TaxTMI 
TaxTMI 
2026 (1) TMI 1013
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....vices entail the management, operation and maintenance of data centres. AWSI with its principal place of business in America is engaged in the business of providing cloud computing services to customers around the world. Cloud computing is the on-demand delivery of computer, power, database, storage, applications, and other IT resources via, the internet with pay-as -you-go pricing. AWSI as one of the cloud computing service providers, offers over 200 fully featured services for a wide range of technologies, industries and use cases to its customers. One of the key characteristics of AWSI services is that it is self service and on demand which means that IT resources are readily accessible to users and anyone wishing to use such resources could go online right now, sign up and immediately start accessing the AWSI services. The cloud computing services are provided by AWSI to the customers around the world, including India pursuance to the Customer agreement between AWSI and such customers on principal-to-principal basis. Data hosting service is merely one of many input services that AWSI acquires to enable it to develop and provide cloud computing services to its customers. 3. T....
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....e tax. 6. The appellant has filed the present appeal on the findings that the appellant is covered under the definition of 'intermediary' as defined under Rule 2(f) of POPS Rules, 2012 and is, therefore, liable to pay service tax in terms of Rule 9. In so far as the demand of service tax on marketing support services, the appellant has restricted the challenge only to the levy of penalty thereon. 7. Shri B.L. Narasimhan, learned Counsel for the appellant submitted that the definition of 'intermediary' under Rule 2(f) and 2(13) of IGST Act are same which has been taken note of by the Punjab and Haryana High Court, Delhi High Court and also Bombay High Court. Therefore, the Circulars issued under the GST regime with regard to the applicability of the term 'intermediary' can be applied in the present case and following the analogy laid down therein, it is clear that the appellant is not an intermediary. He has also referred to the order-in-appeals passed by the Commissioner in terms of these circulars holding that the data hosting services are not covered under the definition of 'intermediary'. The Revenue has not challenged these orders and the same have therefore, attained fin....
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....reement which suggests that the appellant acts on behalf of AWSI and not on principal-to-principal basis. The learned Counsel submitted that the appellant has satisfied the four conditions mentioned in Guidelines, Note 5 of CBEC, Taxation of Services dated June 20, 2012, namely:- "A). An intermediary arranges or facilities the provision of goods or services between two or more persons. B). An intermediary is involved with two supplies at a given point of time, i e. i). supply between the principal and the third party ii). supply of services to his principal for which a consideration is usually charged. In this case, the appellant is involved with two supplies, i e. a) Here, the principal or main activity is of supply of cloud computing services of AWSI to its customers and b) supply of appellants intermediary services to AWS, USA. C). As per the data agreement, the appellant cannot alter the nature or value of cloud computing services offered by AWS, USA to its customers. D). The consideration for an intermediate service is identifiable and distinguishable from the value of goods and services provided by the principal t....
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...., considering the definition under the two provisions, CBIC has taken the view that broadly there is 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. The Circular No.159/15/82021-GST dated September 20, 2021 takes note of the fact that the concept of 'intermediary' was borrowed in GST from the service tax regime and laid down the basic prerequisites of intermediary services. Subsequently, clarification was issued on place of supply of data hosting services provided by service providers located in India to cloud computing service providers located outside India under Circular No. 232/26/2024-GST dated September 10,2024. The question framed and the clarification issued was as under: "3.1 Whether data hosting service provider qualifies as 'Intermediary' between the cloud computing service provider and their end customers/users/subscribers as per Section 2(13) of the IGST Act and whether the services provided by data hosting service provider to cloud computing service providers are covered as intermediary services and whether the place of....
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....place of supply of the same cannot be determined as per section 13(8)(b) of IGST Act." In view of the clarification, the Appellate Authority under the GST laws (S.No.10-11) decided the issue of providing data hosting services in favour of M/s Amazon Data Services India Pvt. Ltd. that the services provided by data hosting service provider to its overseas cloud computing service cannot be considered as 'intermediary services'. On that basis, the Adjudicating Authority vide order dated November 22, 2024 and March 5, 2025 allowed the refund claim as the services in question qualified as export of services. The claim of the Department that the appellant rendered intermediary services as defined under section 2(13)of the IGST Act stood rejected. These decisions have been accepted by the Revenue as they have not been challenged stands accepted by the High Court of Delhi in its Order dated May 29, 2025 in batch of writ petitions (Writ Petition Nos.7191/2025) in the case of M/s Amazon Data Services India Pvt. Ltd. 11. We are of the considered view that the interpretation given with reference to the definition under the IGST Act in identical circumstances would equally apply in the cas....
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.... 2(6) of the IGST Act. We may refer to some of the decisions cited in the said decision. 13. In the case of Ernest and Young Limited Pvt. Ltd. Vs. CST, Delhi-II [2020 (35) GSTL 202 (Tri.-Delhi)], Delhi High Court examined the issue whether the service agreement constitute service as an intermediary with reference to the provisions of Section 2(13) of the IGST Act and observed as under: "20. A plain reading of the aforesaid definition makes it amply clear that an intermediary merely "arranges or facilitates" supply of goods or services both between or more persons. Thus, it is obvious that a person who supplies the goods or services is not an intermediary. The services provided by the intermediary only relate to arranging or facilitating the supply of goods or services from the supplier. In the present case, there is no dispute that the petitioner does not arrange or facilitate services to EY entities from third parties; it renders services to them. The petitioner had not arranged the said supply from any third party." The aforesaid view of the Delhi High Court in Ernst and Young has been accepted by the Bombay High Court in the case of K.C. Overseas Education Private....
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....ty 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 are not its recipients. 50. The decision of Larger Bench of CESTAT in Paul Merchants Ltd. v. CCE, Chandigarh (supra) may be referred to at this stage. The period with which the dispute in that case related to was between 1st July, 2003 and 30th June, 2007. It involved, 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 vi....
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....of "intermediary services" as per section 2(13) of IGST Act and did not qualify as "export of services, the learned Division Bench considering the definition of "intermediary services" under the service tax regime and the GST observed as under: "37. A perusal of the definition of "intermediary" under the service tax regime visa-vis the GST regime would show that the definition has remained similar. Even as per circular dated 20-9-2021 issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs (GST Policy Wing), the scope of "intermediary" services has been dealt in Para 2 thereof. In Para 2.2 it stands clarified that the concept of "intermediary" was borrowed in GST from the Service Tax Regime. The circular after making a reference to the definition of "intermediary" both under Rule 2(f) of the Place of Provision of Service Rules, 2012 and under Section 2(13) of the IGST Act clearly states 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." 18. H....
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.... affiliates. The learned Single Judge by a very elaborate judgement held that the petitioner in that case is not an "intermediary" under section 2(13) of the IGST Act in terms of the circular dated 20.09.2021 and the customer support services provided by the petitioner to foreign affiliates qualify as "export of service" under section 2(6) of the IGST Act. 20. Having examined the judicial decisions rendered by several High Courts as well as the various Benches of the Tribunal, both under the service tax law and under the IGST provisions, the law is settled that an intermediary merely arranges or facilitates supply of goods or services or both between two or more persons and a person, who supplies the goods or services is not an intermediary. On the interpretation placed on the term intermediary, the Courts have formulated the following criteria for the purpose of classifying any service as an intermediary service:- "(a) Such person must be acting in the capacity of a broker, an agent or any other person, by whatever name called; (b) Such person must arrange or facilitate a provision of a service or supply of goods; (c) Such arrangement or facilitation ....
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....ndent activity in the nature of data hosting services, which is one of the inputs for provision of cloud computing services by AWSI. There is no scope for arranging or facilitating any provision of service by the appellant. The submission of the appellant that the term arranging or facilitating when interpreted in conjunction with the terms brokers or agents suggest activity of 13 2021(47) GSTL 355 (Tri. Del.) 14 2021 (50) GSTLJ9(SC). negotiations and interactions on behalf of the principal so as to ensure the provision of service or sale of service by the principal with a third party, appears to be correct. In the present case, the activities with respect to negotiations, contracts, invoicing, payment from customers are undertaken by AWSI independently whereas the appellant has been engaged only for providing data hosting services by setting up and maintaining complete turnkey data centre services required for high availability data catching as per Exhibit B to DSA which provides for 'Data Service'. Further, as per Exhibit C titled as 'Service Fees', clause 1.3 provides the manner of payment of consideration for the services performed on cost plus percentage basis and not under sa....
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.... service shall be the location of the recipient of service. Rule 9 provides that 'Place of Provision of Specified Services shall be the location of the service provider and Rule 9(c) incorporates 'intermediary services'. Since we have already held that appellant is not rendering any intermediary services, the scope of applicability of Rule 9 is ruled out, and consequently, under the General Rule 3, the place of provision shall be the location of the recipient of service. There is no dispute that the service recipient ASWI is located outside India and therefore, the services provided by the appellant would be taxable outside the taxable territory and as a result there is no scope for levy of service tax. 28. Having decided the issue on merits that the appellant is not an 'intermediary' as per the definition given in Rule 2(f) of POPS Rules and, therefore, the place of supply of service being the location of the service recipient, which is outside India, no service tax is leviable. On the issue of invocation of extended period of limitation, we are of the considered view that this is not a case which falls under any of the exceptions provided for invocation of the extended period.....
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.... paid the interest amount before the issuance of SCN and if so, no penalty is leviable. At the same time, we would like to refer to the decision of the Karnataka High Court, which the adjudicating authority may keep in mind while recording a finding thereto. The Division Bench of the Karnataka High Court in CCE & ST, LTU, Bangalore versus Adecco Flexione Workforce Solutions Ltd. [2012 (26) STR 3 (Kar.)], by a short order has very strongly observed as:- "3. Unfortunately the assessing authority as well as the appellate authority seem to think. If an assessee does not pay the tax within the stipulated time and regularly pays tax after the due date with interest. It is something which is not pardonable in law. Though the law does not say so, authorities working under the law seem to think otherwise and thus they are wasting that valuable time in proceeding against persons who are paying service tax with interest promptly. They are paid salary to act in accordance with law and to initiate proceedings against defaulters who have not paid service tax and interest in spite of service of notice calling upon them to make payment and certainly not to harass and initiate proceedings ....