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TMI Blog2019 (8) TMI 384X X X X Extracts X X X X X X X X Extracts X X X X ..... of POPS, shall be the place of provision of services, provided to Verizon US - HELD THAT:- The said stand of Revenue is wholly mis-construed and erroneous. Firstly, no demand notice was issued on the appellant refusing or questioning the status of the export of service to Verizon US, as declared in their ST-3 Returns -. Further, admitted facts are that the appellants have provided output services and raised invoices on principal to principal basis. The appellant has not been acting as intermediary between another service provider and Verizon US. This fact is also supported from the fact that the appellant has raised their bills for the services provided on the basis of cost plus 11% mark-up. As the services have been provided by the appellant under contract with Verizon US, who are located outside India and have raised their invoices, for such services and have received the remittance in convertible foreign exchange, the appellant satisfies all the conditions, as specified under Rule 6 A of Service Tax Rules, 1994, inserted w.e.f 1.7.2012. It is evident that the services of the appellant to Verizon US do not merit classification under the category of intermediary services - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ims of proportionate input service tax credit under Rule 5 of the Cenvat Credit Rules 2004 read with Notification No.27/2012-CE (NT). All these appeals relate to rejection of refund claim on export of service, as it appeared to Revenue that the appellant is providing the services to their principal located outside India as an intermediary as defined under Rule 2 (f) of POPS Rules read with Rule 9(c) of POPS Rules, which provides the place of provision of following services shall be the location of the service provider (a).............................. (b)................................... (c)Intermediary services 4. Further, Rule 2(f) defines intermediary - means broker, an agent or any other person , by whatever name called, who arranges or facilitates a provision of a service (hereinafter referred to as the Main Service ) or supply of goods, between the two or more persons, but does not include a person who provides the main service or supplies the goods on his own account . The details of the appeals and the period involved is as follows:- Appeal No. Period Involved Impugned order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and only the extent permitted by Local Regulations, including: sales support, marketing, advertising, billing, maintenance and engineering support, IT support, systems integration, legal, human resources, financial, executive and other administrative services, as well as any other services where a function or resource of one of the parties is used by the other party or benefits are shared by the parties and such telecommunications services outside the territory as are procured by Globenet and /or OpCo. Customers persons (other than any member of the Verizon Group) who have entered or in the future enter into contracts with the Verizon Group for the provision of certain Business Services). Telecommunication Services the provision of voice and /or data transmissions and associated services which includes (but is not limited to) internet services and any other services which are ancillary to the provision of such telecommunication services; 2.Provision of Service Reference in this Clause 2 (except Clause 2.1) to an obligation on Globenet to perform or not to perform an action shall be deemed to include an alternative obligation on Globenet to procu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk requirements, CPE procurement identification, installation of CPE, and sales support and service (including repair of network, as required ) 2.3.1.13 to the extent the OpCo sales team maintains secondary customer relationships which support the efforts of Globenet, OpCo will mange aspects of the customer service requirement in the Territory including, but not limited to, serving as a local point of contact for relevant customers outside the territory, identifying the requirements of local customer operations, coordinating other local aspects of global contracts, ensuring compliance with local rules and regulations, and managing the availability of the local network; and 2.3.1.14 OpCo will invoice customers located in the Territory with whom the OpCo has a direct contact. 2.4 Gobenet s Obligations 2.4.1 Subject to its right to procure performance of the same in accordance with the first paragraph of this Clause 2 and if and when and only to the extent permitted by all applicable laws and regulations, Globenet shall perform the Globenet Functions with respect to rendering Business Services, such Globenet Functions to be provided from the Effective Date, ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will enter into such contract with the customers in the Territory as principal in its own name and on its own account only and not as agent of any other member of the Verizon Group. Schedule I to the Agreement 2.1 The percentage outlined below reflect the arm s length price for Business Services as of the Effective Date of this Agreement based on the most recent data available at that time. Any of the percentages may be amended pursuant to Clause 3.10 of the Agreement from time to time in order to ensure that such percentages continue to represent arm s length prices for such Business Services. 2.1.1. The Net Cost Plus Percentage shall mean 11 (eleven) percent. 2.1.2. The Operating Margin Percentage shall mean 11(eleven) percent. 3.1 The Business Services Fee payable to OpCo by Globenet for Business Services performed by OpCo pursuant to this Agreement shall include reimbursement for the following amounts (collectively, the Reimbursed Costs): 3.1.1 Non-Routine Bad Debt Expense; 3.1.2 Non-Routine Inventory Obsolescence Expense; 3.1.3 Certain losses from the sale of fixed assets used in the conduct of the Business as set forth in Clause 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has actually realised full exports proceeds of the relevant period in convertible foreign exchange. (vi) Whether the input services, on whose credit the refund is applied for, are used for providing the exported service. (viii) Whether the Refund claim calculation is as per Notification No.27/2012 dated 18.06.2012 read with Rule 5 of Cenvat Credit Rules, 2004. 7. Further, the Adjudicating Authority examined the conditions laid down in Rule 6 A of Service Tax Rules, 1944, which are as under :- Service Tax Rules, 1994: the conditions to be fulfilled for Business Support Services to qualify as exports were prescribed in the Service Tax Rules which were as follows: Condition 1: The service provider should be located in the taxable territory. Condition 2: The service recipient should be located outside India; Condition 3: The service should not be covered under Section 66 D of the Finance Act, 1994 for negative list of services. Condition 4: The place of provision of services should be outside India Condition 5: The payment for such services should be received by the service provider in convertible foreign exchange. Condition 6: The servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal amount as shown in export invoices has been realised in convertible foreign exchange. 9. The assessee provides the services mentioned above to MC Communications Services Inc., U.S.A. The services have been classified by the assessee under Business Support Services. On perusal of the agreements and the write up submitted by the party, it appears that party is supporting the business of overseas entities and is covered under the ambit of Business Support Services. Therefore, the services are correctly classified under the category of Business Support Services. 10. On going through the export invoices and documents submitted as evidence for realisation of export proceeds, it is observed that the total amount as shown in export invoices was realised in convertible foreign exchange. Self certified statement including relevant BRCs evidencing the receipt of export proceeds invoices wise has also been annexed to the claim. 11. The assessee has furnished the following justification for use of input services for output services. 12. For providing the output service exported, the Adjudicating Authority observed that the appellants have used the following input services along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer Recruitment service Manpower is essential for rendition of output services and the manpower agencies assist in recruitment, selection and supply of manpower. These services help in recruitment of competent professionals who perform various activities in relation to the output services of the company. These services thus qualify as input service. 7. Consultancy Service This service is used for obtaining expert advices/consultancy for managing IT infrastructure, IT Platform, integration of information Technology and improving IT services. Therefore, these services are consumed in relation to providing an output service thus qualify as input services. 8. Information Technology Software Service These services are used for analysis, up gradation and installation of IT software at customer premises in relation to the information Technology software and data security. All these are therefore directly related to the business operations and hence qualify as input service. 9. Installatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the service provider . It appeared to Revenue that the appellant is providing service as intermediary and not as a principal on his own account and as such, the place of provision is in India within the taxable territory, thus, it appeared that the services provided by the appellant to the MCI, USA are not export of service and hence, the appellant is not eligible to refund. Accordingly, the Revenue filed appeal before the Commissioner (Appeals). The Commissioner (Appeals) has been pleased to record the findings that in the instant case the main service is telecommunication service which is being provided by the group of companies of respondent assessee to their clients. The respondent have been facilitating the provision of such services by the group companies to their clients. Further, Section 66 F provides for the principal of interpretation of specified description of services or bundled services, where a service is capable of differential treatment for any purpose based on its description the most specific description shall be preferred, over a more general description. 15. Accordingly, held it appears that the activities undertaken by the respondent/assessees are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is further submitted that in order to be intermediary, three parties are essentially involved. The appellants submit that the services do not qualify as intermediary services, as only two parties are involved in the transaction under dispute viz. the appellant, Verizon India Ltd. and Verizon, USA. There is no tripartite agreement wherein the appellant acting as a facilitator between the Verizon - US and its customers in India. The appellants have provided the services on principal to principal (P2P) and on its own account. Referring to clauses 2.3.1.12/13/14 of Agreement, it is evident that the appellant is providing the services to Verizon, USA as a principal on its own account raising their own invoices. Further, neither by reasoning or by any documentary evidences, the Department is able to prove as to how the appellant facilitates the services between the Verizon, US and its customers in order to qualify as intermediary services . Further, sofar the appellants have provided the direct services to domestic customers (within India) based on the mandate of Verizon, US, they have discharged the applicable service tax and thus, by virtue of aforementioned clauses, the appellant i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in India and, therefore, is not an export of service. The Hon ble High Court in para44 and 45 held as follows:- 44. What this Circular does is to indicate, in an Annexure thereto, the classification (by a three digit code) of services for the purposes of levy of service tax. The Annexure does not refer to telecommunication services . This did not, however, mean that in relation to telecommunication services , the earlier Circular dated 3rd January, 2007, continued to operate. Paragraph 6 of the Circular dated 23rd August, 2007 makes it explicit that, all circulars , clarifications and communications issued from time to time stands superseded. There is nothing to replace what has been superseded as far as the Circular dated 3rd January, 2007. 45. In any event the Circular dated 3rd January, 2007 would in any event not apply to the services provided by Verizon India to Verizon US. In order to determine who the recipient of a service is, the agreement under which such service has been agreed to be provided has to be examined. When the Master Supply Agreement between Verizon India and Verzon US is examined, it is plain that the recipient of the service is Verizon US an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... electronic data transfer service. It was wrongly applied by the Department. With its total repeal by the subsequent Circular dated 23rd August, 2007, there was no question of it applying to deny the refund for the period January 2011 till September, 2014. (vi) Even for the period after 1st July, 2012 the provision of telecommunication service by Verizon India to Verizon US satisfied the conditions under Rule 6A(1)(a), (b), (d) and (e) of the Service Tax Rules and was therefore an export of service . The amount received for the export of service was not amenable to service tax. 55. The Court is satisfied, therefore, that in the present case, 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 impugned orders dated 12th September, 2016 passed by the Commissioner denying the refund of cenvat credit to Verizon India for the aforementioned period and the SCN dated 11th November, 2016 issued to it raising a demand of service tax for the export of services, and all proceedings consequent thereto, are he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iary services, the location of the service provider shall be the place of provision of service. Further, it is evident from Clauses 2.3.1.12/13/14 of Agreement that the appellant is a person, who arranges and facilitates the provision of service between the Verizon US and the customers in the territory of India. 27. The ld. Authorised Representative further submits that the ruling of Delhi High Court in the appellant s own case pertains to Positive List Regime, before 30.06.2012. When there was no rules regarding POPS which came into operation only during Negative List Regime w.e.f. 1.7.2012 in the form of POPS Rules. Further, the recipient of service is the person, on whose instructions/orders, the service is provided and who is obliged to make payment for the same and whose need is satisfied by the provision of such services. In the instant case, due to applicability of Rule 9, place of provision of service rules (POPS Rules) is the location of service provider- appellant. Accordingly, the ld. Authorised Representative prays for dismissing the appeals. 28. Having considered the rival contentions, we find that so far the Appeal No.ST/51164 of 2017 relating to the period Apr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27th February, 2018. (2) M/s. Sunrise Immigration Consultants Pvt. Ltd. Vs. Commissioner of Central Excise and Service Tax, Chandigarh [2018-TIOL-1849-CESTAT-CHD dated 16th March, 2018] (3) GoDaddy India Private Limited as Commissioner of Service Tax, Delhi-IV [AAR/ST/08/2016] [ GoDaddy ] (4) Universal Services India Private Limited Vs. The Commissioner of Service Tax, Delhi-IV [AAR/ST/07/2016]. 31. From perusal of the aforementioned ruling, it is evident that the services of the appellant to Verizon US do not merit classification under the category of intermediary services . Further, the Hon ble High Court has held in the appellant s own case (supra) that the agreement between the related parties does not have any impact on the export of services. Further, the findings of the Commissioner (Appeals) that the service provided by the appellant do not qualify as export, as such services provided to the customers, have been consumed in India, is directly in conflict with the ruling of this Tribunal in the case of Paul Merchants Ltd. (supra). Accordingly, we hold that the appellants have rendered services to Verizon US as principal service provider and not as an in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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