2022 (1) TMI 1125 - AT - Service Tax

Levy of service tax - Business Auxiliary Service or not - contract with Syntech (HK) Technology Ltd. Hongkong (STLH) in order to short list states for launching Gionee mobile phones and make arrangement for its advertisement - appellant undertook to set up (STLH) offices in India etc - intermediary services or not - place of provision of services - impugned orders in contradiction with the order of the Commissioner (Appeal) - HELD THAT - The appellant nowhere of providing service amongst two or more persons, in fact, the appellant is providing service to set up STLH office in India, recruitment service companies, advertisement agency, service staff and also appoint Distribution partners for states short listed for launch of Gionee mobile phones. These services nowhere include any sale of goods and the appellant is nowhere involved in the providing the service of sale of goods. In fact, for sale of goods, M/s STLH has separately entered into contract with the Distribution partners who import goods in their own names and sell in India. The appellant is neither related to import of goods nor any sale of goods and also nor concern with the payment against those goods, therefore, it cannot be said that the appellant is an Intermediary as per Rule 2(f) of POPS Rules, 2012. The appellant do not qualify as Intermediary in terms of Rule 2(f) of POPS Rules, 2012, therefore, no demand of service tax sustainable against the appellant - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of services under "intermediary services" as per Rule 2(f) of Place of Provision of Service Rules, 2012 (POPSR, 2012).
2. Determination of whether the services provided by the appellant qualify as "export of service".
3. Examination of the appellant's role in facilitating the sale of goods.
4. Validity of the demand for service tax, interest, and penalties.
5. Applicability of the extended period of limitation.

Issue-wise Detailed Analysis:

1. Classification of Services under "Intermediary Services":
The primary issue was whether the services rendered by the appellant fell under the category of "intermediary services" as defined in Rule 2(f) of POPSR, 2012. The appellant entered into a contract with Syntech (HK) Technology Ltd. (STLH) to facilitate the launch of Gionee mobile phones in India by setting up offices, recruiting service companies, advertisement agencies, and appointing distribution partners. The Revenue argued that the appellant’s activities constituted intermediary services as they facilitated the supply of goods between STLH and the distributors. However, the Tribunal found that the appellant was not involved in providing services among two or more persons but was directly providing services to STLH. The appellant's role was limited to setting up offices and recruiting partners, and they were not involved in the actual sale or import of goods. Therefore, the appellant did not qualify as an "intermediary" under Rule 2(f) of POPSR, 2012.

2. Determination of "Export of Service":
The appellant initially paid service tax on the commission received from STLH, classifying their service as "Business Auxiliary Service" but later sought a refund, claiming that the service provided was an export of service. The Commissioner (Appeal) had previously held that the services provided by the appellant were covered by Rule 3 of POPSR, 2012, and the place of provision of service was the location of the recipient, which was outside India. The Tribunal agreed with this finding, noting that the payments were made in convertible foreign exchange and the provider and recipient of the service were not merely establishments of distinct persons.

3. Examination of the Appellant's Role in Facilitating the Sale of Goods:
The Revenue contended that the appellant facilitated the sale of goods by STLH through the distribution network in India. However, the Tribunal found that the appellant's services did not include the sale of goods. The appellant was involved in setting up offices and recruiting partners, while STLH entered into separate contracts with distribution partners for the sale of mobile phones. The appellant was not related to the import or sale of goods and did not handle payments for the goods. Therefore, the appellant could not be considered an intermediary facilitating the sale of goods.

4. Validity of the Demand for Service Tax, Interest, and Penalties:
Given the Tribunal's findings that the appellant did not qualify as an intermediary and that the services provided were export services, the demand for service tax, along with interest and penalties, was not sustainable. The Tribunal set aside the impugned orders, thereby allowing the appeals filed by the appellant with consequential relief.

5. Applicability of the Extended Period of Limitation:
The Revenue had invoked the extended period of limitation, arguing that the appellant's activities constituted intermediary services. However, since the Tribunal concluded that the appellant was not an intermediary and the services were export services, the extended period of limitation was not applicable.

Conclusion:
The Tribunal concluded that the appellant did not qualify as an "intermediary" under Rule 2(f) of POPSR, 2012, and the services provided were export services. Consequently, the demand for service tax, interest, and penalties was set aside, and the appeals were allowed with consequential relief.