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2019 (8) TMI 384 - AT - Service TaxClassification of services - intermediary services or not - export of services - Refund claim - scope of the Service Agreement - Business Support services - rendering Business Services including sales support, marketing, advertising, billing, etc. - services on principal to principal basis, or as an intermediary ? - rejection of refund claim on export of service, as it appeared to Revenue that the appellant is providing the services to their principal located outside India as an intermediary - POPOS Rules - Rule 5 of the Cenvat Credit Rules 2004 read with Notification No.27/2012-CE (NT). Period April, 2012 to June, 2012 - HELD THAT - The same is for the Positive List Regime (prior to 30.06.2012) - demand do not sustain - decided in favor of appellant. Location of service provider/appellant - Rule 9 of POPS - case of Revenue is that the location of service provider/appellant is in India and further in terms of Rule 9 of POPS, the service provided, being intermediary services, the location of the service provider under Rule 9 of POPS, shall be the place of provision of services, provided to Verizon US - HELD THAT - The said stand of Revenue is wholly mis-construed and erroneous. Firstly, no demand notice was issued on the appellant refusing or questioning the status of the export of service to Verizon US, as declared in their ST-3 Returns -. Further, admitted facts are that the appellants have provided output services and raised invoices on principal to principal basis. The appellant has not been acting as intermediary between another service provider and Verizon US. This fact is also supported from the fact that the appellant has raised their bills for the services provided on the basis of cost plus 11% mark-up. As the services have been provided by the appellant under contract with Verizon US, who are located outside India and have raised their invoices, for such services and have received the remittance in convertible foreign exchange, the appellant satisfies all the conditions, as specified under Rule 6 A of Service Tax Rules, 1994, inserted w.e.f 1.7.2012. It is evident that the services of the appellant to Verizon US do not merit classification under the category of intermediary services - the appellants have rendered services to Verizon US as principal service provider and not as an intermediary. The appellants are entitled to refund under Rule 5 of the Cenvat Credit Rules, 2004 read with the notification - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Whether the appellants have exported their services. 2. Whether the appellants have provided services on a 'principal to principal' basis or as an 'intermediary' as defined in Rule 2(f) of the Place of Provision of Service Rules, 2012 (POPS Rules) read with Rule 9 of the said Rules. Issue-wise Detailed Analysis: 1. Export of Services: The appellants, registered with Service Tax Authorities, claimed to have exported Business Support Services (BSS) to Verizon US, under Rule 6A of the Service Tax Rules, 1994. The Adjudicating Authority confirmed that the appellants met all six conditions for export of services: - The service provider was located in the taxable territory (India). - The service recipient was located outside India. - The services were not covered under the negative list. - The place of provision of services was outside India. - Payment for services was received in convertible foreign exchange. - The service provider and recipient were separate legal entities. The Adjudicating Authority verified the nature of services, agreements, invoices, and foreign exchange receipts, concluding that the services qualified as exports and granted the refund claim. 2. Principal to Principal vs. Intermediary Services: The Revenue argued that the appellant acted as an 'intermediary' under Rule 2(f) of POPS Rules, which would mean the place of provision of services is in India, making the services taxable domestically and ineligible for export benefits. The Reviewing Authority and Commissioner (Appeals) supported this view, stating that the appellant facilitated services between Verizon US and its customers, thus acting as an intermediary. However, the Tribunal found that the services were provided on a principal-to-principal basis. The agreement and transactions indicated that the appellant directly provided services to Verizon US, raising invoices and receiving payments in convertible foreign exchange. The Tribunal emphasized that there was no tripartite agreement involving the appellant as a facilitator between Verizon US and its customers. The Tribunal also referenced a Delhi High Court ruling in the appellant’s favor, which held that the recipient of the service was Verizon US, and the services qualified as export. Conclusion: The Tribunal concluded that the appellant provided services to Verizon US on a principal-to-principal basis and not as an intermediary. Thus, the services qualified as export, and the appellant was entitled to a refund under Rule 5 of the Cenvat Credit Rules, 2004. All appeals were allowed with consequential benefits, and the impugned orders were set aside.
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