2024 (3) TMI 1178 - AT - Service Tax

Classification of service - service rendered by the appellant to overseas universities/colleges amounts to export of service or intermediary service or not - period 1.07.2012 to March 2016 - HELD THAT - The undisputed fact is that the appellant had entered into agreement with various foreign universities whereby the appellant was required to provide services to the universities which implies that the service provider is located in India and the recipients of service were located outside India. It is also an undisputed fact that the appellant was receiving the consideration for the service rendered by way of convertible foreign exchange. The nature of service provided by the appellant was to recruit students in the courses conducted by these universities/institutes. From the definition of intermediary services , it is found that activity between two parties cannot be considered as an intermediate service as intermediary essentially arranges or facilitates the main supply between two or more persons, which is not the case here. Further, the definition of intermediary service excludes any person who has provided the service on their own account. Here from the facts, it is evident that the appellant has provided the service on his own account to the recipient of service, i.e. the foreign university placed beyond the taxable territory of India. The Chandigarh Bench in M/S SUNRISE IMMIGRATION CONSULTANTS PRIVATE LIMITED VERSUS CCE ST, CHANDIGARH 2018 (5) TMI 1417 - CESTAT CHANDIGARH considered the issue whether the assessee is an intermediary with reference to the service to universities, colleges and banks and whether any service tax could be levied and answered the issue in favour of the assessee. Following the observations in MS EVALUESERVE SEZ PVT LTD, EVALUESERVE COM PVT LTD VERSUS C.C.E S.T GURGAON I (VICE-VERSA) 2018 (12) TMI 1242 - CESTAT CHANDIGARH , that receipt of consideration from the overseas client excluded them from tax as intermediary, the appellant cannot be held to be providing intermediary service as it is an admitted position that the appellant had been receiving consideration in the form of commission from the recipients of service placed abroad. The stand of the department that the appellant was rendering two types of services, one by way of rendering consultancy services to the students who wanted to study abroad by assisting them and the second was service to foreign universities by way of recruitment of students for them, is not correct. Firstly, the fees deposited by the students is directly remitted to the universities. Secondly, the appellant is not charging any consideration from the students and there cannot be any taxable service without any consideration - there is no privacy of contract between the appellant and the prospective students as laid down by the Delhi High Court in VERIZON COMMUNICATION INDIA PVT. LTD. VERSUS ASSISTANT COMMISSIONER, SERVICE TAX, DELHI III, DIVISION-XIV ANR. 2017 (9) TMI 632 - DELHI HIGH COURT . The learned Counsel for the appellant has taken an alternate plea in terms of the exemption notification No. 25/2012 dated 20.06.2012 issued by the Central Government in exercise of power under section 93 of Finance Act, 1994, where at serial No. 9 services provided to or by an educational institution in respect of education has been exempted from service tax and subsequently by amendment vide Notification No. 06/2014 dated 11.07.2014 the exemption was provided to services relating to admission to, or conduct of examination by such institution and therefore the appellant was not liable to pay service tax. The impugned order deserves to be set aside - The appeal is, accordingly allowed.

Summary

Issues Involved:
1. Whether the service rendered by the appellant to overseas universities/colleges amounts to "export of service" or "intermediary service" as claimed by the Revenue.

Summary:

Issue 1: Export of Service

The appellant rendered services to overseas educational universities by enrolling prospective students for admissions, receiving commission in convertible foreign exchange. The recipient of service (foreign universities) are located outside India, and the benefit of service accrues outside India. The appellant argued that their services qualify as "export of service" as per Rule 6A of the Service Tax Rules, 1994, satisfying all criteria for export of service: service provider located in India, recipient located outside India, payment in convertible foreign exchange, and the benefit of service accruing outside India.

Prior to 1.07.2012, the services were treated as export of service under the Export of Service Rules, 2005 (ESR, 2005). Post 1.07.2012, Notification No. 28/2012 introduced the Place of Provision of Service Rules, 2012, and Rule 6A was introduced by Notification No. 36/2012 to define export of services. The Tribunal found that the appellant met all conditions under Rule 6A, thus qualifying their services as export of service, not liable to service tax.

The Tribunal cited several decisions, including All India Federation of Tax Practitioners Vs. Union of India, Verizon Communication India Private Limited Vs Assistant Commissioner, ST, Delhi, and Study Overseas Global (P) Ltd Vs. Commissioner of Service Tax, Delhi, supporting the principle that service tax is a destination-based consumption tax, and services provided outside the taxable territory are considered export of service.

Issue 2: Intermediary Service

The department contended that the appellant's services should be treated as "intermediary services" under Rule 2(f) of the Place of Provision of Service Rules, 2012. The Tribunal noted that an intermediary arranges or facilitates the main supply between two or more persons, which was not the case here. The appellant provided services on their own account to foreign universities, not acting as an intermediary.

Referring to Rule 6 of the Rules, 2012, the Tribunal agreed with the appellant's submission that they were providing services relating to specific events (recruitment of students), and the place of provision of service should be where the event is actually held. The Tribunal cited decisions like Sunrise Immigration Consultants Private Limited Vs Commissioner of Central Excise and Service Tax, Chandigarh, and Ernest and Young Vs. Additional Commissioner, CGST, Delhi, concluding that the appellant's services do not qualify as intermediary services.

The Tribunal also noted that there was no privity of contract between the appellant and the students, and the fees were directly remitted to the universities. The appellant did not charge any consideration from the students, aligning with the principle laid down in Verizon Communications India.

Given the findings, the Tribunal set aside the impugned order and allowed the appeal, concluding that the appellant's services qualify as export of service and are not subject to service tax.