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TMI Blog2023 (11) TMI 898X X X X Extracts X X X X X X X X Extracts X X X X ..... itten agreement between the appellant and the vendors/exporters of garments. Also, the appellant had not received any consideration for the services provided in relation to export of goods from the vendors in India. The appellant does not satisfy the conditions to be an intermediary for his services and as such, the impugned order 08.07.2019 cannot sustain and is required to be set aside. Extended period of limitation - penalties - HELD THAT:- Since the services of the appellant are not to be categorized as intermediary services, it is opined that there is no need to discuss regarding the invocation of extended period or imposition of penalties. Appeal allowed. - HON BLE MRS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL) And HON BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) Shri J.V. Niranjan, Advocate for the Appellant Shri R. Rajaraman, Authorized Representative for the Respondent ORDER Order : [Per Mr. Vasa Seshagiri Rao] Service Tax Appeal No. 41459 of 2019 has been filed by the appellant viz., M/s. SNQS International Socks Private Limited, Tirupur assailing Order-in-Original No. 08/2019-COMMR. dated 08.07.2019 of the Commissioner of G.S.T. a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ency through banks. They stopped procuring orders from April 2016 onwards. During the period from October 2014 to March 2016, the appellant has provided the following: - Design and development of products Evaluation and development of vendors Quality assurance including testing of live production samples Logistical and operational support to vendors to their foreign clients and quantified the service charges as a percentage of the FOB value of export goods for which orders were procured by them and were paid in convertible foreign exchange termed as commission , which would be covered by the definition of intermediary , for which service the place of provision would be the location of the service provider and accordingly, liable to pay Service Tax. 3. As per Rule 2(f) of the Place of Provision of Services Rules, 2012, as amended vide Notification No. 14/2014 dated 11.07.2014, intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates provision of a service (hereinafter called the main service) or a supply of goods, between two or more persons, but does not include a person who provides the main ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 75 of the Act and for imposition of penalty under the provisions of Sections 76 and 78 of the Act. 6. After due process of law, the Show Cause Notice was adjudicated by the Commissioner of G.S.T. and Central Excise, Coimbatore vide Order-in-Original No. 08/2019-COMMR. dated 08.07.2019 confirming the demand of Service Tax along with interest and also imposed penalty. The adjudicating authority has, however, reduced the penalty imposed under Section 78 to fifty per cent of the Service Tax so determined for the period from 19.12.2014 to 31.03.2015 and 01.04.2015 to 14.05.2015 while holding the appellant liable to pay equal penalty for the period from 15.05.2015 to 31.03.2016, thus quantifying the penalty under Section 78 as Rs.2,21,31,927/-. The proposal to impose penalty under Section 76 of the Act was dropped. 7. Aggrieved by the above Order-in-Original dated 08.07.2019, the appellant came before this forum. 8.1 In the grounds-of-appeal, the appellant has submitted that they have provided the services of : - (a) Design and development of products (b) Evaluation and development of suitable vendors to manufacture and supply the products (c) Quality assurance includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered does not alter the nature of the service rendered. 8.4 It was submitted that their services would be falling under support services of business or commerce by adverting to the decision rendered in the case of M/s. Tata Autocomp Systems Ltd. v. Commissioner of Central Excise, Pune [2015 (37) S.T.R. 252 (Tri. Mumbai)] wherein payment of service charges as a percentage of total turnover of the service recipients of the service provider, for the services by way of marketing support, arranging for loans from financial institutions, liaisoning with Government agencies, etc., was involved and such services were held to be support services of business or commerce. 8.5 The appellant has also placed reliance on the decision of the Tribunal in the case of M/s. Lubrizol Advanced Materials India Pvt. Ltd. v. Commissioner of Central Excise, Belapur [2019 (22) G.S.T.L. 355 (Tri. Mumbai)] wherein it was held that the activities of promotion of products and solicitation of orders from prospective customers located in India for overseas group entities are not intermediary services but export of services inasmuch as the transactions between the overseas entities and the assessee we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f provision of service would be the location of the service recipient, in terms of Rule 3 of the Place of Provision of Service Rules, 2012. 8.8.1 On the issue of invocation of extended period of limitation, the Ld. Advocate has submitted that the appellant themselves had brought to the knowledge of the Department about the activities undertaken by them and they had filed refund claim of the erroneously paid Service Tax for the months of October 2014 and November 2014; the appellant had clearly set out the reasons as to why they were not liable to pay Service Tax in the refund claim itself and the same has to be construed as a bona fide interpretation of law. 8.8.2 It is further submitted that the ld. adjudicating authority has relied on only one fact for invoking the extended period, that the appellant did not declare the service charges received from their foreign clients in their S.T.-3 returns filed with the Department, which amounted to suppression, ignoring the plethora of decisions of the Hon ble Apex Court, Hon ble High Courts and the Tribunal and has thus committed a gross error. 8.9 The appellant has further referred to the order passed by Tribunal, Chennai in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and notifications e.g., the CENVAT Credit Rules, 2004 9.3 It is contended by the Ld. Departmental Representative that Rule 9(c) of the Place of Provision of Services Rules defines that the place of provision of intermediary services shall be the location of the service provider. Intermediary service is the most specific description in the appellant s case. 9.4 He has further contended that in terms of Rule 6A of the Service Tax Rules, 1994, the appellant has not satisfied the condition of place of provision of the service is outside India and as such, the services provided by M/s. SNQS International Socks Pvt. Ltd. cannot be treated as export of services. 9.5 Further, he would submit that as M/s. SNQS International Socks Pvt. Ltd./appellant identifies prospective suppliers/exporters of goods for selling to foreign buyers thus arranging or facilitating supply of goods between these two persons and the services have not been provided to foreign buyers by the appellant on a principal-to-principal basis. 9.6 He has argued that the decisions rendered by the Tribunal in the cases of M/s. Fifth Avenue v. Commissioner of Service Tax, Chennai [2009 (15) S.T.R. 387 (Tri. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.3 The relevant portion of the order of the Tribunal vide Final Order No. 40478 of 2023 dated 23.06.2023 (supra) in the appellant s own case relating to whether the services rendered by the appellant are intermediary or not and also whether these services can be considered as export of service or not, is extracted below: - 12.1.1 An intermediary is generally meant to be a person who arranges or facilitates supply of goods or provision of service, or both, between two persons without any material alteration/processing. Paragraph 5.9.6 of the Education Guide issued by the C.B.E.C. dated 20.06.2012 has clarified as to intermediary services, as under: - Generally, an intermediary is a person who arranges or facilitates a supply of goods, or a provision of service, or both, between two persons, without material alteration or further processing. Thus, 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 goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service or a supply of goods, between two or more persons, but does not include a person who provides the main service or supplies the goods on his account . Commission agent means a person who causes sale or purchase of goods, on behalf of another person for a consideration, which is based on the quantum of such sale or purchase (as defined in exemption Notification No. 13/2003-S.T. dated 20.06.2003). Subsequently, with effect from 16.05.2005, commission agent was defined in Section 65 (19) of the Finance Act, 1994 to mean 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 . The words on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services Pvt. Ltd. [2016 (46) S.T.R. 806 (A.A.R.)] is relevant to understand the term intermediary in its correct perspective, wherein it was observed as under: - 10. The definition of intermediary as envisaged under Rule 2(f) of POPS does not include a person who provides the main service on his own account. In the present case, applicant is providing main service, i.e., business support services to WWD US and on his own account. Therefore, applicant is not an intermediary and the service provided by him is not intermediary service. Further, during arguments, applicant drew our attention to one of the illustration given under Paragraph 5.9.6 of the Education Guide, 2012 issued by C.B.E. C. Relevant portion is extracted as under; Similarly, persons such as call centers, who provide services to their clients by dealing with the customers of the client on the client s behalf, but actually provided these services on their own account , will not be categorized as intermediaries. Applicant relying on above paragraph submitted that call centers, by dealing with customers of their clients, on client s behalf, are providing service to their client on their own ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied is whether the place of provision of service is outside India or not. 13.2.1 In terms of Rule 3 of the Place of Provision of Services Rules, 2012, the place of provision of service shall be the location of the recipient of service. In respect of intermediary service, in terms of Rule 9, the place of provision of service shall be the location of the service provider. Rules 3 and 9 of the Place of Provision of Services Rules, 2012 are extracted below: - Rule 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 course of business, the place of provision shall be the location of the provider of service. . Rule 9. Place of provision of specified services.- The place of provision of following services shall be the location of the service provider: - (a) Services provided by a banking company, or a financial institution, or a non-banking financial company, to account holders; (b) Online i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arments by these vendors are incidental services for procurement goods and as per the direction of the foreign client, who is the recipient of the services provided by the appellant. Thus, the appellant is the service provider and the overseas buyer is the service recipient and there is no oral or written agreement between the appellant and the vendors/exporters of garments. Also, the appellant had not received any consideration for the services provided in relation to export of goods from the vendors in India. 11.5 In view of the above, we find that the appellant does not satisfy the conditions to be an intermediary for his services and as such, the impugned order 08.07.2019 cannot sustain and is required to be set aside accordingly. 12.1 We find that the Department has filed Service Tax Cross Objection No. 40669 of 2019 wherein they have taken the ground that the adjudicating authority ought to have imposed penalty equal to the Service Tax determined for the entire period. On perusal of the impugned order, we find that the adjudicating authority has imposed a penalty of Rs. 2,21,31,927/- under Section 78(1) of the Finance Act, 1994 read with Section 174 of the C.G.S.T. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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