. For the above reasons, demand as well as the impugned order are not sustainable and consequently, the same are set aside and the appeal stands allowed with consequential benefits if any, as per law." 9. In view of the foregoing discussions, we do not find any merits in the impugned order passed by the adjudicating authority in confirming the adjudged demands on the appellant. Therefore, by setting aside the impugned order, the appeal is allowed in favour of the appellant." The department having been aggrieved by the above order, had filed Civil Appeal Diary No. 51950 of 2023 before the Hon'ble Supreme Court. In deciding the said appeal, the Hon'ble Supreme Court vide its judgement delivered on 29.01.2024 has upheld the order of the Tribunal and dismissed the appeal filed by the department. 10. In the case of Advinus Therapeutics Limited (supra), this Tribunal has come to an inescapable c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Yet, Revenue insists that performance of service is in India. A service is not necessarily a single, discrete, identifiable activity; on the contrary, it is a series of invisibles that cater to the needs of a recipient; it is upon the consumption of the service by the recipient that service is deemed to have become taxable. This has been so held by the Hon'ble Supreme Court in All India Federation of Tax Practitioners v. Union of India & others [2007 (7) S.T.R. 625 (S.C.)] below : '7. In the light of what is stated above, it is clear that Service Tax is a VAT which in turn is destination based consumption tax in the sense that it is on commercial activities and is not a charge on the business but on the consumer and it would, logically, be leviable on services provided within the country.' It would appear from the exposition in the judgment that the tax was intended as a levy on activities that would otherwise be performed by the recipient for itself. The new industry of hiving out or outsourcing of what was, conceivably, being done within the enterprise was intended to be subject to the new levy. In the matter of service rendered by respondent, this activit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sel for the petitioner, there is no question on the service of haircut having been received in India.' The intent in Rule 4 to remedy out some specific situations that would, otherwise, have enabled escapement from tax or leviability to tax where Rule 3 of Place of Provision of Services Rules, 2012 may not serve to confer jurisdiction becomes increasingly obvious. 15. Accordingly, we can infer that the location of performance of service in respect of goods is not an abstract, absolute expression for fastening tax liability on services that involve goods in some way; for that, Rule 3 would have sufficed. A contingency that is not amenable to Rule 3 has been foreseen and remedied by Rule 4 and in the process, the sovereign jurisdiction to tax is asseted. It is, therefore, not by the specific word or phrase in Rule 4(1) of Place of Provision of Services Rules, 2012 that the taxability is to be determined but from the mischief effect intended to be plugged. It is obviously not intended to tax any activity rendered on goods as to alter its form because that would be covered by excise on manufacture or be afforded privileges available to merchandise trade. The provision....
X X X X Extracts X X X X
X X X X Extracts X X X X
....By this elaboration, we have amplified our earlier decision in (re Sai Life Sciences Ltd.) that it is contrary to law to isolate an expression in a rule to deny the general principle built into all indirect tax statutes for exempting export of services from levy. Reiterating the consistent judicial stand, we hold the respondents to be entitled to refund of accumulated Cenvat credit." 11. Further, we also find, in a number of cases, this Tribunal has held that when the contractual arrangement do not provide for empowering the appellant to act as intermediary, the service liability cannot be fastened on the appellants service provider. The relevant paragraph of the said orders is extracted and given below: (i) In the case of Commissioner of Service Tax-VII Vs. Life Care Medical Systems - 2018 (18) G.S.T.L. 587 (Bom.), the Hon'ble High Court of Bombay have held that it is not the place of performance, but the location of the service receiver which will make it an export of services and also found that the CBEC clarification is in favour of the appellants. The relevant paragraphs are as follows: "6. We find that this Court in SGS India Pvt. Ltd. (supra) has h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....therefore, the interpretation of the ESR, 2005 as amended and applicable during the said period. There the assessees were intermediary agents providing money transfer services to foreign travellers who were the end user on behalf of their principals. The contention of the Department that this did not qualify as 'export of service' was rejected by the CESTAT. It noted that the C.B.E. & C. had to issue a clarification Letter No. 334/1/2010-TRU, dated 26th February, 2010 acknowledging the difficulties that were faced by the trade in complying with the condition that the services had to be 'used outside India'. It was clarified that "as long as the party abroad is deriving benefit from service in India, it is an export of service." 51. In the considered view of the Court, the judgment of the CESTAT in Paul Merchants Ltd. v. CCE, Chandigarh (supra) is right in holding that "The service recipient is the person on whose instructions/orders the service is provided who is obliged to make the payment from the same and whose need is satisfied by the provision of the service." The Court further affirms the following passage in the said judgment in Paul Merchants Ltd. v. CCE, Chandigar....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 554 (Bom.)]. "24. It is in that sense that the Tribunal holds that the benefit of the services accrued to the foreign clients outside India. This termed as 'export of service'. In these circumstances, the Tribunal takes a view that if services were rendered to such foreign clients located abroad, then, the act can be termed as 'export of service'. Such an act does not invite a Service Tax liability. The Tribunal relied upon the circulars issued and prior thereto the view taken by it in the cases of KSH International Pvt. Ltd. v. Commissioner and B.A. Research India Ltd. The case of the present respondent was said to be covered by orders in these two cases. To our mind, once the Hon'ble Supreme Court has taken the view that Service Tax is a value added tax which in turn is destination based consumption tax in the sense that it taxes non-commercial activities and is not a charge on the business, but on the consumer, then, it is leviable only on services provided within the country. It is this finding and conclusion of the Hon'ble Supreme Court which has been applied by the Tribunal in the facts and circumstances of the present case. 25. The view taken by the Tribu....