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TMI Blog2023 (9) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... at there is no contract between SingTel and service providers in India like Airtel, Vodafone, Reliance etc., and the agreement between SGIPL and SingTel is on principal-to-principal basis - Clause 19 of the Agreement specifically stipulates that the relationship of the parties to the Agreement shall always and only be that of independent contractors and nothing in the Agreement shall create or be deemed to create a partnership or the relationship of principal and agent or employer and employee between the parties. Incidentally, the appellant has not even alleged that the aforesaid agreement is a camouflage, fraudulent or designed to get over the service tax dragnet. The issue that came to be was addressed by the Co-ordinate Bench was whether the telecommunication services provided by Verizon India for the period in question amounted to export of services within the meaning of Rule 6(A) of the ST Rules - This was answered in the affirmative. It was held that since the recipient of the service Verizon US was outside India, Verizon India rightly treated it as an export of service and accordingly it was exempted from the liability of paying service tax. The present appeals ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d October, 2015 to December, 2016, which led to filing of appeal No.52682/2019 by the appellant. Similarly, the Commissioner (Appeals) passed an order dated 31 October 2019 thereby setting aside order dated 23 July 2019 passed by the Assistant Commissioner by which refund claim of Rs. 3,30,37,934/- for the period January, 2017 to June, 2017 claimed by the SGIPL was rejected, which led to the appellant filing STA No. 50023/2019. The three appeals were disposed of by the impugned common order dated 07 December, 2022, whereby it was held that SGIPL is not an intermediary and was entitled to refund towards the CENVAT credit for the period in question i.e., July, 2015 to June, 2017. 4. The aforesaid decisions arose in the background of SGIPL, which is a company based in India, being engaged in providing global telecommunication and ancillary support services, and it is claimed that part of its services is also exported. It entered into an agreement dated 14 July 2011 with SingTel, which is a licensed telecommunications service provider in Singapore. The aforesaid agreement envisaged SGIPL providing necessary infrastructure in India so as to enable SingTel to facilitate seamless ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be considered as export of service particularly when it is considered that SGIPL is merely arranging or facilitating the main service of telecommunication services from the Indian telecom operators to Singtel in its original form and not providing the main service of telecommunication services on their own account, thereby charging handling fee and getting charges reimbursed on actual basis from SingTel. 9. Learned Standing Counsel has urged that the impugned order passed by the learned CESTAT raises the following issues:- (a) Whether the services provided by the respondent are covered under export of services ? (b) Whether the services provided by the respondent qualify as intermediary services ? (c) Whether the respondent is entitled to refund of unutilised CENVAT credit under Rule 5 of Cenvat Credit Rules 2004? 10. It was further canvassed that reliance on the decision Verizon Communications India Ltd. (supra) was misplaced since the SLP filed by the Revenue against the said decision has been admitted for hearing by the Hon'ble Supreme Court. It was also pointing out that Verizon India has in fact admitted their liability under Sabka Vishwas (Legac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, decree or order against which leave to appeal has been sought for, continues to be final, effective and binding as between the parties. Once leave to appeal has been granted, the finality of the judgment, decree or order appealed against is put in jeopardy though it continues to be binding and effective between the parties unless it is a nullity or unless the Court may pass a specific order staying or suspending the operation or execution of the judgment, decree or order under challenge. 12. Reverting back to the instant appeals, it would be expedient to take note of the relevant statutory provisions. Rule 6(A) of the ST Rules provides as under:- 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 excha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 le 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 amount charged by an agent from his principal is referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly agreed by both parties from time to time. 4. Responsibilities of SGIPL 4.1 SGIPL shall provide or use its reasonable endeavors to procure Service in India as ordered by SingTel. 4.2 SGIPL shall provide the Services when SingTel's Customers require the services originating in Territories and terminating in India. 4.3 SGIPL shall provide at its own expense, all facilities and resources whatsoever necessary to enable SGIPL to provide the Services to SingTel. 4.4 SGIPL shall provide to SingTel customer care, customer support (including assistance to a Customer in matters relating telecommunications access, data entry and data retrieval to and from the Services provided hereunder) and other services as may be reasonably required by SingTel from time to time. 4.5 SGIPL shall maintain detailed records and other supporting documentation associated with the provision of the Services. 4.6 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, wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19.1 The Relationship of the parties to this Agreement shall always and only be that of Independent contractors and nothing in this Agreement shall create or be deemed to create a partnership or the relationship of principal and agent or employer and employee between the parties. 18. On a careful perusal of the terms and conditions of the aforesaid Agreement dated 14 July 2011 between SingTel and SGIPL, we find no legal infirmity or irrational approach adopted by the learned CESTAT when it comes to conclude that SGIPL is not providing intermediary services . The plea that SGIPL is not providing any services on its own account is misplaced. It is manifest that there is no contract between SingTel and service providers in India like Airtel, Vodafone, Reliance etc., and the agreement between SGIPL and SingTel is on principal-to-principal basis. Indeed, SGIPL has entered into separate contracts with the telecom operators in India but on its own account and not as in the nature of a broker or agent for SingTel. The above-referred communication dated 16 March 2012 also supports such a disposition. The agreement envisages that SGIPL has to provide, at its own expenses, all necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Tax Practitioners v. Union of India 2007 (7) STR 625 (SC), wherein the nature of service tax was explained and it was observed that: 6. At this stage, we may refer to the concept of Value Added Tax (VAT), which is a general tax that applies, in principle, to all commercial activities Involving production of goods and provision of services. VAT is a consumption tax as It is borne by the consumer. 7. In the light of what is stated above, it is dear that Service Tax is a VAT which in turn is destination based consumption tax in the sense that it is on commercial activities and is not a charge on the business but on the consumer and it would, logically, be leviable only on services provided within the country. Service tax is a value added tax . 20. Without further ado and applying the same analogy to these matters, we find that the submissions advanced by the learned Standing counsel for the appellant overlooks the fact that the recipient of services is based outside India. At the cost of repetition it may be stated that SGIPL apart from facilitating main service of telecommunication services also provides services of customer care and customer support service ..... X X X X Extracts X X X X X X X X Extracts X X X X
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