2022 (3) TMI 1258 - AT - Service Tax

Refund of unutilised CENVAT credit paid - input services used for providing the output services exported during the impugned period - whether the authorities below are justified in treating the appellant as an intermediary and consequently justified in rejecting the refund claim of the appellant? - Rule 5 of the CENVAT Credit Rules 2004 read with Notification No.27/2012-CE (NT) dt. 18/06/2012 - HELD THAT - It is quite clear from the very definition itself, that there should be at least two or more persons, excluding broker agent or any other person by whatever name called. The agreement which is referred to by the lower authorities whereby the appellant was obliged to provide Management and Technical Services to the company, is clearly between the appellant and the company alone with no third person anywhere figuring in it. It is the basic document which binds both the appellant as well as the company which also defines scope of services and hence, the necessary implication is that the Management and Technical Services which are provided by the appellant are only to the company which is located outside India. There is no allegation that the appellant was involved in any way, either in purchase or sale of goods or even in the collection of sale proceeds from the customers of the company. By this alone, it can be safely concluded that the appellant is not acting as an agent or a middleman for anyone, and hence, is not covered by the mischief of the definition of intermediary and consequently, Rule 9 of POP. Hence, the same cannot be held that there is no export of services under Rule 6A ibid. The authorities below have grossly misconstrued the relevant provisions to deny the valid refund claims of the appellant and hence, the order of Commissioner (Appeals) cannot sustain and hence, the same is set aside. Learned Chandigarh Bench of CESTAT in MACQUARIE GLOBAL SERVICES PVT LTD VERSUS COMMISSIONER OF CE ST, GURGAON-I 2021 (12) TMI 481 - CESTAT CHANDIGARH has analysed the scope of intermediary service and it was held that In the present case, the appellants are providing services to their parent company at Japan and they did not involve in any manner in the activity of negotiation for sale and purchase of goods in India or collection of sale proceeds from customers on behalf of the parent company, hence cannot be called as an intermediary and, accordingly, do not fall under Rule 9(c) of the Place of Provisions of Service Rules, 2012. The appeals are allowed.

Summary

Issues:
1. Rejection of refund claim under Rule 5 of the Cenvat Credit Rules, 2004.
2. Determination of whether the appellant is an "intermediary" and the consequent rejection of the refund claim.
3. Interpretation of the relevant provisions to assess the validity of the refund claims.

Analysis:
1. The appeals revolve around the rejection of refund claims under Rule 5 of the Cenvat Credit Rules, 2004, concerning unutilized CENVAT credit on input services used for exported output services. The appellant, engaged in Business Auxiliary Service (BAS) and exporting management consultancy services, sought refunds following a show-cause notice leading to the rejection of claims based on service provision locations and agreements.

2. The key issue is whether the appellant qualifies as an "intermediary" under Rule 9 of the Place of Provision of Service Rules, 2012, impacting the refund eligibility. The appellant's service agreement with a Singapore-based company raised concerns regarding service provision locations and definitions of intermediary services, leading to the rejection of refund claims by lower authorities.

3. The judgment analyzed the definitions of "intermediary" pre and post-amendment to ascertain the appellant's role in facilitating services between parties. The agreement between the appellant and the Singapore company was crucial in determining the service provision scope and locations, emphasizing the absence of a third party involvement to classify the appellant as an intermediary, thus affecting the export of services under Rule 6A.

4. The judgment highlighted the misinterpretation by lower authorities in deeming the appellant as an intermediary, citing the absence of multiple parties involvement and the service nature provided solely to the Singapore company. Reference to a previous CESTAT decision and circular further clarified the criteria for intermediary services, emphasizing the necessity of multiple parties' involvement for such classification.

5. Ultimately, the judgment allowed the appeals, overturning the previous decisions, and emphasized the correct interpretation of relevant provisions to validate the appellant's refund claims. The ruling provided consequential benefits as per the law, emphasizing the importance of accurately assessing the intermediary status and service provision locations in determining refund eligibility.

This detailed analysis of the judgment comprehensively covers the issues involved and the court's reasoning behind the decision, ensuring a thorough understanding of the legal complexities addressed in the case.