2024 (9) TMI 409 - AT - Service Tax

Classification of service - referral service of the Appellant provided to Canadian Bank and foreign universities - Intermediary Service or not - export of services or not - extended period of limitation - interest - penalties. Whether the services provided by the Appellant fall under the ambit of Export of Services and are exempted from service tax; or are classifiable under Intermediary Service as defined under Rule 2(f) of the Place of Provision of Service Rules, 2012 read with Rule 9 of the Place of Provision of Service Rules, 2012? HELD THAT - Hon ble Punjab Haryana High Court in the case of GENPACT INDIA PVT. LTD. VERSUS UNION OF INDIA AND OTHERS 2022 (11) TMI 743 - PUNJAB AND HARYANA HIGH COURT has held that the following three conditions must be satisfied primarily for a person to qualify as an Intermediary i). the relationship between the parties must be that of a principal-agency relationship. ii). the person must be involved in arrangement or facilitation of provisions of the service provided to the principal by a 3rd party. iii). the person must not actually perform the main service intended to be received by the service recipient itself. Scope of an intermediary is to mediate between two parties i.e. the principal service provider (the 3rd party) and the beneficiary who receives the main service and expressly excludes any person who provides such main service on his own account. It is found that in the Appellant s own case for the same impugned services for the earlier period in M/S SUNRISE IMMIGRATION CONSULTANTS PRIVATE LIMITED VERSUS CCE ST, CHANDIGARH 2018 (5) TMI 1417 - CESTAT CHANDIGARH this Tribunal has allowed the appeal of the Appellant and has held that the services rendered/provided by the Appellant do not fall in the definition of Intermediary Services . The Tribunal has also held that the services rendered by the Appellant satisfy the conditions prescribed for the Export of Services and therefore, the Appellant are not liable to pay service tax on the services rendered by them. Since the issue involved in the present case has already been decided by this Tribunal in the above case, in favour of the Appellant holding that the services provided by the Appellant amount to Export of Services and not Intermediary Services . The said decision of the Tribunal was appealed by the Revenue before the Hon ble High Court but later on the appeal was withdrawn on monetary limit under CBIC instructions dated 22.08.2019. Invocation of extended period of limitation - HELD THAT - The activities carried on by the Appellant were in the knowledge of the department because for the previous period also, the extended period of limitation was invoked and the Tribunal in M/S SUNRISE IMMIGRATION CONSULTANTS PRIVATE LIMITED VERSUS CCE ST, CHANDIGARH 2018 (5) TMI 1417 - CESTAT CHANDIGARH , has held that the demand is barred by limitation; therefore, invocation of extended period is bad in law in the present case also. Interest and penalties - HELD THAT - The question of interest and penalties does not arise because the demand of service tax itself is not sustainable. The impugned order is not sustainable in law and is liable to be set aside - Appeal allowed.

Summary

Issues Involved:
1. Classification of services provided by the Appellant as 'Intermediary Services' or 'Export of Services.'
2. Invocation of extended period of limitation for demand.
3. Imposition of interest and penalties.

Issue-wise Detailed Analysis:

1. Classification of Services:
The core issue was whether the services provided by the Appellant fall under 'Intermediary Services' as defined under Rule 2(f) of the Place of Provision of Service Rules, 2012, or qualify as 'Export of Services.'

- Definition of Intermediary Services: The Tribunal examined the definition of "intermediary" under Rule 2(f) which states, "intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the 'main' service) or a 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."
- CBIC Circular No. 159/15/2021: The Tribunal also referred to the CBIC Circular which clarifies that an intermediary must arrange or facilitate the supply of goods or services between two or more persons and must not provide the main service on his own account.
- Case Law References: The Tribunal cited several cases, including Genpact India Pvt. Ltd. and Verizon India Pvt. Ltd., which emphasized that an intermediary must have a principal-agency relationship and should not perform the main service themselves.
- Appellant's Services: The Tribunal found that the Appellant provided services directly to foreign universities and banks, promoting their business and receiving commissions. This was deemed not to fall under 'Intermediary Services' but rather 'Export of Services,' as the Appellant was providing the main service on their own account.

2. Invocation of Extended Period of Limitation:
The Tribunal addressed whether the extended period of limitation was rightly invoked.

- Knowledge of Department: It was noted that the activities of the Appellant were in the knowledge of the department, as similar demands for previous periods had been raised and adjudicated.
- Case Law References: The Tribunal referred to decisions such as Nizam Sugar Factory vs. CCE and Commissioner vs. Tetra Pack India Ltd., which held that the extended period of limitation cannot be invoked if the department was aware of the facts.
- Tribunal's Decision: The Tribunal concluded that the invocation of the extended period of limitation was not justified in this case.

3. Imposition of Interest and Penalties:
The Tribunal considered the imposition of interest and penalties under sections 75, 76, and 78 of the Finance Act, 1994.

- Non-Sustainability of Demand: Since the demand for service tax itself was found to be unsustainable, the Tribunal held that the imposition of interest and penalties was also not tenable.
- Case Law References: The Tribunal cited cases like XL Health Corporation India Pvt. Ltd. vs. UOI and UOI vs. Kamlakshi Finance Corporation Ltd., which supported the view that interest and penalties cannot be imposed if the primary demand is not valid.

Conclusion:
The Tribunal set aside the impugned order, holding that the services provided by the Appellant qualify as 'Export of Services' and not 'Intermediary Services.' The invocation of the extended period of limitation was found to be unjustified, and consequently, the imposition of interest and penalties was also deemed untenable. Both appeals were allowed with consequential relief as per law.