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TMI Blog2020 (1) TMI 1125X X X X Extracts X X X X X X X X Extracts X X X X ..... litating the supply of the products of Infinera US between the Principal in USA and the Principal s customer in India. He is not supplying the products of Infinera on behalf of the Principal. He is only arranging the contact between the Principal and the Principal s customer and the actual supply of the products is done by the Principal directly to the customer. The service of facilitating a supply of goods between the Principal and the customers is provided by the Appellant to the overseas client. The Appellant is not supplying such goods on his own account. The pre-sale and marketing service provided by the Appellant of the products of the overseas client - Infinera US, is in the nature of facilitating the supply of the products of the overseas client and is appropriately classified as an intermediary service as defined under Section 2(13) of the IGST Act. The ruling of Advance Ruling authority upheld. - KAR/AAAR-09/2019-20 - - - Dated:- 20-1-2020 - SHRI. D.P. NAGENDRA KUMAR, AND SHRI. M.S. SRIKAR, MEMBER Represented by : Sri T.R. Venkateshwaran, Authorized representative PROCEEDINGS (Under Section 101 of the CGST Act, 2017 and the KGST Act, 2017) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies carried out in India by the applicant in terms of the Pre-sale and Marketing Services Agreement qualifies the applicant as an Intermediary as defined under Section 2(13) of the IGST Acts 2017 and consequently by Subject to the levy of GST. 6. Aggrieved by the said ruling, the Appellant has preferred this appeal before us on the following grounds: 6.1. The marketing support services provided by the Appellant are auxiliary in nature and the Appellant at no point of time has any authority to negotiate prices or to enter into / conclude contracts for or on behalf of Infinera USA. The Appellant is not executing end to end process but only executing specific task as per the agreement entered into with Infinera USA There exists a principal-to- principal relationship between the Appellant and Infinera USA. The performance and remuneration of the Appellant is no way linked to the purchase prices or the prices which the contracts are concluded by Infinera USA. The Appellant receives compensation on cost plus basis as per the Agreement. The Appellant provides services on its own account and not on behalf of Infinera USA or any other entity. Thus, the services provided by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly of goods or services by Some person is different from the Supply of the principal it cannot be said that the person is merely arranging or facilitating supply of goods or services. 6.3. The Appellant submits that they only conduct preliminary market study/research and provide information of business concern to Infinera USA. Thereafter, Infinera USA team gets in touch with the prospective customers and carries out host of activities, which inter-alia includes the following: Requirement Analysis (assessment of the exact requirements of the customer), Request for Proposal (Infinera USA takes part in the bidding process), Supply of networking equipment (supply of goods to customers in India), Installation (by technical experts), Integration (integration of equipment to make it fully operational). All the above activities are performed by the Infinera USA team. No activities pertaining to installation / post-sales support or servicing of the optical networking equipment, etc would be carried out by the Appellant nor can the Appellant enter into any negotiation of contractual terms and price with respect to the Infinera USA products with any prospective customer The pre-sales mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons who act similar to an agent or a broker or such class of individuals They submitted that the nature of services provided by the Appellant does not fall under the definition of the term agent as it is not acting on behalf of Infinera. USA; that the Appellant is not end to end process but only executing specific task as per the agreement with Infinera USA; that the Appellant provides support services to its parent Company located outside India; that they do not participate or negotiate prices or conclude contracts for or on behalf of Infinera USA. 6.6. The Appellant submitted that the Authority had erred in holding that the ratio of the rulings given in the case of M/s GoDaddy India = 2016 (3) TMI 355 - AUTHORITY FOR ADVANCE RULINGS and M/s. Universal Services India Pvt Ltd = 2016 (5) TMI 750 - AUTHORITY FOR ADVANCE RULINGS are not applicable to their Case. They submitted that the services provided by the Appellant are very much similar in nature to the service provided by M/s. GoDaddy India Web Services. They submitted that the definition of intermediary envisages an actual arrangement or facilitation of goods and services by an intermediary, and does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority is bound by law to pass the order within a specified time period, no further adjournments can be given and the Bench allowed the Appellant to submit additional documents if any, by the 16 th Jan 2020. 7.2. The Appellant on Jan 2020 submitted the relevant extract from the Bilateral Advance-Pricing Arrangement ( BAPA ) comprising the details of activities carried out by the pre-sales and marketing services team of the Company. They submitted that the above-mentioned relevant documentation evidences that the company is not executing end to end process but only executing specific task as per the agreement entered with Infinera USA. The Company is engaged in provision of pre-sale marketing services for the optical networking equipment developed by Infinera USA and have contractual Obligation only with Infinera USA. The Company at no point in time negotiates prices or conclude contracts for or on behalf of Infinera USA as the contracts would be concluded and executed by Infinera USA without involvement of the Company. No other information was submitted by them. DISCUSSION FINDINGS: 8. We have gone through the records of the case and considered the submissions made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble and sufficient records of time Spent on rendering the services under the SOW. Infinera USA shall on its part, provide the Appellant with all such information and documentation as may be necessary and required by the Appellant to provide the Services under the SOW and shall cooperate with the Appellant to enable the Appellant to render the services under the SOW. 11. It is seen from the Agreement that, in consideration of the Appellant rendering the services under the Agreement and the SOW, Infinera USA shall the Appellant, a consideration calculated in accordance with and on the basis of all costs of running the Appellant s unit in India at actuals plus 15%. The parties agree that the consideration payable to IIPL for the services rendered by it is subject to the results of transfer pricing study being undertaken by the Appellant and the consideration shall be revised in accordance with the results of the study, if so necessary. The amount so computed constitutes the Appellant s total fee for all services and includes all Appellants costs (such as employee wages and payroll costs). The Appellant shall invoice Infinera for the services rendered on a monthly basis. Since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... munication and Coordination channel between potential Customers in India and product line marketing team in the US. The potential customers of Infinera India are high scale service providers like Vodafone, Reliance, Bharti, Aircel, etc. A typical sales Cycle for Infinera products ranges from 12 to 18 months. Infinera India also participates in industry related events so as to identify prospects Also, Infinera India celebrates a specific day earmarked as Infinera Day Wherein demonstration of the products happens to prospective customers. All the pricing decisions and negotiations with the customers -are done by Infinera US. The contracts are agreed between Infinera US and the customers and Infinera India only plays the role of connect between Infinera US and the end customers. Once the contract is signed between Infinera US and the customer, the product deployment is done outside India and Infinera India does not play any role in the release or Shipment of the products to the Customers in India and the same is taken care of by the Infinera offices in US, London -and Hong Kong. Infinera US has three sources from which they information about the Indian market scenario namely (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle of ejusdem generis would also be applicable in interpreting the definition of intermediary whereby the phrase any other person, by whatever name called should be read in conjunction with the terms van agent or a broker t and hence the scope of the term intermediary would get limited to only such persons who act similar to an agent or a broker or such glass of individuals. We have considered this argument of the Appellant and find that neither of the two canons of statutory construction i.e noscitur a sociis or ejusdem generis are applicable in this case. Ejusdem generis is a canon of statutory construction where, when general words follow the enumeration of particular cases of things, the general words will be constructed as applying to things of the same general class as those enumerated. On the other hand, Noscitur a sociis is used for interpreting questionable words in statutes. It means that the questionable meaning of a doubtful word will be derived from its association with other words. The Apex Court in the case of State of Bombay V/s. Hospital Mazdoor Sabha, (AIR 1960 SC 610) = 1960 (1) TMI 32 - SUPREME COURT , has held that noscitur a sociis is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The terms arrange and facilitate have not been defined in the Act, Merriam Webster Dictionary defines the two words as: Facilitate : to make (something) easier, to help cause (something); to help (something) run smoothly and effectively, Arrange : to bring about an agreement or understanding concerning; to make preparations; to move and organise (things) into a particular order or position; to organise the details of something before it happens, to plan (something). Therefore, a general understanding of the term arranging or facilitation would cover a very wide range of activities ranging from marketing or sales promotion of the goods or services of the client, locating prospective buyers for the client s products or locating sources of supply of the goods or services required by the client, price negotiation with the prospective buyer/ prospective supplier, procuring sales orders in respect of the goods or services of the client and like activities, 18. In the instant case, the activities performed by the Appellant. which have been enumerated in the earlier paras. show that they are facilitating the supply of optical networking equipment betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntity, the same would normally be exigible to GST. To hold otherwise in the case of this Appellant would go against the grain of the expressed intention of the legislature, This would happen only when we ignore the fundamental idea of GST being a destination based consumption tax and insist on applying the rule of Noscitur a sociis inappropriately to certain words/ phrases used in Section 2(13) of the IGST Act. It is an accepted fact that GST is destination based tax in the sense that it is levied on commercial activities and it is not a charge on the business but on the consumer. 21. Coming to the last condition, the definition of intermediary as given in Section 2(13) of the IGST Act excludes a person who supplies such goods or services or both on his own account It is the contention of the Appellant that the services of pre-sales promotion and marketing are being provided to Infinera US on their own account and they are not engaged in buying or selling or supplying goods on behalf of the Principal, It would be worthy to analyse the definition of the term intermediary services under the GST regime and pre-GST regime. Both the definitions have been mentioned below: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marketing services are supplied to the Principal on their own account and hence they fall within the exclusion clause of the definition of intermediary is not a correct interpretation of the law. The language of the exclusion clause is such that it is applicable to those persons who supply such goods or service (or both) on their own account If a person either facilitates or alternately arranges any supply of goods or service (or both), between two or more persons, and does not supply such goods or service (or both) on his own account, he would be regarded as an intermediary . At the risk of being repetitive, the Appellant is clearly facilitating the supply of the products of Infinera US (their overseas client) directly to the client s customers in the territory of India and is not supplying such goods on his own account Therefore, the Appellant does not fall within the ambit of the exclusion. 24. The Appellant in his grounds of appeal has relied heavily on the ruling given by the Authority of Advance Rulings under the Service Tax provisions in the case of GoDaddy India Web Services (P) Ltd Ruling No AAR/ST/08/2016 = 2016 (3) TMI 355 - AUTHORITY FOR ADVANCE RULINGS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind that the ruling given by the Authority at Maharashtra has examined the case of the applicant in the light of the terms of the agreement placed before it. The Authority in that case found favour with the terms of the agreement and held that the applicant in that case was not an intermediary . Although the Pre-sales and Marketing Agreement in this Appellant s case does mention that they are independent contractors and are not to act as an agent of Infinera US in any manner, we find that the actual activity performed by the Appellant as outlined in the BAPA is one of facilitating the supply of goods by Infinera US to their customers in India. For the above reasons we are not inclined to give any weightage to the ruling given in the case of M/s. Asahi Kasei India Pvt Ltd. = 2019 (1) TMI 1091 - AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA . In view of the foregoing discussions, we uphold the decision of the AAR that the pre-sale and marketing service provided by the Appellant of the products of the overseas client - Infinera US, is in the nature of facilitating the supply of the products of the overseas client and is appropriately classified as an intermediary service as define ..... X X X X Extracts X X X X X X X X Extracts X X X X
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