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2023 (5) TMI 300 - CESTAT MUMBAIRefund of unutilized CENVAT credit - Export of services - intermediary service - place of provision of service - to be decided under Rule 3 or Rule 8 &9 of Place of Provision of Services Rules, 2012 or not - HELD THAT:- A plain reading of the definition of “intermediary” as defined under Rule 2(f) of Place of Provision of Services Rules, 2012, makes it clear that to attract the said definition there should be two or more persons besides the service provider. In other words an “intermediary” is someone who arranges or facilitates the supplies of goods or services or securities between two or more persons. It is thus necessary that the arrangement requires a minimum of three parties, two of them transacting in the supply of goods or services or securities (main supply) and one arranging or facilitating the said main supply. Therefore, an activity between only two parties cannot be considered as an intermediary service. Sub-contracting for a service is also not an intermediary service. The supplier of main service may decide to outsource the supply of main service, either fully or partly, to one or more sub-contractors. Such sub-contractor provides the main supply, either fully or a part thereof and does not merely arrange or facilitate the main supply between the principal supplier and his customers and therefore clearly not an intermediary. Who is an “intermediary” and what is “intermediary service” has been clarified by Central Board of Indirect Taxes and Customs (CBIC) vide Guidance Note dated 20.06.2012 and under GST regime also a clarification has been issued by CBIC on 20.09.2021 both of which are in line with the discussions made hereinabove about “intermediary”. On perusal of the agreements as well as submission of the learned Chartered Accountant for appellants, it is found that the Product development Services in relation to creation of new generic drug is limited to the performing of various services by the appellant on Formulation development, Bio-Chemical research, Bio-study research, Bio-equivalent study, clinical study and Active Pharmaceutical Ingredient (API) development as detailed in the agreement dated 02.02.2008 and 10.8.2012, and that too as a backend process - There is nothing on record to show that the appellant is liasioning or acting as intermediary between the foreign service recipient and any other person. Therefore, the finding of the Commissioner (Appeal) that the appellants are an “intermediary” is misplaced. In view of the facts involved herein, it is found that the appellants cannot be termed as an ‘intermediary’ and their services provided to Foreign Service recipient cannot be termed as ‘intermediary services’. If the Revenue is not in agreement with the claims of the appellants and if, according to Revenue, the services in issue do not fall within the ambit of export of service then the Revenue ought to have initiated the proceedings against the appellants for demanding the Service Tax in respect of taxable service provided by the appellants. Admittedly no such proceedings have been initiated by the Revenue as borne out from the records of the case and therefore in a way Revenue itself has allowed this taxable service provided by appellants as export of service. There are force in the submission of learned Chartered Accountant about applicability of Rule 3 of Place of Provision of Services Rules, 2012 which provides that generally the place of provision of service is the location of service recipient. Since in the instant case the location of service receiver having its principal place of business at England, UK therefore the place of provision of service is outside India and hence the services provided in this issue qualify as ‘export of services’ in terms of Rule 6A of Service Tax Rules, 1994. The impugned order of Commissioner (Appeals) denying refund of CENVAT credit on impugned services are not sustainable in law and therefore the appeals filed by the appellants deserve to be allowed - Appeal allowed.
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