TaxTMI 
TaxTMI 
2026 (7) TMI 1449
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.... Inc"). The registered office of the Appellant is located at Bangalore. The Appellant has various units in Special Economic Zones engaged in the business of offering wide range of products and services such as routers, switches, wireless, security building systems, network management, data centre switches, technical support services and application network services etc. The Appellant renders various services to its group entities including management services, manufacturing support services, marketing and sales support services, administrative support services, technical assistance services, advanced services, spare services etc. A substantial portion of the services are rendered from the above-mentioned units located in SEZ. Appellant is registered for providing Business Support Services, Information Technology Software Services and Business Auxiliary Services. Alleging that the Appellant had provided marketing and sale service to their client for marketing client's product and services within the taxable territory by acting as intermediary, investigation commenced and a Show Cause Notice was issued under Section 73(1) of the Finance Act, 1994 by invoking the extended period of li....
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....uires to customers, potential customers to information relating to the products, maintenance of adequate staffs per selling location etc. 4. Learned Sr. Counsel further drew our attention to the other services including Marketing and Sales Support, Technical Support Service, Advanced services, spare services and Pan regional / administrative support services where all the services are agreed upon a term of cost-plus percentage basis and not connected with the sale of the products. He also drew our attention to the Manufacturing support service agreement dated 01.04.2016 between Appellant with CSIBV and international service agreement dated 01.04.2008, between Appellant with Cisco, California. As regards Marketing and Sales Support, it is submitted that Marketing and sales support services includes: a. Supply of marketing research, forecasts and use of advertising; b. Distribution of promotional materials and related General & Administration Costs. c. Participation in trade shows, prompt responses to all inquiries by customers or potential customers for information relating to the products; d. Maintenance of adequate staff per selling location ....
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.... quality control and similar types of support. f. Treasury including assistance and advice on cash management, foreign currency risk analysis and accounting, interest rate risk analysis and debt/equity funding related G & A and other support services; 5(ii). Regarding Manufacturing Support Services, it includes:- a) Oversight of contractual relationships between CSI BV and Contract Manufacturers (CM) 5(iii). As regards General Support Services, it includes:- a. Communicating, interacting, co-ordinating and liaison with CMS. a. b. Evaluating and auditing the logistics of CM, b. Conducting on-site inventory audits and on-site supplier audits; c. Evaluating and auditing fulfilments of orders, d. Monitoring product test plans including test development for new products, sequencing of orders and expedition of urgent orders, e. Evaluating and auditing component related, test script and quality issues, f. Training CM's regarding new products and assessing the operations, quality of services provided by them 5(iv). As regards Global Manufacturing Operations, Learned Sr. Counsel further submitted t....
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....arketing services which includes branding and advertising activities, targeted campaigns to specific groups like enterprises, service providers, customers etc. 6. The Learned Sr. Counsel further drew our attention to the definition 'intermediary service' under Rule 2(f) of POPS Rules, 2012 where it is specifically stated that intermediary means a broker, an agent or any other person by whatever name called, who arranges or facilitate a provision of a service herein after called the main service or supply of goods between two or more persons but does not include a person who provide the main service or supplies the goods on his account. Further, it is settled that said provision is in pari materia with Section 2(13) of GST Act, 2017. The scope and requirement of intermediary service is also clarified by the Board vide Circular No. 159/15/2021-GST dated 20.09.2021 stating that minimum of three parties of distinct supplies, character of an agent or broker or any other similar person, exclude for persons supplying goods or services or both on account. Thus, the concept of intermediary can be alleged only if there are three parties, viz. the supplier of principle service, recipient o....
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....ariably 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 is 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) Commission agent for a service [an agent for buying or selling of goods is excluded] iv) Recovery Agent Even in other cases, wherever a provider of any service acts as an intermediary for another person, as identified by the guiding principles outlined above, this rule will apply. Normally, it is expected that the intermediary or agent would have documentary evidence authorizing him to act on behalf of the provider of the 'main service'. 2. Scope of Intermediary services 2.1 Scope of Intermediary services 'Intermediary' has been defined in the sub-section ....
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.... case of provision of intermediary services; (1) Main supply, between the two principals, which can be a supply of goods or services or securities; (2) Ancillary supply, which is the service of facilitating or arranging the main supply between the two principals. This ancillary supply is supply of intermediary service and is clearly identifiable and distinguished from the main supply. A person involved in supply of main supply on principal to principal basis to another person cannot be considered as supplier of intermediary service. 3.3 Intermediary service provider to have the character of an agent, broker or any other similar person: The definition of "intermediary" itself provides that intermediary service provider means a broker, an agent or any other person, by whatever name called....". This part of the definition is not inclusive but uses the expression "means" and does not expand the definition by any known expression of expansion such as "and includes". The use of the expression "arranges or facilitates" in the definition of "intermediary" suggests a subsidiary role for the intermediary. It must arrange or facilitate some other supply, w....
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....ntermediary services is outside India. 8. The Learned Sr. Counsel also drew our attention to the decision of this Tribunal in the matter of Commissioner of General Tax, CC Vs. Informatica Business Solutions Pvt Ltd (2025 (26) Centax 167 (Tri-Bang.)) where it is held that:- "10. We find that recently Board has issued a circular bearing No.159/15/2021-GST dated 20.09.2021 clarifying who should be considered as an 'intermediary' in the context of GST, which is borrowed from the definition of Rule 2(f) of the POPS Rules, 2012. The said circular has been noted in various judgments of this Tribunal and which are referred in the case of Commissioner of CG&ST &CE, Delhi South Vs. Grant Thornton Advisory Pvt. Ltd. [2024(10) TMI 147 - CESTAT NEW DELHI]. The relevant portion of the order reads as follows:- 15. The relevant clauses of the Cost Reimbursement Agreement do not indicate that Grant Thornton, India was to act as an 'intermediary'. The activities undertaken by Grant Thornton, India are for promoting the brand name of Grant Thornton in India. Grant Thornton in India had to provides services on its own account and merely because Grant Thornton, India outsourced cer....
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....ection 2(13) of the Integrated Goods and Service Tax Act, 2017 is pari-materia with the definition of 'intermediary services' in rule 2 (f) of the 2012 Rules. The meaning of 'intermediary services' has been considered by the Punjab and Haryana High Court in Genpact India Pvt. Ltd. vs. Union of India [2023 (68) GSTL 3 (P&H)]. The issue that arose for consideration before the High Court was whether the services rendered by the petitioner under the agreement could be treated as 'intermediary services' under the provisions of the IGST Act". 9. The Learned Sr. Counsel also drew our attention to the decision of this Tribunal in the matter of M/s Salesforce.com India Pvt Ltd vs Commr. of Central Tax, Bangalore [Final Order No. 21721-21722/2024 dated 07.10.2024] wherein it is held that:- "21. We have gone through the service agreement entered by M/s. Sales force.com, Singapore Pte Ltd. (SFDC, Singapore) with the Appellant, where it is specifically stated that the SFDC, Singapore and Appellant desire to enter into an arrangement whereby Appellant will within its designated territory as defined in Exhibit 'A' subject to provide services in support of SFDC, Singapore busin....
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....s been defined in Rule 2(f) of Place of Provision Rules, 2012 as under: "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". Thus, to be an intermediary, the following criteria's are to be fulfilled: (a) intermediary should be a broker or an agent or similar person by whatever name called. AND (b) such person is undertaking either of the two functions: (i) Arranges a provision of a service (hereinafter called the 'main' service) between two or more persons: (ii) Facilitates a provision of a service (hereinafter called the 'main' service) between two or more persons: 19. At the outset it is important to mention that the phrase 'any other person' in the definition has not to be read in absolute isolation else the existence of the first two words- agents or brokers would have no relevance. By applying the princi....
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....22) 1 Centax 226 ( P&M.) vi. SNQS International Socks Pvt Ltd Commissioner of GST and CE Coimbatore (2024) 16 Centax 412 (Th Mad) affirmed in (2024) 16 Centax 413 (SC) vii. Boks Business Services Pvt Ltd. v. Commissioner of CGST Delhi South and Anr. (2023) 10 Centax 44 (Det) viii. M/s Ernst and Young Limited vs. Additional Commissioner, CGST, Appeals-B. Delhi and Ant. (2023) 4 Centax 440 (Del.). ix. M/s Columbia Sportswear India Sourcing Pvt Ltd Vs Union of India, 2025-VIL-512-KAR x. M/s. Athene Technologies India LLP vs State of Karnataka 2025-VIL 531 KAR 13. The Learned Senior Counsel further submitted that the demand is also confirmed by invoking extended period of limitation and there is no justification to invoke the extended period of limitation. The learned Senior Counsel submitted that close to 60% of the demand raised in the impugned SCN has been dropped by the impugned order after detailed analysis of the facts and documents already available with the Department (demand in respect of Research and Development Services). On this ground alone, it is evident that the Appellant has never suppressed information from the Department....
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....se 3.6 of the customer orders, it is specifically stated that all customer orders shall be placed on service recipient. Service provider will forward any orders received from customers to service recipient for further handling by service recipient. Service recipient shall accept or reject such orders in its sole discretion and shall inform customers directly of its decision. Further as regarding status, an independent contractor, clause 7.1 specify that independent contractor, service recipient is engaging service provider to perform service on behalf of service recipient as an independent contractor. Nothing in the agreement shall be construed to: i) Give either party the power to direct and control the day to day activities of the other party. ii) Construed the parties as Partners, Joint Ventures, Principle and Agent, Employer and Employees, Co-owners or participant in a joint undertaking. 15. Further submitted that the activities performed by the appellant viz. the act of identifying the potential customers in India, promoting the products of the principal to the potential customers, addressing the queries of the potential customers with regard to the Princi....
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....e principal must know the exact value at which the service is supplied for obtained) on his behalf, and any discounts that the intermediary obtains must be passed back to the principal. It is seen that in the present case, the goods and services (called products) belonging to the service recipient are being directly supplied by the service recipient to the customers in India. The service recipient abroad directly enters into contract with the customers. The appellant is only facilitating the supply between the service receiver and customers in India. Further, they are receiving the consideration on cost plus 10% basis. They are under obligation to place all customers orders on service receiver for further handling by service recipient. Further service recipient accepts or rejects such orders in its sole discretion and inform the customers directly of its decision and collect the value for supply directly. Therefore, this condition is fulfilled. 17. As regarding the submission related to separation of value, the Learned Special Counsel for the Revenue submitted that the value of an intermediary's service is invariably identifiable from the main supply of service that he is ar....
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....ies. The Agreement has to be read as a whole. The nature of activities involving analysis of information system, design of system, selection of hardware and software, implementation of system and maintenance of computer systems, internal support, designing of network infrastructure, network management and administration that these services are, by and large, provided to the customers of the service recipients. Though the appellant has contended that these services are provided directly to CSI, BV, Netherlands, there is no documents produced in support of the above contention. From the agreements relied by the appellant, it is clear from the scope of services as mentioned above that selection of hardware and software, implementation of computer systems, assistance in designing and management are considered to be rendered to the customers in India. The appellant is providing legal and tax services to the customers in India in connection with the sale of products (Goods and Services) of the service recipient. The appellant has issued invoices under the service category "Business Auxiliary Service" and have given the description of service as "Marketing, Sales, General & Administrative....
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.... of customers along with suitable modifications/customizations were being suggested by the appellant to the service recipients as per the feedback received from the customers in India. They were also demonstrating the equipment and programmes to the potential customers and replying to the enquiries and request by customers for information relating to products. 19. The Learned Special Counsel further drew our attention to the various conditions including Article 4, 7 of the agreement and submitted that from the above said conditions, it is evident that the Appellant have been engaged to provide various manufacturing related services in connection with the manufacturing activities of the contract manufactures in India by assisting them with development operation plans, delivery performance, evaluate quality and reliable performance. Thus, the Appellant is facilitating the overseas entity service recipient. All these activities also clearly show that the appellant was facilitating supply of goods and services (products) of the service recipient to the customers. These activities clearly amount to rendering of intermediary services and accordingly, the Place of Provision of Service ....
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....in their own right though for the benefit of the beneficiaries". 21. The Learned Special Counsel for the Revenue also drew our attention to the judgment of Hon'ble Supreme Court in the matter of The State Vs. Gangamma & others (AIR 1965 KANT 235) - High Court of Karnataka where it is held that: - "(13) Thus the words, 'on behalf of connote an agency; when one person acts on behalf of the other the former acts as a agent of the latter. No doubt ordinarily, an agency, that is, the relationship of principal and agent, is the result of a contract express or implied; but an agency may also be created by a statute". 22. As regards invocation of extended period of limitation, he reiterated the finding in the impugned order and submits that Appellant failed to correctly disclose the nature of services provided, classifying them as exports under ITSS, BAS, or BSS, instead of intermediary services, thereby not paying the applicable Service Tax. The argument that all information was available with the Department through ST-3 returns or audits is not a valid defence when the information provided in such returns or during audits was itself a misclassification or misrepresenta....
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....es the main service or supplies the goods on his account. The Commissioner in the impugned order examines three of the agreements entered into by the appellant Technical Assistant Services, International Service Agreement and Marketing and Sales Support Services. As per the International Service agreement dated 27.07.2009 And as observed by the Commissioner in the impugned order, the service provider is M/s. Cisco India (the appellant) and the obligations of the service provider is to get all customer orders and place before the service recipient (M/s. Cisco California). Further the service recipient engages the service provider to perform services on behalf of service recipient as an independent contractor and service provider shall not conclude or sign any contract involving the sale or lease of any products on its own behalf or on behalf of service recipient. It is also to be noted that the appellant is paid in accordance with the cost incurred at actuals plus a markup of 10%. The Commissioner in the impugned order at para 119 observes that 'I find that the manner of receipt of consideration and cost-plus basis and not Commission is irrelevant, as it is seen clearly in ....
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....plies such goods or services or both or securities on his own account." 2.2 The concept of 'intermediary' was borrowed in GST from the Service Tax Regime. The definition of 'intermediary' in the Service Tax law as given in Rule 2(f) of Place of Provision of Services Rules, 2012 issued vide notification No. 28/2012-ST, dated 20-6-2012 was as follows: "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 Circular No. 159/15/2021-GST 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-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 ....
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.... supplies such goods or services or both or securities on his own account". Use of word "such" in the definition with reference to supply of goods or services refers to the main supply of goods or services or both, or securities, between two or more persons, which are arranged or facilitated by the intermediary. It implies that in cases wherein the person supplies the main supply, 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 subcontractors. 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' subcontracts a part....
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...., located outside India, requires to process insurance claims of its clients in respect of the insurance service being provided by 'P' to the clients. For processing insurance claims, 'P' decides to outsource this work to some other firm. For this purpose, he approaches 'Q', located in India, for arranging insurance claims 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....
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.... words, in the absence of any agency relationship between the petitioner and the foreign affiliates or the Amazon consumer entities, the very first / basic / pre-requisite/ pre-condition for the petitioner to be constituted or treated or construed as an "intermediary" and for being an agent acting on behalf of the foreign affiliates would neither be fulfilled nor satisfied and the customer support services provided by the petitioner clearly do not constitute intermediary services and consequently, the said contention of the respondents - revenue cannot be accepted'. 26. Further with regard to all the agreements referred above and the activities carried out by the Appellant, we find that the issues were considered by the Hon'ble High Court of Karnataka in the matter of Amazon Development Centre India Pvt Ltd (Supra) wherein it is held that: the meaning of term facilitation/arrangement cannot be extended to cover agreements where main services are rendered by the service provider on its own account as an intermediatory arranges of facilitate main supply between two or more other person and does not himself provide the main supply. The last limb of definition of term intermediatory....