2018 (3) TMI 1430 - AT - Service Tax

Refund of unutilized CENVAT credit - Place of Provision of services - appellants are engaged in providing of services to their client and the facilitating their clients for providing those services by third party. - intermediary services in terms of Rule 2(f) of Place of Provision of Rules, 2012 - reverse charge mechanism - Held that - the appellant has provided the services to customers of their Client and having no direct nexus with the customers of their client has been provided by the appellant to their client and nowhere has facilitated or arranged for the services provided to their client by third party. Furthermore, the appellant has themselves provided the services to their client as the main service provider on principal to principal basis, therefore, the activity undertaken by the appellant do not qualify intermediary as defined in Rule 2(f) of Place of Provision of Services Rules, 2012. The appellant are not intermediaries in terms of Rule 2(f) of the Place of Provision of Service Rules, 2012. Therefore, the appellants are not liable to pay service tax being provider of service in India in terms of Rule 9 of the Place of Provision of Service Rules, 2012. Refund allowed - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Eligibility for refund claim under Rule 5 of Cenvat Credit Rules, 2004.
2. Classification of services as intermediary services under Rule 2(f) of Place of Provision of Services Rules, 2012.
3. Applicability of Rule 9 of Place of Provision of Services Rules, 2012.
4. Principles of natural justice and consistency in judicial decisions.

Detailed Analysis:

1. Eligibility for Refund Claim under Rule 5 of Cenvat Credit Rules, 2004:
The appellant filed a refund claim for the period April 2015 to September 2015 under Rule 5 of the Cenvat Credit Rules, 2004, read with Notification No. 27/2012 dated 18.06.2012, for unutilized Cenvat credit availed on input services used for providing taxable services under the category of Business Auxiliary Services in respect of Export of Services. The adjudicating authority sanctioned the refund claim. However, the Commissioner (Appeals) rejected it, asserting that the appellant provided intermediary services and was required to pay service tax under the reverse charge mechanism, thus disqualifying them from claiming a refund of unutilized Cenvat credit.

2. Classification of Services as Intermediary Services under Rule 2(f) of Place of Provision of Services Rules, 2012:
The appellant contended that they did not qualify as an intermediary under Rule 2(f) of the Place of Provision of Services Rules, 2012, as they provided the main service directly to their client, Evalueserve Ltd., Bermuda, and not to their client's customers. The definition of "intermediary" under Rule 2(f) states that an intermediary arranges or facilitates the provision of a service or supply of goods between two or more persons but does not include a person who provides the main service on his own account. The Tribunal found that the appellant provided services directly to their client and not as an intermediary, as they did not facilitate or arrange services provided by a third party.

3. Applicability of Rule 9 of Place of Provision of Services Rules, 2012:
Rule 9 of the Place of Provision of Services Rules, 2012, specifies that the place of provision of intermediary services is the location of the service provider. The Commissioner (Appeals) held that the appellant's services fell under this rule, making them liable to pay service tax in India. However, the Tribunal disagreed, stating that the appellant provided the main service on a principal-to-principal basis and did not act as an intermediary. Therefore, Rule 9 did not apply, and the appellant was not liable to pay service tax in India.

4. Principles of Natural Justice and Consistency in Judicial Decisions:
The appellant argued that the same Commissioner (Appeals) had taken a contrary view in a similar case involving M/s. LBF Travel India Pvt. Ltd., where it was held that the services provided were not intermediary services. The Tribunal noted this inconsistency and emphasized the need for adherence to principles of natural justice. The Tribunal also referred to decisions by the Advance Rulings Authority of India in the cases of Universal Services India Pvt. Ltd. and GoDaddy India Web Services Pvt. Ltd., which supported the appellant's position that they were not intermediaries.

Conclusion:
The Tribunal concluded that the appellant was not an intermediary under Rule 2(f) of the Place of Provision of Services Rules, 2012, and thus not liable to pay service tax under Rule 9. Consequently, the refund claim filed by the appellant was admissible. The impugned order was set aside, and the appeal was allowed with consequential relief.

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