2024 (9) TMI 1172 - AT - Service Tax

Grant of erroneous refund - appellants are an intermediary or not - whether the appellant are eligible for refunds filed by them periodically? - HELD THAT - The appellants are working on a principal-to-principal basis as far as Airbnb, Ireland and PayU are concerned. Airbnb, Ireland is engaged in provision of accommodation to tourists/ visitors all over the places; Airbnb has a pool of accommodation which is offered by the owners of the properties to Airbnb for a consideration; the customers who require accommodation book the same on the website of Airbnb, Ireland. The appellant, pursuant to the Master Service Agreement provides Payment Processing Services by collection reservation amounts booked on Airbnb platform by Indian guests originating in India by initiating payment of fees due to hosts for utilization of their accommodation. In the instant case, the conditions laid down by Hon ble Punjab Haryana High Court in the case of Genpact 2022 (11) TMI 743 - PUNJAB AND HARYANA HIGH COURT are not satisfied as the relationship between the appellant and the Airbnb, Ireland is not that of a principal agent; there is nothing in the agreement to indicate that the appellants are facilitating the main service provided by Airbnb to their customers; in fact, the appellants are rendering services to ensure that the property owners received their consideration for renting of the property to M/s Airbnb, Ireland; the appellants are not mediating between Airbnb, Ireland and their customers in the provision of the main service. There are no main service and the auxiliary service in the instant case. Though the appellant is located in India, the recipient of the service rendered by the appellant is located outside India; the appellant receives remuneration in foreign exchange and the appellant and Airbnb, Ireland is not different establishments of a distinct person. As far as the provision of main service is concerned, there are only two parties in the present case i.e. the appellant and Airbnb, Ireland; the appellant provides single service of processing of payment to Airbnb, Ireland; the appellants have no relation whatsoever with the customers accessing the platforms of Airbnb; there is no tripartite agreement either; the clauses of the agreements do not create a principal-agent relationship; the appellant does not receive a commission and does not facilitate any main service between Airbnb, Ireland and their customers. In fact, in the facts and circumstances of the case, the appellants are providing Back Office Services which are outsourced which cannot be called Intermediary Services. In the instant case, the appellants do not satisfy the conditions so as to render their services to be Intermediary . It is clear from the terms of the Agreement that they are on principal-to-principal basis; there is no principal-agent relationship and the appellants do not render any service to facilitate the provision of main service by Airbnb, Ireland. On the other hand, they satisfy the conditions of Rule 6A of Service Tax Rules and accordingly, the services rendered by them to Airbnb, Ireland are to be treated as Export of Services. Therefore, the appellants are eligible for the refunds claimed and they are not liable to pay any service tax on the services rendered by them. Accordingly, the impugned orders are liable to be set aside. Appeal allowed.

Summary

Issues Involved:
1. Determination of whether the appellant is an intermediary.
2. Eligibility of the appellant for the refunds claimed.
3. Sustainability of the demand of service tax.

Issue-wise Detailed Analysis:

1. Determination of whether the appellant is an intermediary:
The primary issue is whether the appellants are intermediaries as per Rule 9(iii) of the POPS Rules, 2012. The definition of "intermediary" under Section 2(f) of the POPS Rules, 2012, and the CBIC Circular No.159/15/2021 dated 20.09.2021 were examined. The tribunal found that the appellants are working on a principal-to-principal basis with Airbnb, Ireland, and PayU. The Master Service Agreement between the appellant and Airbnb, Ireland, and the agreement between the appellant and PayU, indicated that the appellants provide Payment Processing Services and are not involved in facilitating the main service provided by Airbnb to their customers. The tribunal concluded that the appellants do not satisfy the conditions laid down by the Hon'ble Punjab & Haryana High Court in the case of Genpact India Pvt. Ltd., which requires a principal-agent relationship, involvement in arranging or facilitating the main service, and not performing the main service themselves. Therefore, the appellants are not intermediaries.

2. Eligibility of the appellant for the refunds claimed:
The tribunal examined whether the appellants are eligible for the refunds claimed for the periods October 2016 to December 2016, and January 2017 to March 2017. The tribunal noted that the appellants provide services to Airbnb, Ireland, on a principal-to-principal basis and receive remuneration in foreign exchange. The tribunal referred to several cases, including Verizon India Pvt. Ltd., Orange Business Solutions Pvt. Ltd., and Lubrizol Advanced Materials India Pvt. Ltd., which supported the claim that the services provided by the appellants are not intermediary services but are export of services. The tribunal concluded that the appellants satisfy the conditions of Rule 6A of the Service Tax Rules, and therefore, the services rendered by them to Airbnb, Ireland, are to be treated as export of services. Consequently, the appellants are eligible for the refunds claimed.

3. Sustainability of the demand of service tax:
The tribunal examined the demand of service tax amounting to Rs.2,04,15,167/- along with interest and penalties. The tribunal found that the services provided by the appellants are not intermediary services but are export of services. Since the service tax is not payable on export of services, the tribunal concluded that the demand of service tax is not sustainable. The tribunal also noted that there was no fraud or suppression on the part of the appellants, and therefore, the extended period for issuing the show cause notice is not invokable. The tribunal referred to the case of M/s G D Goenka Private Limited, which supported the claim that the show cause notice is barred by time. Consequently, the demand of service tax along with interest and penalties is not sustainable.

Conclusion:
The tribunal concluded that the appellants are not intermediaries and are eligible for the refunds claimed. The demand of service tax along with interest and penalties is not sustainable. Both appeals filed by the appellants are allowed with consequential relief as per law.

(Order pronounced in the open court on 04/09/2024)