2024 (11) TMI 922 - AT - Service Tax

Classification of services rendered - services rendered by the respondent to their parent company situated in USA is an intermediary service or 'export services - 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. 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. The present case is more or less similar to the Illustration 4 of the said Circular dated 20.09.2021 which says 'A' is a manufacturer and supplier of computers based in USA and supplies its goods all over the world. As a part of this supply, 'A' is also required to provide customer care service to its customers to address their queries and complains related to the said supply of computers. 'A' decides to outsource the task of providing customer care services to a BPO firm, 'B'. 'B' provides customer care service to 'A' by interacting with the customers of 'A' and addressing / processing their queries / complains. 'B' charges 'A' for this service. 'B' is involved in supply of main service 'customer care service' to 'A', and therefore, B' is not an intermediary. No merit in the appeal filed by the Revenue.

Summary

Issues Involved:
1. Classification of services rendered by the respondent as 'intermediary service' or 'export service'.
2. Applicability of Rule 9 of the Place of Provision of Services Rules, 2012 (POPS Rules, 2012).
3. Determination of the place of provision of services.
4. Validity of the show-cause notice and the invocation of the extended period of limitation.

Detailed Analysis:

1. Classification of Services:
The core issue was whether the services rendered by the respondent to their parent company in the USA were 'intermediary services' or 'export services'. The Revenue argued that the services, including Marketing and Sales Support and Customer Support, constituted 'intermediary services' as defined under Rule 2(f) of the POPS Rules, 2012. The respondent contended that they provided services on a principal-to-principal basis and not as an intermediary. The Tribunal referenced recent judgments and circulars, such as Circular No.159/15/2021-GST, which clarified that services like customer support do not qualify as intermediary services. The Tribunal concluded that the services were not intermediary services and were, in fact, export services.

2. Applicability of Rule 9 of the POPS Rules, 2012:
The Revenue's position was that under Rule 9 of the POPS Rules, 2012, the place of provision of intermediary services is the location of the service provider, which in this case would be India. However, the Tribunal found that the services provided by the respondent were not intermediary services and thus, Rule 9 was not applicable. Instead, Rule 3 of the POPS Rules, which determines the place of provision based on the location of the service recipient, applied. Since the recipient was located outside India, the services qualified as export services.

3. Determination of the Place of Provision of Services:
The Tribunal emphasized that the place of provision of services should be determined based on the location of the recipient, as per Rule 3 of the POPS Rules. The respondent's services were provided to their parent company in the USA, and the payment was received in convertible foreign currency, fulfilling the criteria for export of services under Rule 6A of the Service Tax Rules, 1994. This determination aligned with the Tribunal's findings in similar cases, reinforcing the conclusion that the services were exported.

4. Validity of the Show-Cause Notice and Extended Period of Limitation:
The Revenue claimed that the show-cause notice was not vague and sufficiently detailed the charges against the respondent. However, the Tribunal upheld the Commissioner's decision that the notice lacked clarity in establishing how the services were intermediary services. Additionally, the respondent argued that there was no fraud or misrepresentation to justify the invocation of the extended period of limitation. The Tribunal agreed, noting the absence of any intent to evade tax, thus invalidating the extended period's applicability.

In conclusion, the Tribunal found no merit in the Revenue's appeal, upheld the Commissioner's order, and dismissed the appeal, confirming that the services provided by the respondent were export services and not subject to service tax in India.