9911796707
TMI Blog2024 (9) TMI 1172X X X X Extracts X X X X X X X X Extracts X X X X ..... instant 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 sing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s back to 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, alo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken different stand 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) G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and submits that the Market/ Technical Support Services falling under BAS provided 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 incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f intermediary services in the GST regime vis-a-vis the Service Tax regime, except addition of supply of securities in the definition of intermediary in the GST Law. 3. 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, betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is customers, and therefore, clearly is not an intermediary. For instance, 'A' and 'B' have entered into a contract as per which 'A' needs to provide a service of, say, Annual Maintenance of tools and machinery to '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 intermedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r definition of sub-section (13) of section 2 of the IGST Act. Illustration 4 'A' is a manufacturer and supplier of computers based in USA and supplies its goods all over the world. As a part of this supply, 'A' is also required to provide customer care service to its customers to address their queries and complains related to the said supply of computers. '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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erables, timelines and any increases or decreases in the compensation. 1.2. Airbnb Ireland Performance. This Agreement does not prohibit Airbnb Ireland from performing Services on its own behalf or obtaining Services from others. 1.4…. (d) Nothing in this Agreement or in the arrangements hereby contemplated shall constitute or be taken to mean that Service Provider acts as the agent of Airbnb Ireland or Member for any purpose whatsoever and Service Provider 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 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey also do not have any agreement vis-à-vis the provision of service by Airbnb to their customers. The appellants can at best be described to perform certain services regarding the payments which are outsourced to them by Airbnb, Ireland. There is nothing in the agreements to indicate that the appellants are an intermediary. We find that in the instant case, the conditions laid down by Hon'ble Punjab & Haryana High Court in the case of Genpact (supra) 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore us, we find that the activity of computer networking is networking service which is an application running at the network application layer and above, that provides data storage, manipulation, presentation, communication or other capability which is often implemented using a client-server or peer-toarchitecture based on application layer network protocols. 12. In view of the above, we do not find any arrangement or facilitation of the main service between two parties by a third person under the category of computer networking 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es on principal to principal basis. The appellant has not been acting as intermediary between another service provider and Verizon US. This fact is also supported from the fact that the appellant has raised their bills for the services 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. 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 & Ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain service between two or more person but did not include a person who provided the main service on his account. Similarly, in the GST regime, an intermediary refers to a person who facilitates the supply of goods or services or both between two or more persons but excludes a person who supplies such goods or services or both on his own account." Accordingly, in the light of such position wherein there is no change in the legal position i.e. with regard to the scope and ambit of "intermediary" services under the service tax regime vis-a-vis the GST regime and there being no change of facts 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 perme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lier decision or where the earlier decision is per incuriam. However, these are fetters only on a coordinate bench which, failing the possibility of availing of either of these gateways, may yet differ with the view expressed and refer the matter to a bench of superior strength or in some cases to a bench of superior jurisdiction." 41. The principle of consistency as such ought to apply in the present matter as well and we find merit in the stand taken on behalf of the petitioner that the view taken in the order-in-original dated 25-1-2018 (Annexure P-2) holding the petitioner to be not an "intermediary" 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 consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been brought on record to show that the petitioner has a direct contract with the customers of GI. Still further there is nothing on record to show that petitioner is liaisoning or acting as an "intermediary" between GI and its customers. All that is evident from the record is that the petitioner is providing the services which have been subcontracted to it by GI. As a sub-contractor it is receiving fee/charges from the main contractor i.e. GI for its services. The main contractor i.e. GI in turn is receiving commission/agents from its clients for the main services that are rendered by the petitioner pursuant to the arrangement 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 wher ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
