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TMI Blog2022 (12) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... ces 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 CO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service Rules 2012 [ the 2012 Rules ] of the unutilized input service credit of input services used by SGIPL to export telecommunication services to Singapore Telecommunications Ltd. [ SingTel ] (located in Singapore) in terms of the contract dated 14.07.2011. The order passed by the Commissioner (Appeal s) while granting the refund, has primarily placed reliance upon the judgment of the Delhi High Court in Verizon Communication India Pvt. Ltd. versus Asstt. Commr. S. T., Delhi-III [ 2018 (8) G.S.T.L. 32 (Del.) ]. 6. It needs to be noted that the period involved in Service Tax Appeal No. 52609 of 2019 is from July 2015 to September 2015 and the refund claim pertaining to the said period was allowed by the Assistant Commissioner by order dated 18.06.2018 after holding that SGIPL was not an intermediary. However, the refund claim for the period October 2015 to December 2016, which is the subject matter of Service Tax Appeal No. 52682 of 2019, and the refund claim for the period from January 2017 to June 2017, which is the subject matter of Service Tax Appeal No. 50023 of 2020, was rejected by the Assistant Commissioner by orders dated 23.10.2018 and 23.07.2019 on the ground that S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice are not merely establishments of a distinct person in accordance with item (b) of Explanation 3 of clause (44) of section 65B of the Act (2) Where any service is exported, the Central Government may, by notification, grant rebate of service tax or duty paid on input services or inputs, as the case may be, used in providing such service and the rebate shall be allowed subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification. 10. As noticed above rule 6A of the 1994 Rules deals with export of services and sub-clause (d) of sub-rule (1) provides that the provision of service shall be treated as export of service when the place of provision of service is outside India. The place of provision of service is determined under the 2012 Rules. Rule 3 deals with place of provision generally. It is as follows: 3. Place of provision generally. - The place of provision of a service shall be the location of the recipient of service: Provided that in case of services other than online information and database access or retrieval services, where the location of the service receiver is not available in the ordinary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an intermediary is involved with two supplies at any one time: (i) the supply between the principal and the third party; and (ii) the supply of his own service (agency service) to his principal, for which a fee or commission is usually charged. For the purpose of this rule, an intermediary in respect of goods (commission agent i.e a buying or selling agent) is excluded by definition. In order to determine whether a person is acting as an intermediary or not, the following factors need to be considered:- Nature and value: An intermediary cannot alter the nature or value of the service, the supply of which he facilitates on behalf of his principal, although the principal may authorize the intermediary to negotiate a different price. Also, the principal must know the exact value at which the service is supplied (or obtained) on his behalf, and any discounts that the intermediary obtains must be passed back to the principal. Separation of value: The value of an intermediary's service is invariably identifiable from the main supply of service that he is arranging. It can be based on an agreed percentage of the sale or purchase price. Generally, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and a recovery agent have been given. 20. In order to appreciate the contentions advanced by Shri Ravi Kapoor learned authorized representative appearing for the department and Shri Krishna Rao assisted by Ms. Akansha Wadhani learned counsel for SGIPL, the Agreement dated 14.07.2011 entered into between SGIPL and SingTel has to be examined. The agreement would determine whether the services provided by SGIPL would fall in the category of intermediary service . 21. The relevant clauses of the Agreement are, therefore, reproduced below: SGIPL Supply Agreement Date: This Agreement is made this 14th day of July 2011 Parties: (1) SingTel Global (India) Private Limited, a company incorporated in India and having its registered office at 5th Floor, Statesman House, 148, Connaught Place, New Delhi-110001 (hereinafter referred to as SGIPL ) on the one part, AND; (2) Singapore Telecommunications Limited, a corporation organized and existing under and by virtue of the laws of Singapore, Company Registration Number 199201624D, having its registered office at 31 Exeter Road, Singapore (239732) (hereinafter referred to as SingTel ) on the other part. Recitals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SGIPL shall provide the Services in accordance with the terms and conditions of its telecom licenses and all applicable laws. 4.7 SGIPL shall bill on SingTel for the Services provided by SGIPL. 5. Responsibility of Singtel 5.1 SingTel shall, whether itself or through its distributors or suppliers, provide, operate, maintain and manage all ILCs and network equipment in the Territories. 5.2 SingTel shall also bear the exchange risk realizable and arising from any transactions transacted in foreign currency and similarly will be remunerated fully for any realised exchange gains attributable to SGIPL. 5.3 When SingTel submits an order for the Services, SingTel must submit a Letter of Undertaking signed by the End User Customer in India in the form attached as [Schedule C] attached. 5.4 SingTel and SGIPL shall each be responsible for all planning, design and capacity management activities required for its respective network, including associated bandwidth, to support the launch and delivery of Services. This includes responsibility for any future enhancements and changes to the network. 6. Charges and Payment 6.1 Service provided by SGIPL will be charged at m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Singapore. It, on its own or through one or more of its affiliates or suppliers, has the capability to provide services in foreign territories. SGIPL is a licensed provider of certain telecommunication services in India and provides, or can procure, certain telecommunication services in India. SGIPL had desired to supply and SingTel had agreed to procure from SGIPL services necessary and ancillary to enable SingTel to provide to its customers seamless global telecommunication services upon the terms set out in the Agreement. The responsibilities of SGIPL are contained in clause 4 of the Agreement. Clause 4.3 provides that SGIPL shall provide, at its own expense, all facilities and resources whatsoever necessary to enable it to provide services to SingTel. In terms of clause 4.7, SGIPL shall bill on SingTel for the services provided by it. The responsibilities of SingTel are contained in clause 5 of the Agreement. Clause 6 of the Agreement deals with charges and payment. It provides that SGIPL will invoice SingTel in US dollars for the services by the end of the month following the month of the provision of services and SingTel will be required to pay such monthly invoices within 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. SGIPL entered into agreements with the Indian telecommunication service providers for providing bandwidth so as to enable it to provide the required services to SingTel for its customers. Thus, the two Agreements are distinct and independent from each other. SGIPL provides the main service i.e. telecommunication service to SingTel on its own account. 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. 26. The Commissioner (Appeals) had relied upon the decision of the Delhi High Court in Verizo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered in India; and the place of provision of such service to Verizon US remains outside India. 28. In this connection, the Circular dated 24.02.2009 was relied upon which is as follows: For the services that fall under category III [Rule 3(1)(iii)], the relevant factor is the location of the service receiver and not the place of performance. In this context, the phrase used outside India is to be interpreted to mean that the benefit of the service should accrue outside India. Thus, for Category III service [Rule 3(1)(iii)], it is possible that export of service may take place even when all the relevant activities take place in India so long as the benefits of these services accrue outside India... 29. The summary of the conclusions noted by the Delhi High Court are as follows:- 54. To summaries the conclusions: (i) It made no difference that Verizon India may have provided telecommunication service and not business support services since to qualify as export of service both had to satisfy the same criteria. (ii) The provision of telecommunication services by Verizon India during the period January, 2011 till 1st July, 2012 complied with the two con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h services have been provided to their overseas client. In other words, the appellant have emphasized the fact that the respondent have merely procured the services for their overseas client. However, such pleadings are not agreeable for the reasoning that the respondent have provided such services on their own account. Various input service providers of respondent raise invoices of value of taxable services on the respondent. The respondent pay the same. In turn, they raise invoices on their overseas client. The intermediary essentially excludes any person who has provided the service on their own account. Also, the issue in hand is squarely covered by the judgment in Verizon Communications India Pvt. Ltd. Vs ACST [2018 (8) GSTL-32 (Del)] where in the Hon'ble High Court has clearly held that for the period post July 2012, the telecommunication service falls under Rule 3 of Place of Provision of Services Rules, 2012 (para 49 of this judgment refers). In the present case, it is undisputed that the service provided by the respondent merits classification under telecommunication service. Hence, in view of reasoning stated above and also considering the ratio of judgment as afore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordingly, we hold that the appellants are entitled to refund under Rule 5 of the Cenvat Credit Rules, 2004 read with the notification . Thus, these appeals are also allowed with consequential benefit and the impugned orders are set aside. (emphasis supplied) 32. Learned counsel for the SGIPL also placed reliance upon a decision of the Chandigarh Bench of the Tribunal in Service Tax Appeal No. 61877 of 2018 decided on 08.08.2022 [M/s. BlackRock Service India Private Limited vs. Commissioner of CGST]. After reproducing the definition of intermediary , the Bench observed that: 5. A plain reading of the aforesaid provision makes it clear that to attract the said definition there should be two or more persons besides the service provider. In other words an intermediary is someone who arranges or facilitates the supplies of goods or services or securities between two or more persons. It is thus necessary that the arrangement requires a minimum of three parties, two of them transacting in the supply of goods or services or securities (main supply) and one arranging or facilitating the said main supply. Therefore, an activity between only two parties cannot be considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33. Learned authorized representative appearing for the department however placed relied upon the decision of the Mumbai Bench of the Tribunal in Commissioner of Service Tax vs. Lamhas Satellite Services Ltd. [2019-TIOL-2716-CESTAT-MUM] to contend that SingTel is an intermediary. The respondent therein had filed refund claims under rule 5 of the 2004 Credit Rules for claiming refund of accumulated credit against the export of services. It is on a consideration of the agreement entered into between Lamhas Satellite Services and Globecast Asia PTE Ltd. that the Tribunal concluded that the services were covered by the term intermediary defined under rule 2(f) of the 2012 Rules. The relevant portion of the decision is reproduced below:- 5.7 From the agreement referred above it is quite evident that the agreements provide in detail the responsibilities of the parties to the agreement. It also provides for payments for various activities and manner of payment to. As per this agreement for certain services, i.e.- i. Channel Carriage, the claimant enters into agreement with the Channel Distribution Partner on and behalf of GlobeCast. The Channel Distribution Agreement is entered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The distinguishing factor was noticed in paragraph 5.10 in the following manner: From the schemes as depicted above it is very clear that, the head office of the recipient of service was located outside India and was billed by the entity located in USA. Hence the services were held to be provided in USA. In the present case the except for routing the payment through LAMHAS, who have entered into the Channel Distribution Agreement with Channel Distribution Partners, the services of Channel Carriage were provided by the Channel Distribution Partners to TV-NOVOSTI directly. Hence the services provided by the LAMHAS in this respect qualify as intermediary services . 35. 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. 36. Thus, for all the reasons stated above, all the three Service Tax Appeals, namely Service Tax Appeal No. 52609 of 2019, Service Tax Appeal No. 52682 of 2019 and Service Tax Appeal No. 50023 of 2020 filed by the department deserve to be dismissed and are dismissed. (Order pronounced on 07.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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