2022 (12) TMI 469 - AT - Service Tax

Refund of unutilized input service credit of input services used by SGIPL to export telecommunication services - intermediary services or not - place of provision of services - intermediary services - HELD THAT - An intermediary is a person who arranges or facilitates provision of the main service between two or more persons. SGIPL is not involved in the arrangement or facilitation of the supply of service. In fact, it has entered into two Agreements; one with SingTel and the other with the Indian telecommunication service providers. It needs to be noted that SingTel had entered into Agreements with end customers for providing telecommunication services and it is for the provision of this telecommunication services that SingTel entered into an Agreement with SGIPL on a principal to principal basis - The telecommunication service provided by SGIPL qualify for export since it is providing telecommunication services to SingTel which is outside India and is receiving convertible foreign exchange for such services. SGIPL is not a privy to the Agreement entered into between SingTel and its end customers. Merely because SGIPL is charging handling fee on SingTel would not mean it is an intermediary. The judgment of the Delhi High Court in VERIZON COMMUNICATION INDIA PVT. LTD. VERSUS ASSISTANT COMMISSIONER, SERVICE TAX, DELHI III, DIVISION-XIV ANR. 2017 (9) TMI 632 - DELHI HIGH COURT squarely applies to the facts of the present case, where it was held that The denial of the refund of the Cenvat credit to Verizon India and the raising of a demand of service tax on the consideration received by it for export of telecommunication services to Verizon US are not sustainable in law - The Commissioner (Appeals) correctly appreciated the position in the impugned orders in holding that SGIPL was not intermediary and had provided export of service to SingTel. The decision of the Tribunal in COMMISSIONER OF SERVICE TAX, CENTRAL EXCISE VERSUS LAMHAS SATELLITE SERVICES LTD. (VICE-VERSA) 2019 (6) TMI 271 - CESTAT MUMBAI was in the context of the agreement between Lamhas Satellite Services and Globecast Asia PTE Ltd. The appellant acted only to mediate the provision of service by the channel distribution partner to GlobeCast and the service was not provided by the appellant to GlobeCast. It is in such circumstances that the Tribunal observed that the service would an intermediary service. The decision of the Delhi High Court in Verizon India was distinguished for the reason that the agreement was entirely different - The said decision of the Tribunal in Lamhas Satellite Services would not, therefore, help the revenue and it is the judgment of the Delhi High Court in Verizon India that would apply to the facts of these appeals. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Refund claims under Rule 5 of the CENVAT Credit Rules 2004.
2. Determination of whether SGIPL is an intermediary under the Place of Provision of Service Rules 2012.

Issue-wise Detailed Analysis:

1. Refund Claims under Rule 5 of the CENVAT Credit Rules 2004:
The department filed three appeals challenging the orders passed by the Commissioner of Central Tax (Appeals) Delhi, which upheld the refund claims of SGIPL. The refund claims pertained to different periods: July 2015 to September 2015, October 2015 to December 2016, and January 2017 to June 2017. The Assistant Commissioner had sanctioned the refund for the first period but rejected the claims for the latter periods, citing that SGIPL was an intermediary. The Commissioner (Appeals) reversed the rejections, holding that SGIPL was not an intermediary and provided services on its own account.

2. Determination of Whether SGIPL is an Intermediary:
The core issue was whether SGIPL acted as an intermediary under Rule 9(c) of the 2012 Rules. The department argued that SGIPL procured services from Indian telecom operators and provided them to SingTel without alteration, thus acting as a conduit. SGIPL contended it provided services to SingTel on its own account, not as an intermediary.

Legal Provisions and Definitions:
- Rule 5 of the CENVAT Credit Rules 2004: Allows refund of CENVAT credit for exported services.
- Rule 6A of the Service Tax Rules 1994: Defines "export service" and its conditions.
- Rule 3 of the 2012 Rules: States that the place of provision of a service is the location of the recipient.
- Rule 9(c) of the 2012 Rules: Specifies that the place of provision for intermediary services is the location of the service provider.
- Definition of Intermediary (Rule 2(f) of the 2012 Rules): An intermediary arranges or facilitates the provision of a service between two or more persons but does not include a person who provides the main service on his own account.

Analysis of the Agreement Between SGIPL and SingTel:
The Agreement dated 14.07.2011 between SGIPL and SingTel was scrutinized to determine the nature of services provided. The Agreement indicated that SGIPL provided telecommunication services to SingTel on a principal-to-principal basis, not as an intermediary. Key clauses highlighted SGIPL's responsibilities, including providing facilities and resources at its own expense and billing SingTel in US dollars. The Agreement explicitly stated that the relationship between SGIPL and SingTel was that of independent contractors.

Judicial Precedents:
- Verizon Communication India Pvt. Ltd. vs. Asstt. Commr., S.T., Delhi-III: The Delhi High Court ruled that Verizon India provided services to Verizon US on a principal-to-principal basis, qualifying as export of services. This ruling was applied to SGIPL's case, supporting the view that SGIPL was not an intermediary.
- Tribunal's Decision in Verizon India Pvt. Ltd. vs. Commissioner of Service Tax, Delhi: Reaffirmed that services provided on a principal-to-principal basis do not qualify as intermediary services.
- M/s. BlackRock Service India Private Limited vs. Commissioner of CGST: Clarified that an intermediary involves three parties, and a service provider supplying services on its own account is not an intermediary.

Conclusion:
The Tribunal concluded that SGIPL provided telecommunication services to SingTel on its own account, not as an intermediary. The Agreement and judicial precedents supported this conclusion. The Commissioner (Appeals) correctly held that SGIPL's services qualified as export of services, entitling SGIPL to the refund claims. The department's appeals were dismissed.