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TMI Blog2023 (6) TMI 1084X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration / remuneration for the above services is computed as a percentage of the value of merchandise exported to the client by the vendors developed by the appellant, which is received in convertible foreign exchange. There is no agreement entered into by the appellant with any of the vendors, either on their behalf or on behalf of the foreign client. The appropriate classification of these services would be support services of business or commerce rather than business auxiliary service . Business auxiliary services are general in nature as compared to support services of business or commerce. The appellant s services are not limited to being a commission agent / buying agent since their services are not limited to only procurement and dispatch, but includes a wide range of services from the stage of designing to testing and quality monitoring and getting the goods manufactured till the final export is made, including assisting in the transportation and dispatch of the goods. The decision rendered in the case of FIFTH AVENUE VERSUS COMMISSIONER OF SERVICE TAX, CHENNAI [ 2009 (3) TMI 133 - CESTAT, CHENNAI] is applicable wherein the appellant rendering services such as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he applicant to GoDaddy US cannot be categorized as intermediary or services, as intermediary service. - The above is applicable to decide the issue in this appeal as the facts obtaining in these two cases are similar. Whether the services provided by the appellant could be treated as export of service or not? - HELD THAT:- In the present case, there is no dispute that the provider of service is located in the taxable territory and the recipient is located abroad/outside India. The services rendered are not specified in Section 66D of the Finance Act. The payment for the said services has also been received by the appellant in convertible foreign exchange. Therefore, the only condition that is required to be satisfied is whether the place of provision of service is outside India or not. The activities of the appellant will be coming under business support services and also would not be falling under intermediary services, the place of provision of the services applicable to the appellant, is the location of the service recipient, in terms of Rule 3 of the Place of Provision of Services Rules, 2012. Rule 9 is not applicable to the appellant as the services rendered by him i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted in support of the refund claim. 2.3 The assertion of the Revenue is that the appellant had acted as an intermediary between M/s. Primark, Ireland and various suppliers for a certain consideration and as such, liable to pay Service Tax on the consideration received as in the case of intermediary services and the place of provision of service is the location of the service provider in terms of Rule 9 of the Place of Provision of Services Rules, 2012, as amended. As such, it appeared to the Department that the Service Tax paid by them was proper and the refund claim filed by the appellant appeared to be unsustainable. Consequently, a Show Cause Notice No. 06/2015 dated 06.10.2015 came to be issued to the appellant. 3. After due process of law, the adjudicating authority vide Order-in-Original Sl. No. 57/2015-ST dated 30.11.2015 rejected their refund claim of Rs.27,32,953/- under Section 11B of the Central Excise Act, 1944 made applicable to Service Tax matters in terms of Section 83 of the Finance Act, 1994. 4. On appeal being filed with the Commissioner of Customs, Central Excise and Service Tax (Appeals-I), Coimbatore, the same was rejected on the ground that the serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. Chennai)] : 4.1 We find that FA and FAWPL had rendered services to the companies in terms of their contracts with them. They assisted processing of purchase orders by the vendors. They monitored progress and timely execution of the export orders placed by the companies. There was no contract between the appellants and their respective vendors. FA and FAWPL admittedly rendered the services described in the Show Cause Notices as evaluation of prospective customers for the companies, processing of purchase orders, customer management, processing of transactions, information and tracking of delivery schedules, operational assistance for marketing, formulation of customer service and pricing policies, managing distribution and logistics. Scope of SSBC as per clause (104c) of Section 65 of the Act is as follows : (104c) support services of business or commerce means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ECAS, Ireland inconvertible foreign exchange. 6.3.2 Relying on the decision of the Tribunal in the case of M/s. Provincial Life Style Retail Services v. Commissioner of Central Excise, Nagpur [2014 (36) S.T.R. 305 (Tri. Mumbai)], the appellant has argued that its services would not be classifiable as that of a commission agent as, in the above decision, the assessee who was involved in undertaking the activities of display and sale of stock, design, maintenance of showrooms, appointing additional agents, bearing expenses of running showrooms and management fee as a percentage of turnover received, was held to be not a commission agent. In view of the above decision, it is also submitted that the mode of quantification of remuneration for the services rendered by them is not relevant for determination of the description of the services, but only the activities performed are relevant for arriving at the appropriate description of service. 6.4 Basing on the above, it is submitted that the services provided by them would only fit into the description of support services of business or commerce . 6.5 The appellant has further argued that Rule 3 of the Place of Provision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneral market research to contract/price negotiations with identified customers. The nature of activities admittedly carried out by the appellant do not fall under the excluded category of intermediary , i.e., a person who provides the main service or supplies the goods on his own account. The services provided by the appellant are falling under the post-amendment definition of intermediary in the Place of Provision of Services Rules, 2012 and thus, the appellant are liable to pay Service Tax on the said intermediary services provided by them. Regarding the argument of the appellant that the services provided by them would fall under the category of support services of business or commerce as the said services provided to a person located outside the taxable territory would amount to export of services and so exempted from payment of Service Tax and their reliance on the decisions of M/s. Fifth Avenue Sourcing (P) Ltd. v. Commr. of Service Tax, Chennai [2011 (22) S.T.R. 55 (Tri. Chennai)] and M/s. Fifth Avenue Sourcing Pvt. Ltd. v. Commr. of Service Tax, Chennai [2014 (34) S.T.R. 291 (Tri. Chennai)], it has been held that the period involved is prior to the amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcentage of the FOB value of the merchandise exported by the vendors developed by the appellant and thus, being an intermediary, the appellant is liable to pay Service Tax as the place of provision of service is the location of the service provider. 7.3.2 In view of the above, it is her contention that the appellant has rightly discharged Service Tax and so, not eligible for any refund of the tax paid by it and as such, she has requested for rejection of the appeal. 8. Heard both sides and perused the records, as available in the appeal. 9. The issues that are before us for decision in this appeal relate to: - (1) Classification of the services rendered by the appellant whether under business auxiliary service as defined under Section 65(19) of the Finance Act, 1994 or support services of business or commerce as defined under Section 65(104c) of the Finance Act, 1994? (2) Whether the services rendered by the appellant can be categorized as that of an intermediary or not and consequently, whether these services would tantamount to export of service or not, for arriving at a decision as to the place of provision of service in terms of the Place of Provision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes services as a commission agent, [but does not include any activity that amounts to manufacture of excisable goods]. [Explanation. For the removal of doubts, it is hereby declared that for the purposes of this clause, (a) commission agent means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration, and includes any person who, while acting on behalf of another person (i) deals with goods or services or documents of title to such goods or services; or (ii) collects payment of sale price of such goods or services; or (iii) guarantees for collection or payment for such goods or services; or (iv) undertakes any activities relating to such sale or purchase of such goods or services; [(b) excisable goods has the meaning assigned to it in clause (d) of section 2 of the Central Excise Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions, information and tracking of delivery schedules, operational assistance for marketing, formulation of customer service and pricing policies, managing distribution and logistics, etc., were held to be classifiable under support services of business or commerce and not under business auxiliary service. 11.4.2 We also find the ratio in the case of GECAS Services India Pvt. Ltd. v. Commr. of Service Tax, New Delhi [2014 (36) S.T.R. 556 (Tri. Del.)], which is referred to in paragraph 6.3.1 above, to be relevant for taking a decision for classifying the services rendered by the appellant as support services of business or commerce. 11.4.3 A similar conclusion has been arrived at by the Tribunal, Chennai in the case of M/s. Fifth Avenue Sourcing Pvt. Ltd. v. Commissioner of Central Excise and Service Tax, Chennai in Service Tax Appeal No. 347 of 2011 ors. [Final Order Nos. 40125 to 41027 of 2023 dated 07.03.2023 CESTAT, Chennai], wherein it has been held as under: - 11. We find from a plain reading of clause (104c) of Section 65 that support services of business or commerce specifically relates to evaluation of prospective customers, telemarketing, processing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ency 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 (such as a commission agent i.e. a buying or selling agent, or a stockbroker) is excluded by definition. Also excluded from this sub-rule is a person who arranges or facilitates a provision of a service (referred to in the rules as the main service ), but provides the main service on his own account. 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 perce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment for such goods or services; or (iv) undertakes any activities relating to such sale or purchase of such goods or services . The words on behalf of in the statute connote an agency when one person acts on behalf of the other. The former acts as an agent of the latter. An agency is the relationship of principal and agent in terms of a contract express or implied. 12.2.2 The broker does not sell the goods on his own account, but merely brings the vendor and the vendee together and settles the price. 12.2.3 In the definition of intermediary , as in Rule 2(f) of the Place of Provision of Services Rules, 2012, the words broker and agent are used synonymously though there are fine differences among the intermediary, commission agent and broker, to be analysed depending upon the facts of each case. As given in paragraph 12.1.1 above, there are two supplies in case of an intermediary (i) supply between the principal and the third party and (ii) the supply of his own service to his principal for which he gets paid. In the instant case, there is only one supply by the appellant to his principal i.e., the foreign client, that too on his account. There is no service pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at call centers, by dealing with customers of their clients, on client s behalf, are providing service to their client on their own account. Similarly, applicant is providing business support service such as marketing and other allied services like oversight of quality of third party customer care centre operated in India and payment processing services, on behalf of GoDaddy US. Therefore, these services provided by the applicant to GoDaddy US cannot be categorized as intermediary or services, as intermediary service. The above is applicable to decide the issue in this appeal as the facts obtaining in these two cases are similar. 13. The next issue that is required to be decided in this appeal is whether the services provided by the appellant could be treated as export of service or not. In this regard, the following are required to be gone through for arriving at a decision as to what is the place of provision of service, as applicable to the case of the appellant. 13.1.1 Rule 6A of the Service Tax Rules, 1994 states that:- (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided by a banking company, or a financial institution, or a non-banking financial company, to account holders; (b) Online information and database access or retrieval services; (c) Intermediary services; (d) Service consisting of hiring of means of transport other than, - (i) aircrafts, and (ii) vessels except yachts, upto a period of one month.] 13.2.2 As we have held that the activities of the appellant will be coming under business support services and also would not be falling under intermediary services, the place of provision of the services applicable to the appellant, is the location of the service recipient, in terms of Rule 3 of the Place of Provision of Services Rules, 2012. Rule 9 is not applicable to the appellant as the services rendered by him in relation to procurement of goods to the foreign client are on his own account. The appellant is not said to be acting as an intermediary i.e., the services were performed by the appellant on a principal-to-principal basis and at arm s length basis. 13.3 As all the conditions prescribed under Rule 6A of the Service Tax Rules, 1994 are satisfied, the services of the appellant are to be tre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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