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TMI Blog2022 (12) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... r in India, performs various promotion and marketing services more particularly set out in Schedule A of the Agreement or as requested by Blackberry Singapore from time to time. The terms of the Agreement also per se do not create any relationship of principal and agent or employer and employee. An agent is a person employed to do any act for another or to represent another in dealing with third persons. The persons for whom such act is done, or who is so represented, is the principal. A broker is a middleman or an agent who, for a commission on the value of the transaction, negotiates for others the purchase or sale of stocks, bonds, commodities, or a property. These two situations do not arise in the present case. An intermediary is a person who arranges or facilitates provision of the main service between two or more persons. The appellant is not involved in the arrangement or facilitation of the supply of service. The service provided by the appellant qualify for export since it is providing services to Blackberry Singapore, which is outside India and is receiving convertible foreign exchange for such services. The refund claimed by the appellant under rule 5 of the Credit Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Marketing Activities Agreement effective September 3, 2006, as amended and restated effective as of March 4, 2007 (the "Amended & Restated MAA"), whereby Service Provider performs various promotion and marketing services as more particularly set out in Schedule A hereto or as otherwise requested by RIM from time to time (the "Services"). C. RIM and Service Provider desire to amend and restate the terms and conditions of the Amended & Restated MAA as hereinafter set forth. xxxxxxxxx 3.3 Services. The scope, quality and timeliness of the Services offered and provided by Service will conform to the guidelines that RIM and Service Provider may agree and establish from time to time. xxxxxxxxx 3. RIM's Assistance. RIM will provide Service Provider, at Service Provider's request, with promotional and technical materials, training and assistance to perform the Services, including, but not limited to, access to the product, marketing and business development groups to help Service Provider perform the Services. Service Provider acknowledges that RIM may subcontract third party service providers to provide any such materials, training or assistan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or control the daily activities of the other party; or constitute the parties as employer and employee, franchisor and franchisee, partners, joint venturers, co-owners or otherwise as participants in a joint undertaking. Service Provider has no right or authority to assume or create any obligation of any kind, express or implied, on behalf of RIM, or waive any right, interest or claim that RIM may have against any other person." (emphasis supplied) "SCHEDULE A 1. Service: The Services are: * promotion and marking; * technical marketing assistance; and * other related services. 2. Cost Plus Fee: 10%of the Costs 3. Cost Period: Quarterly, with RIM's fiscal quarters and with the first quarter commencing on the first of RIM's quarters that commences on or after of Effective Date. xxxxxxxxxx" 4. It would be seen from the aforesaid that the appellant is required to provide the services to Blackberry Singapore in relation to technical marketing assistance of Blackberry products. The said services would involve the following activities: (i) To create awareness and promotion of BlackBerry products and services packages in India; (ii) To recommend appropriate ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er i.e. the appellant have provided the services, as mentioned in Schedule-A, to the various clients / customers in India and these services receivers are in India. In the present case, I note that the appellant has facilitated the services between Indian customers and foreign firm. Appellant has provided the services in terms of the agreement as directed by the foreign firm. In the present case, the appellant arranged for a provision of service, between the customers and foreign company, without material alteration in terms of the agreement. Thus, from the above, I find that the appellant acted as an intermediary between the service consumers in India and foreign company and in this way two kinds of services were involved at a moment. I further note that the territory for rendering the said services is clearly mentioned as India in the said agreement. Further, under Rule 2(f) of Place of Provisions of Services Rules, 2012 and in terms of Rule 9 of Place of Provision of Services Rules, 2012 specified vide Notification No. 28/2012-S.T., dated 20-6-2012, place of provision of services to be location of service provider, therefore, I find that said services rendered cannot be treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , shall be allowed refund of CENVAT credit as determined by the following formula subject to procedure, safeguards, conditions and limitations, as may be specified by the Board by notification in the Official Gazette: Refund amount=(Export turnover of goods+ Export turnover of services)/ Total turnover x Net CENVAT credit xxxxxx xxxxxx xxxxxx Explanation 1: For the purpose of this rule,- (1) "export service" means a service which is provided as per rule 6A of the Service Tax Rules, 1994." 13. Since "export service" means a service which is provided as per rule 6A of the Service Tax Rules 1994 [the 1994 Rules], the said rule is reproduced: "6A. Export of services.- (1) The provision of any service provided or agreed to be provided shall be treated as export of service when,- (a) the provider of service is located in the taxable territory, (b) the recipient of service is located outside India, (c) the service is not a service specified in the section 66D of the Act, (d) the place of provision of the service is outside India, (e) the payment for such service has been received by the provider of service in convertible foreign exchange, and (f) the provider of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... … (ii) …… (iii) Specified in clause (105) of section 65 of the Act, but excluding,- (a) Sub-clauses (zzz) and (zzzv); (b) Those specified in clause (i) of this rule except when the provision of taxable services specified in sub-clauses (d), (zzzc), (zzzr), and (zzzzm) does not relate to immovable property; and (c) Those specified in clause (ii) of this rule, When provided in relation to business or commerce, be provision of such services to a recipient located outside India and when provided otherwise, be provision of such services to a recipient located outside India at the time of provision of such service:" 19. 'Business Auxiliary Service' is defined in section 65(19) of the Finance Act and it has been made taxable under section 65(105)(zzb) of the Finance Act. 20. The first issue that arises for consideration is as to whether the services provided by the appellant prior to 01.07.2012 can be termed as export of services. 21. The adjudicating authority, after referring to the provisions of rule 3(1) of the 2005 Export Rules, observed that BAS is excluded from the ambit of service. It is seen that BAS, which is taxable under section 65(105)(zzb) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained) 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 amount charged by an agent from his principal is referred to as "commission". Identity and title: The service provided by the intermediary on behalf of the principal are clearly identifiable. In accordance with the above guiding principles, services provided by the following persons will qualify as 'intermediary services:- (i) Travel Agent (any mode of travel) (ii) Tour Operator (iii) Stockbroker (iv) Commission agent [an agent for buying or selling of goods is excluded (v) Recovery Agent Even in other cases, wherever a provider of any service acts as an agent for another person, as identified by the guiding principles outlined above, this rule will apply." 26. Rule 2(f) of the 2012 Rules, as noticed above, defines an "intermediary" to mean a broker, an agent or any other person, by whatever name called, who arranges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chedule A, the services that are included are promotions and marketing; technical marketing assistance; and other related services. Under clause 2.4 of the Agreement the service provider could sub-contract the services, in whole or in part, to third party service providers provided it did not impose any additional liability on Blackberry Singapore and was consistent with the terms and conditions of the Agreement. Clause 4.1 of the Agreement provides that in exchange for providing the services, Blackberry Singapore will pay to the service provider i.e. the appellant a fee equal to the sum of all costs and expenses that the service provider incurred in providing such services plus 'Cost Plus Fee' as set out in Schedule A. For this purpose, the service provider has to submit an invoice and Blackberry Singapore is required to pay within 45 days after receipt of such invoice. Clause 8.2 provides that all references to currency would be as provided in Schedule A and Schedule A provides that the currency would be US in dollars effective 01.04.2008. Under clause 8.3 of the Agreement, the service provider and Blackberry Singapore would be independent parties and nothing in the Agreement wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diary is a person who arranges or facilitates provision of the main service between two or more persons. The appellant is not involved in the arrangement or facilitation of the supply of service. The service provided by the appellant qualify for export since it is providing services to Blackberry Singapore, which is outside India and is receiving convertible foreign exchange for such services. The appellant is not privy to the Agreement entered into between Blackberry Singapore and its end customers. Merely because the appellant is charging Costs Plus on Blackberry Singapore would not mean it is an intermediary. 33. It would be pertains to refer to the decision 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.)]. It is seen from a perusal of the aforesaid judgment that Verizon India had entered into a Master Supply Agreement with Verizon US for rendering connectivity services for the purpose of data transfer. Verizon US was engaged in the provision of telecommunication services for which it entered into contracts with the customers located globally. Since Verizon US did not have the capacity to provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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..." 36. 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 conditions stipulated under Rule 3(1)(iii) of the ESR to be considered as 'export of service'. In other words, the payment for the service was received by Verizon India in convertible foreign exchange and the recipient of the service was Verizon US which was located outside India. (iii) That Verizon India may have utilised the services of Indian telecom service providers in order to fulfil its obligations under the Master Supply Agreement with Verizon US made no difference to the fact that the recipien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices 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 6A of Service Tax Rules, 1994, inserted w.e.f. 1-7-2012. xxxxxxxxxxxx 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kend process. It is the specific case of the appellants that HLX does not have any clients in India. Maintenance, support or troubleshooting function, if any, the appellant is required to perform on requisition from HLX in order to ensure seamless access of services which means there is no requirement of any interaction, whatsoever with the clients of HLX and for performing all these services on behalf of HLX, the appellant receives a pre-agreed consideration from HLX in convertible foreign exchange. Commission is being paid to an intermediary not the transfer pricing, whereas the appellant herein was getting transfer pricing. There is nothing on record to show that the appellant is liasioning or acting as intermediary between the HLX and its clients. Therefore, the finding of the lower authorities that the appellant is an "intermediary' is misplaced. We are astonished to notice that although for earlier periods the then adjudicating authority allowed the refund claim of the appellant, but without looking into those orders and without giving any reason for not following the earlier orders, this time the concerned Authorities held otherwise by denying the credit." (emphasis supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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