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TMI Blog2020 (10) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... ot on its own account to be distinguished by provision of main service on own account, it would appear that while being provider one of the two essential determinants of service the consideration received, as it must for coverage under Finance Act, 1994, by the intermediary is lesser than, or subordinate to, the consideration that corresponds to performance of the main service on own account. Here, irrespective of the delivery of the main service in the taxable territory or otherwise, the consideration received by the provider in India is deemed to have been for service rendered in India. From this would emerge a pattern in which services coalesce within a main service detracting from independent existence of each of them except for the description corresponding to consideration of the coalesced main service rendered on own account which is characterized by the recipient of service acknowledging only one provider for contractual consideration but yet carrying on business with other entities with whom the recipient of consideration has entered into separate contracts. There is no broader span of activity than the ticketing/booking for access to ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s intermediary service taxable in the hands of the provider. Assessee-appellant is provider of the service and, hence, liability devolves on them in terms of rule 9 of Place of Provision of Service Rules, 2012. The impugned order has taxed two streams of consideration: commission based on passenger bookings and fixed marketing service fee and, while the former is consideration for intermediary service as set out above, the nature of the latter is not clear. Though the adjudicating authority has not given much thought to its computation, it would appear from the invoices, that these have been billed as a standard amount. Nevertheless, in the narration of facts, the adjudicating authority has recorded that the dues under this head are netted; as netting out involves adjustment of flows in both directions and there is no ostensible reason for the assessee to pay the overseas entity, we are unable to decide the legality of subjecting the marketing service fee to tax - Furthermore, in the context of our finding on the taxability of commission fee , with consequent denial of refund of accumulated credit, the assessee may be entitled to utilise such CENVAT credit in the disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause notice dated 19th April 2017 for recovery of ₹ 50,65,35,795, under section 73(1) of Finance Act, 1994, along with applicable interest under section 75 of Finance Act, 1994, was confirmed and penalty of like amount imposed under section 78 of Finance Act, 1994 with further penalty of ₹ 5000 under section 77 of Finance Act, 1994 vide order-in-original no. 96/COMMR/(DR. KNR)/CGST CEX/MC/2018-19 dated 6th November 2018 of Commissioner of CGST CEX, Mumbai Central. The assessee is in appeal against this order. 3. M/s Sabre Travel Network (India) Pvt Ltd had, in accordance with rule 5 of CENVAT Credit Rules, 2004, filed four applications for refund of ₹ 28,41,563, ₹ 37,12,591, ₹ 15,85,672 and ₹ 13,63,439, pertaining to each quarter between October 2013 and September 2014, claimed to be the accumulated credit of tax paid on input services attributable to export of output services to M/s Abacus International Pte Ltd, Singapore and to M/s Abacus Travel Systems Pte Ltd, Singapore; these were adjudicated by the competent authority in three orders. While that for October 2013 to March 2014, against 14 invoices, was summarily rejected fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice, of enumeration in the negative list or of exemption under any notification, the transaction is otherwise taxable. The claim to being an exporter is based on the contract, asserted to be on principal-to-principal basis, which places the recipient in Singapore and obliges that entity to remit the dues in convertible foreign currency. The scope and terms of the contract were dealt with at length by Learned Counsel and, placing emphasis on the decision of Tribunal in the dispute for the earlier period, it is contended by him that recourse to intermediary was prompted solely by the determination to saddle them with tax liability, despite the consideration being nothing but export proceeds realized in foreign currency, on the impugned transaction. 6. The thrust of arguments advanced by Learned Counsel for the appellant-assessee is the equivalence of the transaction, affirmed as exports by the Tribunal in the pre- negative list era, with those continued unchanged even thereafter. According to him, the new regime has merely broadened the tax base without any impact on existing assessees and that tax authorities were not justified in denying the privileges that, in the erstwhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncees for marketing the use of their software platforms among travel agents in return for a share in the commission, were held by the Tribunal, in Blue Star Air Travel Services Pvt Ltd v. Commissioner of Service Tax [2018-TIOL-1233-CESTAT-AHM], to be taxable for rendering of business auxiliary service to the licenced holder of the software. The underlying web of transactions were segregated as different taxable services though, as pointed by Learned Counsel with reference the demand raised on the assessee herein for providing business auxiliary service , saved from liability to the extent of conformity with Export of Service Rules, 2005. Thus, even by the argument put forth by Learned Counsel, the impugned activities are conceded to be service in the new regime and taxable as well. 9. We now turn to the fitment of exports within the tax scheme as intangibility of services does not lend itself to as easy a discernment as in commodities. And yet, it must needs be for exclusion from tax without compromising taxability. In its truest sense, service is the satisfying of one s need through another person engaged as a provider , sine qua non in any service transaction, and afforded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the context of tax on services. Not least of such pronouncements is the decision of the Hon ble Supreme Court in Union of India v. Intercontinental Consultants and Technocrats Pvt Ltd [2018 (10) GSTL 401 (SC)] that restricted the taxable value to the extent of description of the taxable transaction manifested through provider and recipient. 11. That design, comprising specific descriptions, encapsulated within the provider-recipient engagement, and consideration, though difficult enough to administer in the domestic jurisdiction, nevertheless, did, inherently, facilitate exemption of exports as the legal eclipsing of the recipient from, and in, the tax jurisdiction could not survive definitional conformity. Two significant developments were to intrude on this simple artifice: maturation of the scheme of CENVAT credit by absorption of service tax within its fold and the according of national treatment to services procured from outside the tax jurisdiction. With taxable output services as the pivot for setting off duties and taxes borne on procurement of goods and services, refund of accumulated credit, ascribed to exports, could be appended to the architecture of the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scerning the service transaction even as recipient , with the obliteration of carefully crafted boundaries inherent to the definition of taxable services by the generalized explication as the substituting of self-performance, had ceased to be. 13. Impliedly, the obligation to recompense the provider devolves on the person who opted for hiving off the undertaking of an activity. Consequently, the extent, and not just the measure of value, of service, no longer bound by the description of activity, corresponds to the consideration which also represents the physical, and legal, capability for, as well as the value at which it is commercially viable to desist from, undertaking the activity by oneself. The expression service in Finance Act, 1994 is the legal template of this economic arithmetic for encompassing all intangibles in the marketplace. Description of a service, if warranted for any purpose related to taxation, would henceforth have to be inferred from the consideration. Ironically, the generality of definition of service in section 65B(44) of Finance Act, 1994, with its emphatic for another as the most apt approximation for outsourcing , could not, of itself, off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scope of taxable service in the erstwhile regime was determined along the border of the provider-recipient transaction that frames the image suggested by the description and to which the consideration was subordinated as a measure of the value for tax. Almost all the enumerations were formulated in by to equations reflecting duality of provision and consideration flows in service transactions. The only exception was business auxiliary service , defined in section 65(105)(19) of Finance Act, 1994 for expounding the scope of section 65(105)(zzb) of Finance Act, 1994, in which the business relationship of client and provider was rendered complete by utility to a third person. It was, probably, the complexity of this three-way transaction that prompted the adjudicating authority to equate it with the no less complex intermediary in rule 9(c) of Place of Provision of Service Rules, 2012. 15. Learned Counsel did, from the outset, oppose this equivalence which, according to him, may apply to a much narrower construct of business auxiliary service and we may safely concur with that proposition though not necessarily on degree of incongruity or its relevance to the disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TMI 1417- CESTAT Chandigarh holding that referral of potential students/customers of banks/educational institutions by the appellant for commission is not taxable as intermediary , in Evalueserve SEZ Pvt Ltd and Anr v. Commissioner of Customs, Central Excise Service Tax, Chandigarh [2018 (12) TMI 1242-CESTAT Chandigarh] holding that receipt of consideration from overseas client excluded them from tax as intermediary , in Valmiki Consultants Pvt Ltd v. Commissioner of Customs Central Tax, Hyderabad [2008 (11) TMI 1085-CESTAT Hyderabad], which followed the decision of the Tribunal in re Sunrise Immigration Consultants Pvt Ltd and other decisions of similar nature cited therein, in Commissioner of Goods Service Tax, Gurgaon II v. Orange Business Solutions Pvt Ltd [2019-VIL-332-CESTAT-CHD-ST] and in Verizone India Pvt Limited v. Commissioner of Service Tax, Delhi [2019-VIL-527-CESTAT-DEL-ST]. The commonality in all these decisions, either setting aside orders of the adjudicating authority or upholding of proceedings dropped by the adjudicating/appellate authority, is that taxability as intermediary service was impugned before the Tribunal. These are, just as strikingly, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther detrimental or beneficial to existing assessee is acceptable as such intent was specifically sanctioned by legislation. The respondent, prior 1st July 2012, was eligible for all benefits as the service rendered by them was treated as export with the recipient of service being outside the country. The corresponding provision in Place of Provision of Service Rules, 2012 is rule 3 which brings the service within the ambit of export of service in rule 6A of Service Tax Rules, 1994. The revenue has not made any submission of legislative intent to deprive a provider of scientific or technical consultancy service in the erstwhile fishing of its status as export of service owing to change in the regime. as supporting of the applicability of earlier decisions to the negative list era too. Therein, it was not that the Tribunal was not cognizant of the new dimension of service tax but that the onus was placed on Revenue to put forth the consequence of the transformation on the assessee and, taking note of their inability to do so, upheld the order of lower authority. In the present dispute, it falls upon the assessee to alienate themselves from designation as intermediary whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax as service rendered in taxable territory under the authority of section 66B of Finance Act, 1994 much like it was in the classificatory regime. The out of normal is the contriving, in specific circumstances, of taxable territory , under authority of section 66C of Finance Act, 1994 by recourse to Place of Provision of Service Rules, 2012 which is designed to locate the delivery of service within the taxable territory , by reference to provider, in rule 9, or recipient, in rule 8 and, in other rules, to triggering circumstances, for invoking section 66B of Finance Act, 1994. Superficial equivalence with commodity exports, by identification of recipient as claimed by appellant-assessee, does not, owing to statutory obliteration of recipient in determining the rendering of service , suffice for exacting privileges without conforming to rule 6A of Service Tax Rules, 1994. 21. Therefore, unlike in the erstwhile regime in which exclusion from taxability was determined, whenever consideration was received in foreign currency, by subjecting the description to the trifurcated categorization in Export of Service Rules, 2005, every activity conforming to the definition of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. Here, irrespective of the delivery of the main service in the taxable territory or otherwise, the consideration received by the provider in India is deemed to have been for service rendered in India. From this would emerge a pattern in which services coalesce within a main service detracting from independent existence of each of them except for the description corresponding to consideration of the coalesced main service rendered on own account which is characterized by the recipient of service acknowledging only one provider for contractual consideration but yet carrying on business with other entities with whom the recipient of consideration has entered into separate contracts. This is the only chain of service providers that offers latitude for several entities to participate in transactions of service that is main service; the alternative model, and more commonplace, is the sequential coalescing of main service on own account that progressively merges to extend the consideration and the corresponding description of the service provided. The argument on behalf of the appellant for exclusion of the former of the alternatives from the intermediary int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee and of the assessee with the travel agent. In all of these multiple transactions that enable a traveler to fly or occupy accommodation, the fare and tariff is in the public domain and the airline/hotel offers commission on that to the parent company of the appellant; consideration for all other transactions pertaining to the ticketing/booking are constrained within this consideration to derogate from autonomy of negotiation and progressive summation of consideration to paid by the ultimate consumer thus derogating from the hallmark of main service on own account. Consequently, the activity of the assessee-appellant rendered is intermediary service taxable in the hands of the provider. Assessee-appellant is provider of the service and, hence, liability devolves on them in terms of rule 9 of Place of Provision of Service Rules, 2012. 24. We may, in addition to the legal scrutiny, subject the transaction of the appellant-assessee to the test of logic too. The key to comprehending the devolution of liability on intermediary is the substitution that is the essence of service as a concept. For the mobilization of travel agents as subscribers, catering to a market comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration has been subjected to the test of conformity with intermediary service. That portion of the refund claim that has been rejected on the ground of lack of nexus and bar of limitation will require to be looked into afresh in the light of several judicial pronouncements that have settled identical disputes. 27. For these reasons, we hold that the appellant-assessee has failed to discharge the tax liability on commission fee received as intermediary for marketing and promoting of computer reservation system but liability thereon requires re-computation; the tax liability, if any, on marketing service fee will have to adjudged upon by ascertainment from the details in the agreement. The availability of CENVAT credit for discharge of consequent liability will also have to be ascertained. Likewise, the refund sanctioning authority can discard the claims relating to marketing service fee only after the competent authority has decided on the place of provision of service. 28. Therefore, while upholding the finding in the adjudication order, arising from the proposal to recover tax, to the extent of the confirmation that commission fee is consideration for servi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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