2019 (12) TMI 1066 - AT - Service Tax

Cash refund of accumulated CENVAT Credit - intermediary services - Rule 2(f) - export service or not - providing taxable output services namely, Business Auxiliary Service viz. marketing and sale promotion of chemicals to their overseas counterpart M/s Chevron Philips Chemicals Global FZE (CPC Global) - POPOS rules - credit denied alleging that the service provided by the appellant is not an export service since they acted as an intermediary defined under Rule 2(f) of the Place of Provision of Services Rules, 2012 (POPS Rules in short), consequently as per Rule 9 of the said Rule the service provider is deemed to be situated in India, hence there can be no export. HELD THAT - The appellant by an agreement with overseas company CPC Global agreed to provide service of sales promotion of the chemicals in the territory specified in the said agreement. The detailed of services required to be rendered in connection with sales promotion in defined territory are stated under the clause (3) of the said agreement. A plain reading of the same reveals that it is an agreement between the Appellant and the CPC Global and no mention of rendering of service to the clients of CPC Global or any other third party. For rendering such services, the appellants are entitled to commission stipulated under clause (5) of the agreement - It is the contention of the appellant that they did not act as an intermediary between the CPC Global and any other person while rendering the service of promotion of sale of the goods in the defined territory. The Appellant are neither concerned the fixation of selling price of the goods and their role is an independent contracting as stipulated under clause (10) of the said agreement. There is merit in the contention of the appellant that since goods was not covered under the scope of definition of intermediary , therefore, for the period prior to 1.10.2014 confirmation of demand is bad in law. I find that the definition of intermediary cannot be made applicable to sale of goods for the period prior to 01.10.2014 in view of the principle law laid down by the Tribunal in CRODA INDIA COMPANY PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX-VII MUMBAI 2019 (5) TMI 1139 - CESTAT MUMBAI . Period after 1.10.2014 - HELD THAT - On merit also, the appellant cannot be called as an intermediary . On a simple reading of the agreement analyzed as above, it is clear that the appellants are appointed by their overseas counterpart CPC Global for sales promotion of the goods for their client in the defined territory. The appellant has no role in fixation of price nor they negotiate in any manner between CPC Global and their clients relating to sales promotion of the goods sold - Therefore, the appellant cannot be called as an intermediary. consequenlty, fall outside the amended definition of intermediary under Rule 2(f) and Rule 9 of the POPS Rules, 2012. Denial of credit on various input services - HELD THAT - The finding of the learned Commissioner (Appeals) that it is not an input service is contrary to the principles of law laid down by this Tribunal in various judgments as submitted by the Advocate for the Appellant. No contrary decision has placed by the Revenue. Therefore, on this count also the order of the learned Commissioner (Appeals) is unsustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether the appellants are an 'intermediary' and hence the services rendered by them fall outside the scope of export service, making them ineligible for cash refund of accumulated credit under Rule 5 of the CENVAT Credit Rules, 2004.
2. Whether certain input services have no nexus with the output services, making them ineligible for cash refund under Rule 5 of the CENVAT Credit Rules, 2004.

Detailed Analysis:

1. Intermediary Status and Export Service:

The appellants provided sales promotion services to an overseas entity, CPC Global, under an agreement dated 14.09.2009. They received commissions in convertible foreign exchange and claimed refunds of accumulated CENVAT Credit under Rule 5 of the CENVAT Credit Rules, 2004. The Department alleged that the appellants acted as an 'intermediary' as defined under Rule 2(f) of the Place of Provision of Services Rules, 2012 (POPS Rules), rendering their services non-exportable and denying their refund claims.

The Tribunal examined the agreement and found that the appellants were engaged in sales promotion exclusively for CPC Global without any interaction with CPC Global's clients or third parties. The Tribunal noted that the definition of 'intermediary' was amended on 01.10.2014 to include 'goods'. For the period before this amendment, the Tribunal held that the appellants could not be considered intermediaries as the definition did not encompass goods. This was supported by the Tribunal's previous decision in Croda India Co. Pvt. Ltd. Vs. CST, Mumbai.

For the period after 01.10.2014, the Tribunal analyzed the agreement and concluded that the appellants did not act as intermediaries because they did not negotiate prices or facilitate transactions between CPC Global and its clients. The Tribunal referenced its decisions in Lubrizol Advanced Materials India Pvt. Ltd. and R.S. Granite Machine Tools Pvt. Ltd., which supported the view that the appellants' services were not intermediary services. Consequently, the Tribunal determined that the appellants' services qualified as export services, making them eligible for cash refund of accumulated credit under Rule 5 of the CENVAT Credit Rules, 2004.

2. Nexus of Input Services with Output Services:

The Commissioner (Appeals) had denied credit on various input services, including Management and Business Consultant services, Business Auxiliary Service, Business Support Service, Membership of Club or Association, Convention Services, Renting of Immovable Property, and Telecommunication services, claiming they had no nexus with the output services provided.

The Tribunal disagreed with this finding, citing various judgments that supported the appellants' position. For instance, Management and Business Consultant services were deemed necessary for efficient business operations, and Business Support Services were related to legal, market, and product research activities. Membership of Club or Association services was considered essential for obtaining trade memberships, and Convention Services were necessary for organizing business events. Renting of Immovable Property and Telecommunication services were integral to conducting business operations.

The Tribunal concluded that these input services met the definition of 'input service' under Rule 2(l) of the CENVAT Credit Rules, 2004, and thus, the appellants were entitled to cash refunds for these services.

Conclusion:

The Tribunal set aside the impugned orders and allowed the appeals, granting consequential relief as per law. The decision was pronounced in court on 20.12.2019.