2019 (2) TMI 579 - AT - Service Tax

Refund of service tax - intermediary services or not - Service Tax paid on various input services used in providing taxable output service - Rule 5 of the CENVAT Credit Rules, 2004 read with Notification No. 27/2012-CE(NT) dated 18.6.2012 - export of service or not within Rule 6A of the Service Tax Rules, 1994 - Held that - As per the Internal Services Level Agreement between the appellant and their client, precisely, the service provider is required to render services, namely, development of various softwares and maintenance of such software supplied to the foreign client. There is no allegation of the Department that any data stored outside India have been retrieved or used by the appellant so as to qualify or fall under the category of Online Information and Database Access or Retrieval Service prescribed under Rule 9(b) of the Place of Provision of Service Rules, 2012. The intermediary is a broker or an agent who arranges or facilities the provision of service between two or more persons, but does not include the person who provides the main service on his account - In the present case, the appellant has directly provided services to the foreign clients and not acted as an intermediate in the provision of development of software and maintenance service - the findings and conclusion of the learned Commissioner (Appeals) that the appellant is an intermediary is without any basis and therefore, not sustainable in law. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the services rendered qualify as an export service for refund of CENVAT Credit?

Analysis:
The appeal was against an Order-in-Appeal passed by the Principal Additional Director General concerning refund claims of Service Tax paid on input services used in providing taxable output services. The appellant, engaged in Business Support and Market Research Agency services, filed refund claims for services exported from April to Sept, 2015. The adjudicating authority sanctioned a partial refund, leading to an appeal by the Revenue. The main issue revolved around whether the services provided by the appellant qualified as export services for refund purposes.

The appellant argued that the services provided were in the nature of export of service, complying with relevant conditions. The Revenue contended that the services fell under IT Enabled Services, not qualifying as export services. The Commissioner (Appeals) held that the appellant was an intermediary, making the services non-exportable. The appellant disagreed, stating they were not providing Online Information and Database Access Retrieval services, nor acting as an intermediary. They argued that the services satisfied Rule 3 of the Place of Provisions of Service Rules, with reference to a relevant Tribunal judgment.

The Revenue maintained that since the software was developed in India and transferred online to a foreign entity, the place of provision of service was in India, thus not constituting an export of service. They cited a Supreme Court judgment to support their position. The Tribunal analyzed the nature of services provided by the appellant, emphasizing that they directly provided services to foreign clients without acting as an intermediary. The Tribunal concluded that the services fell under Rule 3 of the Place of Provision of Service Rules, allowing the refund claim.

The Tribunal deemed the reference to the Supreme Court judgment by the Revenue as misplaced, as it did not apply to the current scenario. Consequently, the impugned order was set aside, and the order passed by the adjudicating authority was restored. The appeal was allowed with any consequential relief as per law.