2024 (1) TMI 887 - AT - Service Tax

Classification of services - intermediary services or not - privity of contract - services provided by the appellant in connection with sales and services and collection services - taxability of services provided by the appellant to the personnel of foreign customers on their visit to India. Services provided by the appellant in connection with sales and services and collection services - HELD THAT - From the perusal of the definition of intermediary extracted herein above and the CBIC Circular of 20.09.2021, show that the sub contracting arrangement would not fall within the purview of intermediary. In the instant case, from the perusal of the sub-contracting agreement referred to hereinabove it is seen that the services undertaken by the group entity HGRL, UK have been sub-contracted to the appellants. There is no privity of contract between the appellants and the Business Partners. Service level monitoring takes place in terms of the Performance Level agreement (PLA). Even here, as provided in the PLA, the terms of the subcontracting agreement shall always prevail in case of any conflict. The responsibility and liability is only between the appellant and the group entity - HGRL from whom compensation is received on cost-plus basis in convertible foreign exchange. It is well settled in terms of the decisions cited by the learned Counsel in Genpact 2022 (11) TMI 743 - PUNJAB AND HARYANA HIGH COURT and Singtel 2023 (9) TMI 304 - DELHI HIGH COURT that where the relationship between the parties is on principal to principal basis, such an arrangement cannot come within the purview of intermediary services. In view of the Board Circular and the precedent decisions it is not possible to accept the view expressed by the Commissioner in Para 31 of the First Order and Para 16 of Second Order on the interpretation of Rule 2(f) of the POPS. The finding that principal-agency relationship is not essential for terming a service provider as intermediary, is clearly contrary to law - Also, the elements of service, namely collections and contact center services for credit/debit card operations, are essentially part of the bundled services and in terms of Section 66F(3)(a), will qualify as part of main service - the elements of service, namely collection services and contact center services for credit/debit card operations, cannot be held to be intermediary services. Taxability of reimbursement claimed by the appellant for accommodation and cab charges, incurred by the appellant on behalf of HGRL/Business Partners - HELD THAT - At any rate, for the service to be classified as rent-a-cab in terms of Section 65(91), upto 30.06.2012, the service is to be provided by a person engaged in the business of renting of cabs, which is not the case in the context of the present appellants. Also, with respect to the period after 01.07.2012, the transportation services cannot fall under Rule 11 of POPS, for determining the place of provision as taxable territory, as in the facts of this case it does not satisfy the definition of continuous journey as per Rule 2(d) of the said Rules - the costs towards rent-a-cab claimed from HGRL, UK which is remitted by the HGRL UK to the appellants in convertible foreign exchange cannot be taxed for the period from 01.10.2010 to 30.06.2012 under Rule 3(1)(ii) of the Export of Service Rules, 2005 and Rule 11 of the POPS post 01.07.2012. Similarly, the costs towards accommodation claimed from HGRL, UK cannot be taxed for the period from 01.07.2012, in terms of Rule 5 of the POPS - levy of service tax in the First Order on accommodation services and rent-a-cab services set aside. Appeal allowed.

Summary

Issues Involved:

1. Classification of services provided by the appellant as intermediary services.
2. Taxability of services provided to personnel of foreign customers visiting India.
3. Reimbursement of costs for accommodation and cab charges.
4. Invocation of extended period of limitation.

Summary:

1. Classification of Services as Intermediary Services:

The Tribunal examined whether the services provided by the appellant, namely collections for credit/debit card operations and contact center services, could be classified as intermediary services. The Tribunal referred to the sub-contracting agreement between the appellant and HGRL (HSBC Global Resourcing (UK) Ltd), noting that the appellant provided services on a principal-to-principal basis and was compensated on a cost-plus basis. The Tribunal held that the appellant's services did not qualify as intermediary services under Rule 2(f) of the Place of Provision of Service Rules, 2012, as there was no principal-agent relationship. The Tribunal relied on various judgments, including Genpact India Private Limited and Singtel Global India Private Limited, concluding that the services provided were not intermediary services.

2. Taxability of Services to Foreign Customers' Personnel:

The Tribunal addressed the issue of whether the services provided to the personnel of foreign customers visiting India, such as accommodation and rent-a-cab services, were taxable. The Tribunal found that these services were connected to the original service provided under the sub-contracting agreement and were reimbursed by HGRL, UK. The Tribunal held that these expenses should qualify as export turnover and be exempt from service tax under Rule 3 of the Place of Provision of Service Rules, 2012, as the place of provision of service was the location of the recipient, HGRL, UK.

3. Reimbursement of Costs:

The Tribunal examined the reimbursement of costs for accommodation and cab charges incurred by the appellant on behalf of HGRL/Business Partners. The Tribunal found that these expenses were part of the original service and were recovered in convertible foreign exchange. The Tribunal held that these costs should be treated as part of the export turnover and be exempt from service tax. The Tribunal relied on the judgment in Ness Technologies (India) Private Limited, which held that reimbursement expenses connected with export services should be exempt from service tax.

4. Invocation of Extended Period of Limitation:

The Tribunal noted the appellant's contention that the extended period of limitation could not be invoked as the department was aware of the agreements and transactions through audit reports and refund claims. However, since the appeals were allowed on merits, the Tribunal left the ground of limitation open and did not make a specific ruling on this issue.

Conclusion:

The Tribunal allowed the appeals, setting aside the impugned orders and granting consequential relief to the appellant. The Tribunal held that the services provided by the appellant were not intermediary services, the reimbursement of costs for accommodation and cab charges qualified as export turnover, and the extended period of limitation could not be invoked.