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TMI Blog2024 (9) TMI 1172X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case, the conditions laid down by Hon ble Punjab Haryana High Court in the case of Genpact [ 2022 (11) TMI 743 - PUNJAB AND HARYANA HIGH COURT] are not satisfied as the relationship between the appellant and the Airbnb, Ireland is not that of a principal agent; there is nothing in the agreement to indicate that the appellants are facilitating the main service provided by Airbnb to their customers; in fact, the appellants are rendering services to ensure that the property owners received their consideration for renting of the property to M/s Airbnb, Ireland; the appellants are not mediating between Airbnb, Ireland and their customers in the provision of the main service. There are no main service and the auxiliary service in the instant case. Though the appellant is located in India, the recipient of the service rendered by the appellant is located outside India; the appellant receives remuneration in foreign exchange and the appellant and Airbnb, Ireland is not different establishments of a distinct person. As far as the provision of main service is concerned, there are only two parties in the present case i.e. the appellant and Airbnb, Ireland; the appellant provides single ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Adjudicating Authority with a direction to check whether the appellant was an intermediary between Airbnb, Ireland and their customers; in the remand proceedings, the Original Authority did not pass any order in respect of the refund for the period October 2016 to December 2016 in respect of refund, for the period January 2017 to March 2017, rejected the refund, saying that the appellant is an intermediary, vide order dated 26.03.2021; on an appeal filed by the appellant, learned Commissioner (Appeals) vide impugned order dated 26.03.2021 upheld the order passed by the Original Authority. Hence, the appellants filed Appeal No. ST/60117/2022. 2. Meanwhile, Department has issued another Show Cause Notice dated 21.10.2021 seeking the re-payment of refund of Rs.57,72,625/- (i.e. Rs.31,47,583/- + Rs.26,25,045/-) alleged to have been erroneously sanctioned to the appellants by the Original Authority vide orders dated 15.11.2019 and 30.09.2019 respectively; the Show Cause Notice also seeks to recover service tax, of Rs.2,04,15,167/-, allegedly not paid by the appellants on the output services rendered by them. The proposals in the Show Cause Notice have been confirmed, along with int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in different orders; OIO dated 14.10.2019 and 15.11.2019 categorically holds that the appellant is not an intermediary, while the appeals against this order mention that the appellant might be an intermediary; while OIA dated 21.04.2020 and 26.03.2021 hold that the appellant is in an intermediary between Airbnb, Ireland and PayU, OIA dated 26.12.2021 holds that the appellant is an intermediary between Airbnb and their customers. 6. Learned Counsel submits that CBIC Circular dated 20.09.2021 clarifies the position of an intermediary and supports the claim of the appellants. He relies on the following cases: Genpact India Pvt. Ltd. CWP-6048-2021 (P H) Blackrock Services India Pvt. Ltd. (ST/61877/2018) Chevron Phillips Chemicals India Pvt. Ltd. 2012 (12) TMI 1066-CESTAT Mumbai. (Civil Appeal filed by Department has been dismissed by Supreme Court in Civil Appeal No.4370 of 2024) SNQS International Socks Private Ltd. ST/41459/2019 (Civil Appeal filed by Department dismissed by Hon ble Supreme Court in Civil Appeal No.1431 of 2024) JFE Steel India Pvt. Ltd. 2021 (44) GSTL 292 (Tri. Chan.) Torm Shipping India Pvt. Ltd. 2021 (44) GSTL 195 (Tri. Mumbai) Singtel Global India Pvt. Ltd. (ST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee to group company located outside India fall under the definition of Intermediary under Rule 2(f) of the Place of Provision of Service Rules, 2012; in terms of Rule 9 read with Rule 3, ibid, the place of provision of services shall be the location of service provider and therefore, services rendered by the appellant cannot be treated as export of services. 10. Heard both sides and perused the records of the case. The brief issue that requires to be decided in the instant appeals is as to whether the appellants are an intermediary and whether the appellant are eligible for refunds filed by them periodically and as to whether the demand of duty is sustainable. We find that it would be beneficial to have a look at statutory provisions in this regard. 10.1. Section 2(f) of POPS Rules, 2012 defines Intermediary as below: intermediary means a broker, an agent or any otherperson, by whatever name called, who arranges or facilitates a 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 service or supplies the goods on his account . 10.2. We find that C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Primary Requirements for intermediary services The concept of intermediary services, as defined above, requires some basic prerequisites, which are discussed below : 3.1 Minimum of Three Parties : By definition, an intermediary is someone who arranges or facilitates the supplies of goods or services or securities between two or more persons. It is thus a natural corollary that the arrangement requires a minimum of three parties, two of them transacting in the supply of goods or services or securities (the main supply) and one arranging or facilitating (the ancillary supply) the said main supply. An activity between only two parties can, therefore, NOT be considered as an intermediary service. An intermediary essentially arranges or facilitates another supply (the main supply ) between two or more other persons and, does not himself provide the main supply. 3.2 Two distinct supplies : As discussed above, there are two distinct supplies in case of provision of intermediary services; (1) Main supply, between the two principals, which can be a supply of goods or services or securities; (2) Ancillary supply, which is the service of facilitating or arranging the main supply between the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o B . A sub-contracts a part or whole of it to C . Accordingly, C provides the service of annual maintenance to A as part of such subcontract, by providing annual maintenance of tools and machinery to the customer of A , i.e. to B on behalf of A . Though C is dealing with the customer of A , but C is providing main supply of Annual Maintenance Service to A on his own account, i.e. on principal to principal basis. In this case, A is providing supply of Annual Maintenance Service to B , whereas C is supplying the same service to A . Thus, supply of service by C in this case will not be considered as an intermediary. 3.6 The specific provision of place of supply of intermediary services under section 13 of the IGST Act shall be invoked only when either the location of supplier of intermediary services or location of the recipient of intermediary services is outside India. 4. Applying the abovementioned guiding principles, the issue of intermediary services is clarified through the following illustrations : Illustration 1 A is a manufacturer and supplier of a machine. C helps A in selling the machine by identifying client B who wants to purchase this machine and helps in finalizing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. A decides to outsource the task of providing customer care services to a BPO firm, B . B provides customer care service to A by interacting with the customers of A and addressing / processing their queries/complains. B charges A for this service. B is involved in supply of main service customer care service to A , and therefore, B is not an intermediary. 5. The illustrations given in para 4 above are only indicative and not exhaustive. The illustrations are also generic in nature and should not be interpreted to mean that the service categories mentioned therein are inherently either intermediary services or otherwise. Whether or not, a specific service would fall under intermediary services within the meaning of sub-section (13) of section 2 of the IGST Act, would depend upon the facts of the specific case. While examining the facts of the case and the terms of contract, the basic characteristics of intermediary services, as discussed in para 3 above, should be kept in consideration. 6. It is requested that suitable trade notices may be issued to publicize the contents of this Circular. 7. Difficulty, if any, in the implementation of this Circular may be brought to the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall not hold itself out or make any warranty, representation or do any act on behalf of the Airbnb Ireland or Member except in accordance with this Agreement. 2. RELATHIONSHIP OF PARTIES. 2.1 Independent Contractor and Arms Length Relationship. The relationship of Airbnb Ireland and Service Provider established by this Agreement is that of independent contractors, and nothing in this Agreement shall be construed: (a) to give either party the right or power to direct or control the daily activities of the other party, (b) to constitute the parties as principal and agent, employer and employee, partners, joint ventures, co-owners or otherwise as participants in a joint undertaking, or (c) to allow either party (i) to create or assume any obligation on behalf of the other party for any purpose whatever except as provided in this Agreement, or (ii) to represent to any person, firm, or entity that such party has any right or power to enter into any binding obligation on the other party's behalf, except as provided in this Agreement, provided that Service Provider will at all times comply with Applicable Law. 11.1. Relevant clauses of the Agreement between the appellant and PayU a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween the appellant and the Airbnb, Ireland is not that of a principal agent; there is nothing in the agreement to indicate that the appellants are facilitating the main service provided by Airbnb to their customers; in fact, the appellants are rendering services to ensure that the property owners received their consideration for renting of the property to M/s Airbnb, Ireland; the appellants are not mediating between Airbnb, Ireland and their customers in the provision of the main service. There are no main service and the auxiliary service in the instant case. Though the appellant is located in India, the recipient of the service rendered by the appellant is located outside India; the appellant receives remuneration in foreign exchange and the appellant and Airbnb, Ireland is not different establishments of a distinct person. 13. We find that as far as the provision of main service is concerned, there are only two parties in the present case i.e. the appellant and Airbnb, Ireland; the appellant provides single service of processing of payment to Airbnb, Ireland; the appellants have no relation whatsoever with the customers accessing the platforms of Airbnb; there is no tripartite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etworking services. 13. We further find that the mandate from the group involves various companies more than two. So it is delivered to third entity on the direction of one M/s. Equant Network Services International Limited (ENSIL) and they act as intermediary. The appellant are processing equipment supply order s including liaison/coordination , so the liaison/coordination is also equivalent to solicitation and is more near to intermediary nature that the act of solicitation. Each mandate where there are two or more than two companies are involved would not automatically by termed as intermediary merely on the ground of involvement of two or more companies. To be intermediary, the criteria laid down has been discussed hereinabove. We hold that the respondent is not intermediary. 14. We further take note of the fact that the activity of the appellant is routine back office process outsourcings activities and are completely based on instructions/guidelines provided by ENSIL/AEs in this regard. The Revenue has not produced any evidence as to why providing of back office process outsourcing should be treated as intermediary. 14.1 Further, we find that this Bench in the case of Lubrizo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, as specified under Rule 6A of Service Tax Rules, 1994, inserted w.e.f. 1-7-2012. 16. We further find that Authority for Advance Ruling held in the case of GoDaddy India Private Limited v. Commissioner of Service Tax, Delhi-IV [AAR/ST/08/2016] [ GoDaddy ] 2016 (46) S.T.R. 806 (A.A.R.)and in the case of Universal Services India Private Limited v. The Commissioner of Service Tax, Delhi-IV [AAR/ST/07/2016] 2016 (42) S.T.R. 585 (A.A.R.)] held that Payment Processing Services are not Intermediary Services. These two cases were relied upon by the Tribunal in the case of Verizon India Pvt. Ltd. (supra). 17. We find that Hon ble Punjab Haryana High Court has dealt the matter in the case of Genpact India Pvt. Ltd. (supra) and held as follows: 36. In the pre-GST regime the term intermediary services was defined under Rule 2(f) of the Place of Provision of Service Rules, 2012. Under the 2012 Rules intermediary services were defined to mean a broker/an agent or any other person, by whatever name called, who arranges or facilitates a 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts as it is the MSA of 2013 (Annexure P-1) which continues to operate, the department cannot take a different view for different periods. In Radhasoami Satsang v. CIT - [1992] 60 Taxman 248/193 ITR 321 (SC)/[1992] 1 SCC 659, even though it had been observed that res judicata does not apply to income tax proceedings, yet it was observed as follows :- 16. We are aware of the fact that strictly speaking res judicata does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 17. On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter - and if there was no change it was in support of the assessee - we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-tax in the earli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry under the MSA, should prevail even under the GST regime. 42. Furthermore, we find that the finding recorded by the respondents-department to hold the petitioner to be in a principal agent relationship with the GI to be without any basis and to be clearly erroneous. The impugned order proceeds oblivious of clause 21.6 of the MSA and which is in the following terms :- 21.6 Relationship of Parties Nothing in this Agreement shall constitute or be deemed to constitute a relationship of employer and employee, agency, joint venture or partnership between the parties hereto or constitute or be deemed to constitute one Party as agent of the other for any purpose whatsoever, and except as expressly provided herein, neither Party shall have the authority or power to bind the other, or to contract in the name of or create a liability against the other, in any way or for any purpose. During the course of arguments, Mr. Sharan Sethi, Learned Senior Standing Counsel for the respondents would concede that there is no separate agreement entered between the petitioner and GI s customers. In no manner as such can the petitioner be equated to be an agent or broker. It would also be useful at this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of subcontracting. Even as per the afore-noticed circular dated 20-9-2021 and in reference to Para 3.5 it stands clarified that sub-contracting for a service is not an intermediary service. 47. In the present case we find that in the written statement reference is made to a Transfer Pricing Report (Annexure P-24) as also to draw a distinction between two categories of supplies as per MSA i.e. main supply and the ancillary supply. The passing of the impugned order is sought to be justified that the main supply takes place between GI and its customers whereas it is the ancillary supply which is provided by the applicant to facilitate the provision of the main supply. 48. We find that the written statement seeks to justify the impugned order on grounds which are not even part of the impugned order and which is clearly impermissible in law. A reference in this regard may be made to the judgment of the Apex Court in Mohinder Singh Gill v. Chief Election Commissioner [1978] 1 SCC 405, wherein it had been held that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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