TaxTMI 
TaxTMI 
2026 (8) TMI 1139
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....nd for compliance with service tax statute, they are registered with the jurisdictional Commissionerate under service tax centralized registration No. AAACT4652JST001. 2.2 During the course of EA-2000 Audit conducted by the department on books of accounts maintained by the appellants, it was found that under the head of 'Commission & Brokerage and Miscellaneous income', the appellants have received certain income during the Financial Years 20122013 to 2015-2016 from their Head office M/s DBS Singapore, and for which no service tax was paid by them. In this regard, upon scrutiny of agreement dated 28.05.2015 entered into by the appellants with their head office, the audit officers have found that the appellants provide various services such as origination/referral; structuring, co-ordination; credit assessment and approval; disbursement, monitoring and credit facility management etc., for which they had received certain amount as remuneration. The department had interpreted that such services have been rendered by the appellants as an 'intermediary' between DBS Bank Singapore and their 'Indian Borrowers' and these services having been performed in the capacity of 'intermediary' w....
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....ement also provided for a method of revenue to be received by the appellants based on the efforts involved in various activities performed by them. The consideration for the services rendered by them was received by them from DBS Singapore in foreign exchange against periodical debit notes raised. For the period 01.04.2014 onwards, a separate Agreement dated 28.05.2015 was executed with DBS Singapore, which was similar to the earlier Agreement that was applicable for the period from 01.04.2012. The remuneration payable to the appellants was bifurcated to the key functions performed by them, as provided in detail in the Annexure-I to the said agreement. For the period upto 31.03.2013, the appellants on a conservative basis were discharging Service tax on the entire consideration received by them from DBS Singapore. However, with effect from 01.04.2013, the appellants, based on review of its tax position, considered the services provided by DBS Singapore as export and discontinued paying service tax on the same. 4.2 He further explained about the details of work undertaken by the appellants and the remuneration received from their foreign entity DBS Singapore, as follows. The vari....
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....eraction with Indian Borrowers desiring to obtain lending services from DBS Singapore. However, actual grant of loan and terms of granting such loan are decided by DBS Singapore alone. The appellants have no power or authority to offer or agree to the terms of lending service to be provided by DBS Singapore to Indian Borrowers, without prior approval of DBS Singapore. Therefore, he submitted that the appellants do not qualify as 'intermediary' and hence there is liability to pay service tax. 4.5 In support of their stand, learned Counsel had relied upon the following decisions of the Tribunal: (i) SNQS International Socks Pvt. Ltd. vs. Commissioner of GST & Central Excise, Coimbatore [(2024) 16 Centax 412 (T)] dated 23.11.2023 read with [(2024) 16 Centax 413 (S.C.)] dated 19.03.2024. (ii) Chevron Philips Chemicals India Pvt. Ltd. vs. Commissioner of Central Tax and Central Excise [(2024) 15 Centax 102 (T)] dated 20.12.2022 read with [(2024) 15 Centax 103 (S.C.)] dated 29.01.2024. 5. On the other hand, the learned AR appearing for the Revenue reiterated the findings recorded in the impugned order. 6. Heard both sides and carefully examined the case rec....
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....termination of place of provision of service.- (1) The Central Government may, having regard to the nature and description of various services, by rules made in this regard, determine the place where such services are provided or deemed to have been provided or agreed to be provided or deemed to have been agreed to be provided. (2) Any rule made under sub-section (1) shall not be invalid merely on the ground that either the service provider or the service receiver or both are located at a place being outside the taxable territory." 8.2 The following are the legal provisions of the Rules framed under the Finance Act, 1994, relevant for the present case and the specific provisions of these Rules are extracted and given below: "Place of Provision of Services Rules, 2012 (Notification No. 28/2012 - Service Tax dated 20.06.2012 as amended) 2. Definitions - In these rules, unless the context otherwise requires,- (a) "Act" means the Finance Act, 1994 (32 of 1994); (f) "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' ....
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....., are necessary for performance of main activity of providing ECB loans by DBS Singapore to Indian customers and therefore, he held that such activities provided by appellants DBS Bank India Limited, to their head office i.e., DBS Singapore amounts to activity carried out by 'one person' in India to 'other person' in Singapore, and therefore would fall under the scope of 'services'. Further, he had also noted in the impugned order that without the activities provided by the appellants, the fruition of main service by DBS Singapore cannot happen, and therefore he concluded that these services would be rightly covered by the category of intermediary service provider. On the above basis, he held the appellants are liable for payment of service tax. 8.4 It is fact on record that the appellants were initially registered in India under the Banking Regulations Act, 1949, as 'Foreign Branch' of DBS Bank headquartered in Singapore (DBS Singapore). Subsequently, the appellants were established as 'DBS Bank India Limited' with transfer of business from Branch Office to itself. The back ground to this is that the Reserve Bank of India (RBI) in the context of global financial crisis of 2008....
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....ffice in respect of the origination of credit facilities booked in Head Office under the extant RBI and MAS guidelines for booking of these assets in Head Office. 3. Services provided by Branch Office: 3.1 The Branch Office will originate credit facilities and mange relationships with Indian companies and any of their subsidiaries whether the subsidiaries are incorporated in India or abroad ("Indian Borrowers") as well as perform credit analysis of the Indian Borrowers. 3.2 Branch office shall perform the following functions: a) In co-operation with the relevant business units and General Management of the DBS Group in Singapore, define a business development plan for respective business units in India; b) Cultivate and create potential client relationships; c) Perform/Evaluate credit analysis for the new relationships; d) Recommend the credit risk to Head Office; e) Negotiate the contractual terms with the Indian Borrower; f) Check the draft facility agreements; g) Resolve any outstanding legal issues (if any); h) Check for collateral offered; i) Generally, manage the relati....
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....t rate risk and foreign currency risk. Further, it was only the DBS Singapore who were authorised to enter into credit agreement with Indian borrowers and not the appellants in India. Therefore, the decision with regard to ECB borrowing were finally decided by DBS Singapore only and by the appellants. 9.3 In this regard, we find that compensation for various activities undertaken by the appellants office in India is provided as an arrangement to compute the revenue split pertaining to loans booked at Head Office. These have been worked out by them on the basis of a formula taking into consideration (i) expected loss i.e., the cost of doing business of granting credit in the event of default (ii) cost of capital being the rate of return which providers of capital require to be compensated and (iii) benefit of capital i.e., the benefit enjoyed by a reduced cost of fund as capital is presumed to be redeployed to fund part of underlying asset. The compensation in the form of remuneration to branch office was accordingly calculated as per above formula and accrued quarterly being payable by Head Office DBS Singapore to the appellants. Thus, the activitie....
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....ty as liable for covering under the scope of 'intermediary services'. The relevant paragraphs dealing with 'intermediary services' are extracted and given below as follows: "CIRCULAR NO. 159/15/2021-GST [F.NO. CBIC-20001/8/2021-GST], DATED 20-9-2021 Representations have been received citing ambiguity caused in interpretation of the scope of "Intermediary services" in the GST Law. The matter has been examined. In view of the difficulties being faced by the trade and industry and to ensure uniformity in the implementation of the provisions of the law across field formations, the Board, in exercise of its powers conferred by section 168 (1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as "CGST Act"), hereby clarifies the issues in succeeding paragraphs. 2. Scope of Intermediary services 2.1 'Intermediary' has been defined in the sub-section (13) of section 2 of the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as "IGST" Act) as under- "Intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both,....
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....tween 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, which is the main supply, and does not himself provides the main supply. Thus, the role of intermediary is only supportive. 3.4 Does not include a person who supplies such goods or services or both or securities on his own account: The definition o....
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.... the overseas entity M/s CPC Global and the appellant. Clauses in the agreement provide that the appellant shall not be empowered to make any pricing decisions, to sign any contracts, or to make any commitments on behalf of the overseas entity; that the consideration received by the appellant from M/s CPC Global as a service provider, is not directly linked with the sale of products by the selling companies in India, but determined based on fees earned by M/s CPC Global; that the relationship between the parties as per the contract is that of the independent contractor-contractee and not that as agents. The content in the agreement clearly provide that no services were provided by the appellant to the selling companies or end customers on behalf of the overseas entity M/s CPC Global. Thus, under such circumstances, it cannot be said that the appellant has acted as an intermediary in the dealings between the 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 a....
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....ry between the overseas entity and the Indian customers. It is an admitted fact on record that the consideration received by the appellant for providing the services was based upon cost plus markup and is nowhere connected with the main supply of goods. In other words, the main supply may or may not happen and thus, cannot be directly correlated with the service provided by the appellant. Thus, the appellant is not acting as a bridge between the overseas group entities and supplies made to their customers in India and 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." Also, in the case of R.S. Granite Machine (supra), this Tribunal has held as under: - 5. The facts of the case as analysed elsewhere in this order, make it clear that obtaining/procuring order for its foreign Principals is the 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 liabili....