2023 (4) TMI 1074 - AT - Service Tax

Refund of Service Tax paid on input services - appellant performs the role of intermediary for the overseas service receiver - place of provision of services - export of services or not - HELD THAT - The relationship between the appellant and the overseas entities are that of Principal to Principal, and there is no otherwise relationship namely joint venture, partnership or agencies. It is not the case of revenue that the appellant had failed to export the taxable output service or failed to receive the payment for such services in convertible foreign exchange. Thus, the condition of Rule 6A (1) ibid have been fulfilled by the appellant for consideration of the disputed services as export of service for the purpose of grant of benefit of refund provided under the Rule 5 ibid read with notification issued thereunder. Further, it is also found that the concept of intermediary appearing in the Rule 2(f) of the POPS Rules, 2012 has been dealt with by the CBIC under the GST regime. The concept of intermediary appearing in the Rule 2(f) of the POPS Rules, 2012 has been dealt with by the CBIC under the GST regime by Circular No. 159/15/2021-GST dated 20.09.2021 - though the said circular was issued under the GST regime but for the purpose of consideration of such phrase under the service tax regime, it should apply mutatis mutandis - the said circular has been issued on the basis of representations received, citing ambiguity caused in interpretation of the term Intermediary services , and after examination of the difficulties faced by the trade and industry, the said circular was issued, with a view to ensure uniformity in the implementation of the provision of the law across field formations. In an identical case, this Tribunal in the case of M/S. BLACK ROCK SERVICES INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CGST, COMMISSIONER OF CENTRAL EXCISE SERVICE TAX GURGAON, HARYANA 2022 (8) TMI 874 - CESTAT CHANDIGARH has defined the true meaning and purpose of the phrase intermediary holding that the appellant therein cannot be considered as an intermediary and accordingly, allowed the benefit of refund provided under Rule 5 ibid. - Rather, the contract referred in the case is the sub-contracting agreement for the services being provided by the appellant to overseas entity as the main contractor and thus, under no stretch of imagination, it can be held that the appellant is an agent or intermediary, engaged for facilitating business of overseas entity. There are no merit in the impugned order, in so far as it has upheld the rejection of refund benefit to the appellant. Therefore, by setting aside impugned order, the appeal is allowed in favour of the appellant.

Summary

Issues involved:
The issues involved in the judgment are the eligibility of the appellant for a refund of service tax paid on input services under Rule 5 of the CENVAT Credit Rules, 2004, and the classification of the appellant's services as exports for the purpose of refund benefit.

Eligibility for Refund:
The appellant, engaged in providing various services, filed refund applications for service tax paid on input services for the period of July 2016 to June 2017. The applications were rejected by the Jurisdictional Refund Sanctioning Authority, and this decision was upheld by the Commissioner (Appeals). The appellant contended that the agreements with overseas entities established a principal-to-principal relationship, not that of an intermediary. The Tribunal examined the agreements and found that the conditions for considering the services as exports were met. The Tribunal also referenced a Circular clarifying the concept of 'intermediary' and a previous Tribunal decision supporting the appellant's position. Consequently, the Tribunal allowed the appeal and granted the refund benefit.

Classification of Services as Exports:
The appellant argued that the transactions with overseas entities should be considered exports based on the agreements, which established a principal-to-principal relationship. The Tribunal analyzed the agreement clauses and found no indication of an intermediary role by the appellant. Reference was made to a Circular defining 'intermediary' and a previous Tribunal decision supporting the exclusion of sub-contracting from intermediary services. The Tribunal concluded that the appellant satisfied the conditions for export of services, thus qualifying for the refund benefit under Rule 5. The appeal was allowed, setting aside the rejection of the refund benefit.

Separate Judgement:
No separate judgment was delivered by the judges in this case.