2024 (12) TMI 1546 - AT - Service Tax

Levy of service tax - services rendered by the appellant be considered as export services or they acted as an intermediary - HELD THAT - The basic requirement to be an intermediary is that there should be at least three parties; an intermediary is someone who arranges or facilitates the supply of goods or services or securities between two or more persons. In other words there is main supply and the role of the intermediary is to arrange or facilitate another supply between two or more other persons and does not himself provide the main supply. Conclusion - The services rendered by the appellant do not satisfy the definition of intermediary and hence falls under the scope of export service . Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal question considered in this judgment was whether the services rendered by the appellant to its overseas group entities could be classified as 'export services' under Rule 6A of the Service Tax Rules, 1994, or whether they constituted 'intermediary services,' thereby attracting service tax liability.

2. ISSUE-WISE DETAILED ANALYSIS

The primary issue revolved around the classification of services provided by the appellant. The legal framework involved Rule 6A of the Service Tax Rules, 1994, which defines 'export of services,' and Rule 2(f) of the Place of Provision of Services (POPS) Rules, 2012, which defines 'intermediary services.' The appellant argued that their services were not intermediary services but were rendered on a principal-to-principal basis, thus qualifying as export services. The Revenue contended that the appellant acted as an intermediary, facilitating the supply of services between Textron Inc. and its customers in India.

Relevant Legal Framework and Precedents:

The appellant relied on various precedents where marketing and promotional activities by an Indian entity for a foreign company were not classified as intermediary services. Key cases included Genpact India Pvt. Ltd. vs. UOI, where the Punjab & Haryana High Court held that services rendered on a principal-to-principal basis do not constitute intermediary services. The appellant also cited several Tribunal decisions supporting their stance.

Court's Interpretation and Reasoning:

The Tribunal analyzed the Master Service Agreement and the nature of services provided by the appellant. It noted that the appellant's activities involved business development, sales and marketing, after-sales services, and sourcing activities. The Tribunal considered the CBIC Circular No. 159/15/2021-GST, which clarified the scope of intermediary services, emphasizing the need for three parties and distinct supplies to qualify as intermediary services.

Key Evidence and Findings:

The Tribunal found that the appellant did not engage in arranging or facilitating the supply of goods or services between Textron Inc. and its customers in India. The services were provided directly to Textron Inc., and the appellant received consideration in convertible foreign exchange. The Tribunal concluded that the appellant's services did not meet the criteria for intermediary services as defined under Rule 2(f) of the POPS Rules, 2012.

Application of Law to Facts:

The Tribunal applied the legal definitions and precedents to the facts, determining that the appellant's services were not intermediary services. The services were rendered on a principal-to-principal basis, with the appellant acting independently and not as an agent or broker for Textron Inc. The Tribunal emphasized that the absence of a tripartite arrangement and the direct nature of the services rendered supported the classification as export services.

Treatment of Competing Arguments:

The Tribunal addressed the Revenue's argument that the appellant acted as an intermediary by highlighting the lack of a tripartite relationship and the absence of facilitation or arrangement of services between two other parties. The Tribunal found the appellant's reliance on precedents and the CBIC Circular persuasive, reinforcing the classification of the services as export services.

Conclusions:

The Tribunal concluded that the services rendered by the appellant did not qualify as intermediary services. Consequently, the services fell within the scope of export services under Rule 6A of the Service Tax Rules, 1994, and were not subject to service tax.

3. SIGNIFICANT HOLDINGS

The Tribunal held that the appellant's services were export services, not intermediary services. The Tribunal's reasoning emphasized the absence of a tripartite arrangement and the direct nature of the services provided to Textron Inc. The core principle established was that services rendered on a principal-to-principal basis, without facilitating or arranging the supply of goods or services between two other parties, do not constitute intermediary services.

Final Determinations on Each Issue:

The Tribunal set aside the impugned order, allowing the appeals and confirming that the services rendered by the appellant were export services, exempt from service tax liability.