2022 (12) TMI 660 - AT - Service Tax

Place of supply - intermediary service - Refund of Cenvat Credit - export of services - Rejection of refund claim on the ground that appellant had acted as an intermediary between the service provider and the service recipient - rule 9 of the Place of Provision of Services Rule 2012 - HELD THAT - The Commissioner (Appeals) observed that since the appellant had arranged for a provision of service between Blackberry Singapore and its customers without making any alteration it would be acting as an intermediary under rule 9(c) of the 2012 Rules and, therefore, the place of provision of service shall be the location of the service provider i.e. in India. According to the appellant, the place of provision of services shall be the location of the recipient of the service as provided under rule 3 of the 2012 Rules In the present case, what transpires from the Agreement is that the appellant, which is a service provider in India, performs various promotion and marketing services more particularly set out in Schedule A of the Agreement or as requested by Blackberry Singapore from time to time. The terms of the Agreement also per se do not create any relationship of principal and agent or employer and employee. An agent is a person employed to do any act for another or to represent another in dealing with third persons. The persons for whom such act is done, or who is so represented, is the principal. A broker is a middleman or an agent who, for a commission on the value of the transaction, negotiates for others the purchase or sale of stocks, bonds, commodities, or a property. These two situations do not arise in the present case. An intermediary is a person who arranges or facilitates provision of the main service between two or more persons. The appellant is not involved in the arrangement or facilitation of the supply of service. The service provided by the appellant qualify for export since it is providing services to Blackberry Singapore, which is outside India and is receiving convertible foreign exchange for such services. The refund claimed by the appellant under rule 5 of the Credit Rules could not have been rejected by the Commissioner (Appeals). Decided in favor of assessee.

Summary

Issues Involved:
1. Whether the services provided by the appellant prior to 01.07.2012 can be termed as export of services.
2. Whether the appellant provided intermediary services post 01.07.2012.
3. Whether the refund claims filed by the appellant under rule 5 of the CENVAT Credit Rules 2004 were rightly rejected.

Detailed Analysis:

1. Whether the services provided by the appellant prior to 01.07.2012 can be termed as export of services:

The adjudicating authority observed that Business Auxiliary Service (BAS) is excluded from the ambit of service under rule 3(1) of the 2005 Export Rules. However, it was found that BAS, taxable under section 65(105)(zzb) of the Finance Act, is not excluded. Rule 3(1) of the 2005 Export Rules treats all services under section 65(105) of the Finance Act as export of service, except those expressly excluded. Therefore, the appellant is entitled to refund for the period prior to 01.07.2012.

2. Whether the appellant provided intermediary services post 01.07.2012:

The concept of "intermediary" was introduced in the 2012 Rules and defined in rule 2(f) as a broker, agent, or any person who arranges or facilitates a provision of a service or supply of goods between two or more persons but does not include a person who provides the main service or supplies the goods on his account. The Commissioner (Appeals) concluded that the appellant acted as an intermediary, facilitating services between Blackberry Singapore and its customers without material alteration. However, the agreement between the appellant and Blackberry Singapore indicates that the appellant provided marketing, administrative, and support services as an independent contractor, not as an agent or intermediary. The appellant was not involved in facilitating supply between Blackberry Singapore and its customers, and the consideration was on a Cost-Plus basis, independent of sales made by Blackberry Singapore to its customers. Therefore, the appellant did not qualify as an intermediary.

3. Whether the refund claims filed by the appellant under rule 5 of the CENVAT Credit Rules 2004 were rightly rejected:

The refund claims were rejected by the Assistant Commissioner on the ground that the appellant provided intermediary services, making the place of provision of services the location of the service provider (India), thus not fulfilling the condition set out in rule 6A of the Service Tax Rules 1994. The Commissioner (Appeals) upheld this decision. However, the analysis of the agreement and relevant rules indicates that the appellant provided services to Blackberry Singapore, located outside India, and received payment in convertible foreign exchange. Therefore, the services qualify as export of services under rule 6A of the 1994 Rules. The appellant is entitled to the refund claimed under rule 5 of the CENVAT Credit Rules 2004.

Conclusion:

The order dated 18.08.2021 passed by the Commissioner (Appeals) is set aside, and the appeal is allowed, recognizing the services provided by the appellant as export of services and entitling them to the refund claimed.