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2023 (6) TMI 1084 - AT - Service TaxRefund of Service Tax erroneously paid - business auxiliary service or intermediary service - facilitated procurement and supply of goods to M/s. Primark, Dublin, Ireland from various persons - applicability of POPOS rules - export of service or not - assertion of the Revenue is that the appellant had acted as an intermediary between M/s. Primark, Ireland and various suppliers for a certain consideration and as such, liable to pay Service Tax on the consideration received as in the case of intermediary services. HELD THAT - The appellant is providing a comprehensive bouquet of services, like designing and product development, including creating new patterns and graphics that are shared with the vendors and arrangement of pre-production samples to the foreign client for approval, evaluation of vendor facilities in terms of its capabilities to provide the merchandise required, quality monitoring and also providing logistics and operational assistance for export of cargo till it reaches the destination. Consideration / remuneration for the above services is computed as a percentage of the value of merchandise exported to the client by the vendors developed by the appellant, which is received in convertible foreign exchange. There is no agreement entered into by the appellant with any of the vendors, either on their behalf or on behalf of the foreign client. The appropriate classification of these services would be support services of business or commerce rather than business auxiliary service . Business auxiliary services are general in nature as compared to support services of business or commerce. The appellant s services are not limited to being a commission agent / buying agent since their services are not limited to only procurement and dispatch, but includes a wide range of services from the stage of designing to testing and quality monitoring and getting the goods manufactured till the final export is made, including assisting in the transportation and dispatch of the goods. The decision rendered in the case of FIFTH AVENUE VERSUS COMMISSIONER OF SERVICE TAX, CHENNAI 2009 (3) TMI 133 - CESTAT, CHENNAI is applicable wherein the appellant rendering services such as evaluation of prospective customers, processing of purchase orders, customer management, processing of transactions, information and tracking of delivery schedules, operational assistance for marketing, formulation of customer service and pricing policies, managing distribution and logistics, etc., were held to be classifiable under support services of business or commerce and not under business auxiliary service. The ratio in the case of M/S GECAS SERVICES INDIA PVT LTD VERSUS COMMISSIONER OF SERVICE TAX 2014 (7) TMI 410 - CESTAT NEW DELHI , also relevant for taking a decision for classifying the services rendered by the appellant as support services of business or commerce. Whether the appellant can be treated as an intermediary ? - HELD THAT - An intermediary is generally meant to be a person who arranges or facilitates supply of goods or provision of service, or both, between two persons without any material alteration/processing. In this case, the appellant is found to be providing services of design and product development essentially for its foreign client to keep track of updates in fashion trends in knitted goods, evaluation and development of vendors, including quality monitoring and logistics and operational assistance. The appellant has not engaged any other service provider for the process of procuring the specific goods to be exported as per the requirement of his foreign client. All these services are rendered only to M/s. Primark, Dublin, Ireland on his own account and he is receiving the consideration for the services as a percentage of FOB value of the merchandise exported. There is no evidence on record to show that he is receiving any consideration from the vendors developed by him and as such, the services could not be termed as falling under the category of intermediary . The decision in the case of In M/S GODADDY INDIA WEB SERVICES PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX, DELHI-IV 2016 (3) TMI 355 - AUTHORITY FOR ADVANCE RULINGS is relevant to understand the term intermediary in its correct perspective, wherein it was observed that applicant is providing business support service such as marketing and other allied services like oversight of quality of third party customer care centre operated in India and payment processing services, on behalf of GoDaddy US. Therefore, these services provided by the applicant to GoDaddy US cannot be categorized as intermediary or services, as intermediary service. - The above is applicable to decide the issue in this appeal as the facts obtaining in these two cases are similar. Whether the services provided by the appellant could be treated as export of service or not? - HELD THAT - In the present case, there is no dispute that the provider of service is located in the taxable territory and the recipient is located abroad/outside India. The services rendered are not specified in Section 66D of the Finance Act. The payment for the said services has also been received by the appellant in convertible foreign exchange. Therefore, the only condition that is required to be satisfied is whether the place of provision of service is outside India or not. The activities of the appellant will be coming under business support services and also would not be falling under intermediary services, the place of provision of the services applicable to the appellant, is the location of the service recipient, in terms of Rule 3 of the Place of Provision of Services Rules, 2012. Rule 9 is not applicable to the appellant as the services rendered by him in relation to procurement of goods to the foreign client are on his own account. The appellant is not said to be acting as an intermediary i.e., the services were performed by the appellant on a principal-to-principal basis and at arm s length basis - As all the conditions prescribed under Rule 6A of the Service Tax Rules, 1994 are satisfied, the services of the appellant are to be treated as export of services. The impugned order is not sustainable and is accordingly set aside - appeal allowed.
Issues Involved:
1. Classification of services rendered by the appellant. 2. Categorization of services as 'intermediary' and determination of 'export of service'. Summary: 1. Classification of Services Rendered by the Appellant: The appellant, M/s. SNQS International Socks Private Limited, provided various services including design and product development, evaluation of vendor facilities, quality monitoring, and logistics assistance to its foreign client, M/s. Primark, Dublin, Ireland. The appellant contended that these services should be classified under "support services of business or commerce" as per Section 65(104c) of the Finance Act, 1994, rather than "business auxiliary service" under Section 65(19) of the Finance Act, 1994. The Tribunal found that the services provided by the appellant were comprehensive and included a wide range of activities from designing to export logistics, which fit more appropriately under "support services of business or commerce" rather than "business auxiliary service." This classification was supported by precedents such as Fifth Avenue v. Commissioner of Service Tax, Chennai [2009 (15) S.T.R. 387 (Tri. - Chennai)] and GECAS Services India Pvt. Ltd. v. Commr. of Service Tax, New Delhi [2014 (36) S.T.R. 556 (Tri. - Del.)]. 2. Categorization of Services as 'Intermediary' and Determination of 'Export of Service': The appellant argued that their services should not be categorized as 'intermediary' services, which would affect the place of provision of services and the eligibility for export status. The Tribunal analyzed the definition of 'intermediary' under Rule 2(f) of the Place of Provision of Services Rules, 2012, and concluded that the appellant was providing services on their own account to the foreign client and not acting as an intermediary. The Tribunal referred to the Education Guide issued by the C.B.E.C. and the decision in In Re: GoDaddy India Web Services Pvt. Ltd. [2016 (46) S.T.R. 806 (A.A.R.)] to support this conclusion. Consequently, the place of provision of services was determined to be the location of the service recipient (outside India) as per Rule 3 of the Place of Provision of Services Rules, 2012. Since all conditions under Rule 6A of the Service Tax Rules, 1994 were satisfied, the services were treated as export of services, making the appellant eligible for a refund of the erroneously paid Service Tax. Conclusion: The Tribunal set aside the impugned Order-in-Appeal No. CMB-CEX-000-APP-186-16 dated 10.08.2016 and allowed the appeal with consequential relief as per law. The services provided by the appellant were classified under "support services of business or commerce" and were deemed to be export of services, thereby entitling the appellant to a refund of the Service Tax paid.
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