2025 (1) TMI 844 - AT - Service Tax

Classification of service - Business Auxiliary Services (BAS) or intermediary services - business of guiding and advising the foreign parties for bidding and negotiations - benefit of export of services for the period from July 2012 to March 2014 - HELD THAT - The issue is no more res integra and is squarely covered by the Tribunal in the Appellant s own case 2018 (7) TMI 1214 - CESTAT ALLAHABAD for the previous period i.e. from April, 2007 to June, 2012. The present proceedings are for the period from July, 2012 to March, 2014. The concept of intermediary becomes relevant for the purpose of determination of the place of provisions of services as per Rule 9 of Place of Provision of Services Rules, 2012. In case of intermediary, it is the location of services provider which is considered as place of provision of services for the purpose of levy of service tax for the period when the appellant is covered by the definition of the intermediary, the place of provision of service, the location of service provider i.e. the taxable territory of India. Hence the benefit of export of services could not be extended to the an intermediary located in India. As per the Rule 3 of the Place of Provision of Services Rules in cases such cases the place of provision of service is location of the service recipient, which in the present case is outside India. Appellant are receiving payment against the provisions of these services in convertible foreign exchange. Thus, these services would qualify to get the benefit of export of services as per Rule 6 of the Service Tax Rules, 1994. Thus for this period there cannot be any levy of service tax and the demand made by the impugned order needs to be set aside. Conclusion - The services provided by the appellant in respect of the sale of goods of associated group companies cannot be said to be services provided by intermediary as defined by said Rules ibid. The benefit of export of services would be available to the appellant. Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the services provided by the Appellant qualify as "Business Auxiliary Services" (BAS) or as intermediary services under the Service Tax framework.
Whether the Appellant is entitled to the benefit of export of services for the period from July 2012 to March 2014.
Whether the Appellant's activities fall under the definition of intermediary services as amended on 01.10.2014.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification of Services as BAS or Intermediary

Relevant Legal Framework and Precedents: The classification of services under BAS and intermediary services is governed by the Finance Act, 1994, and the Place of Provision of Services Rules, 2012. The Tribunal's previous decision in the Appellant's own case for the period April 2007 to June 2012 was referenced, alongside the Sumitomo Corporation India Pvt. Ltd. case.
Court's Interpretation and Reasoning: The Tribunal found that the Appellant's services were not intermediary services prior to the amendment on 01.10.2014, as they were related to goods and not services. The Tribunal reiterated that the Appellant's role was limited to providing information to foreign entities to enable them to conduct negotiations independently.
Key Evidence and Findings: The Appellant provided customer details and market information to foreign companies, facilitating their business in India without directly negotiating or confirming orders.
Application of Law to Facts: The Tribunal applied the definition of intermediary services and concluded that the Appellant's services were excluded from this category as they related to goods.
Treatment of Competing Arguments: The Department argued that the Appellant acted as an intermediary, but the Tribunal dismissed this by emphasizing the nature of the Appellant's services and the timing of the legal definitions.
Conclusions: The Tribunal concluded that the Appellant's services did not qualify as intermediary services for the period in question, thus not subject to service tax as BAS.

Issue 2: Entitlement to Export of Services Benefit

Relevant Legal Framework and Precedents: The Export of Service Rules, 2005, and the Place of Provision of Services Rules, 2012, were key in determining the applicability of export benefits.
Court's Interpretation and Reasoning: The Tribunal noted that the services were provided to foreign entities, with payments received in convertible foreign exchange, thus qualifying as export services.
Key Evidence and Findings: The Appellant received commission payments in foreign currency, supporting the export service claim.
Application of Law to Facts: The Tribunal applied the rules to determine that the place of provision was outside India, affirming the export status.
Treatment of Competing Arguments: The Tribunal dismissed the Department's contention that the services were provided in India, emphasizing the recipient's location and payment method.
Conclusions: The Tribunal held that the Appellant was entitled to the export of services benefit for the period in question.

Issue 3: Impact of Amendment on Intermediary Definition

Relevant Legal Framework and Precedents: The amendment to the definition of intermediary services effective 01.10.2014 was pivotal in this issue.
Court's Interpretation and Reasoning: The Tribunal clarified that the amendment did not apply retroactively, and the Appellant's services before this date were not intermediary services.
Key Evidence and Findings: The Tribunal relied on the unchanged nature of the Appellant's services and the timing of the amendment.
Application of Law to Facts: The Tribunal applied the pre-amendment definition to the Appellant's services, excluding them from intermediary classification.
Treatment of Competing Arguments: The Tribunal acknowledged the Department's reliance on the amended definition but found it inapplicable to the period before the amendment.
Conclusions: The Tribunal concluded that the amendment did not affect the Appellant's tax liability for the period under consideration.

3. SIGNIFICANT HOLDINGS

Core Principles Established: The Tribunal reaffirmed that services related to goods provided to foreign entities, with payments in foreign currency, qualify as export services. It also clarified the non-retroactive application of legal amendments.
Final Determinations on Each Issue: The Tribunal set aside the impugned order, allowing the appeal and confirming the Appellant's entitlement to export benefits for the period from July 2012 to March 2014.
Verbatim Quotes of Crucial Legal Reasoning: "The services provided by the appellant in respect of the sale of goods of associated group companies cannot be said to be services provided by intermediary as defined by said Rules ibid." This quote underscores the Tribunal's reasoning in excluding the Appellant's services from intermediary classification.

The judgment effectively clarifies the classification of services under the Service Tax framework, emphasizing the importance of the nature of services and the timing of legal definitions in determining tax liabilities.

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