2019 (5) TMI 1351 - AT - Service Tax

Refund of unutilized CENVAT Credit - intermediary service or not - export of services - sole allegation of the Revenue is that the respondent provided intermediary service, therefore the benefit of export services is not available to them - HELD THAT - The activity of computer networking is networking service which is an application running at the network application layer and above, that provides data storage, manipulation, presentation, communication or other capability which is often implemented using a client-server or peer-to-architecture based on application layer network protocols. There is no arrangement or facilitation of the main service between two parties by a third person under the category of computer networking services. The activity of the appellant is routine back office process out sourcings activities and are completely based on instructions/guidelines provided by ENSIL/AEs in this regard. The Revenue has not produced any evidence as to why providing of back office process outsourcing should be treated as intermediary - the respondent is not providing any intermediary service, therefore, no service tax is payable by the respondent. Appeal dismissed - decided against Revenue.

Issues Involved:
1. Entitlement to refund of unutilized Cenvat credit.
2. Classification of services provided by the respondent as "intermediary services."
3. Compliance with the conditions of Rule 6A of Service Tax Rules, 1994.
4. Determination of place of provision of service.
5. Examination of the nature of services provided by the respondent.

Issue-wise Detailed Analysis:

1. Entitlement to Refund of Unutilized Cenvat Credit:
The respondent filed refund claims for unutilized Cenvat credit availed on input services used in providing taxable services of "Business Auxiliary Service" exported to clients outside India. The Assistant Commissioner of Service Tax, Gurgaon, sanctioned these refund claims, which were upheld by the Commissioner (Appeals). The Revenue appealed against this decision, arguing that the services provided by the respondent should be classified as "intermediary services," making them ineligible for the refund.

2. Classification of Services Provided by the Respondent as "Intermediary Services":
The Revenue contended that the respondent provided intermediary services as defined under sub-Rule 2(f) of the Place of Provision of Service Rules, 2012. The respondent, OBSISPL, provided services to other Orange Group companies on the direction of ENSIL but had no direct contract with the customers of Orange Group entities. The Revenue argued that this arrangement made the services intermediary in nature. The respondent countered this by providing agreements and explaining that their services were akin to those provided by a call center or Business Process Outsourcing (BPO) unit, not intermediary services.

3. Compliance with the Conditions of Rule 6A of Service Tax Rules, 1994:
The Revenue argued that since the services provided were intermediary services, the place of provision of service would be India, as per Rule 9(c) of the Place of Provision of Service Rules, 2012. Consequently, the respondent did not fulfill condition (d) of Rule 6A of Service Tax Rules, 1994, which requires the place of provision of service to be outside India for the export of services. Therefore, the respondent was not entitled to a refund of unutilized Cenvat credit.

4. Determination of Place of Provision of Service:
The Tribunal examined the agreements and the nature of services provided by the respondent. It was found that the respondent provided remote IT-enabled network management and other related back-office support services from India. The services were provided in accordance with a service agreement with ENSIL, and the consideration for such services was paid by ENSIL. The Tribunal concluded that the respondent's services did not involve arranging or facilitating the main service between two parties, which is a key characteristic of intermediary services.

5. Examination of the Nature of Services Provided by the Respondent:
The Tribunal referred to the CBEC Guidance Note dated 20.6.2012, which clarified the meaning of intermediary services. An intermediary arranges or facilitates a provision of a main service between two or more persons without material alteration or further processing. The Tribunal found that the respondent's activities involved routine back-office process outsourcing based on instructions from ENSIL/AEs and did not meet the criteria for intermediary services. The Tribunal held that the respondent was not providing intermediary services and was therefore entitled to a refund of unutilized Cenvat credit.

Conclusion:
The Tribunal upheld the Commissioner (Appeals) decision, finding no infirmity in the impugned order. The appeal filed by the Revenue was dismissed, and the respondent was entitled to consequential relief as per the impugned order. The Tribunal reiterated that the respondent's services were not intermediary services and thus did not attract service tax. The cross objections were disposed of accordingly.

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