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TMI Blog2019 (4) TMI 1543X X X X Extracts X X X X X X X X Extracts X X X X ..... vities, the Appellant is clearly acting as intermediary. There does not appear to be any intention of the AAR to tax the back operation of the Appellant and the Ruling of AAR which is based on a specific agreement can not be generalized. Intermediary services or not? - HELD THAT:- Appellant have misconstrued the definition of intermediary as provided in Section 2(13) of the IGST Act, 2017. It is seen that the services they are rendering are in relation to the goods in question which belong to either their overseas client or the client's supplier, as the case may be. AAR decision upheld. - MAH/AAAR/SS-RJ/22/2018-19 - - - Dated:- 26-2-2019 - Smt. Sungita Sharma, Member And Shri. Rajiv Jalota, Member ORDER PROCEEDINGS (Under Section 101 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India. b. A Company named M/s. Vikudha India is devoted for sourcing from India and subcontinent. c. There are common Directors in Vikudha Overseas and Vikudha India. d. The office of Vikudha India is situated in the same building wherein the office of the Appellant is situated. e. On the basis of above, the concerned officer came to the conclusion that the Appellant is actually providing services to Vikudha India. f. The Concerned Officer also found that the Appellant was not receiving its consideration in convertible foreign exchange. F. The Appellant filed rejoinder on 6th September 2018, a copy of which is annexed with the appeal. The Appellant, interalia, submitted as under. a. M/s. Vikudha Overseas Corporation, Hong Kong have 19 countries and name of group company engaged in sourcing / marketing in that country / region is clearly mentioned on its website. Similarly, M/s. Vikudha India Trading Ltd. is sourcing from Indian subcontinent. b. The Appellant comes into picture only after finalization of purchase / sale order by the client and provide back offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or services or both or securities on his own account; 2. A person is covered under the aforesaid definition of 'intermediary if following three conditions are satisfied. a. He must be a 'broker' or an 'agent' or 'any other person by whatever name called, who arranges or facilitates the supply of goods or services or both or securities'. b. The supply arranged or facilitated must be between two or more persons. c. He should not be the person who supplies the goods or services or securities on his own account. 3. There can be no scope for confusion when the person either acting as an agent of the supplier or acting as an agent of the recipient, arranges the supply or acting as a broker between a supplier and recipient, finalizes some sale or purchase deal and in these circumstances, the person who arranges the supply or brokers a sale/purchase deal between two or more persons would be an intermediary. 4. But the definition of intermediary also covers 'any person by whatever name called' who facilitate the supply of goods or services or both or s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the definition though their normal import may be much wider. We are not impressed by this argument. It must be borne in mind that noscitur a sociis is merely a rule of construction and it cannot prevail in cases where it is clear that the wider words have been deliberately used in order to make the scope of the defined words correspondingly wider. It is only where the intention of the Legislature in associating wider words with words of narrower significance is doubtful, or otherwise not clear then the present rule of construction can be usefully applied. It can also be applied where the meaning of the words of wider import is doubtful; but, where the object of the Legislature in using wider words is clear and free of ambiguity, the rule of construction in question cannot be pressed into service. 7. As per the rule of 'ejusdem generis' when particular words pertaining to a class, category or genus are followed by general words, the general words are construed as limited to things of the same kind as those specified. Hon'ble Supreme Court explained the ambit and scope of this rule in Amar Chandra Vs. Collector of Excise, Tripura, AIR 1972 SC 1863 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es is a very wide term. Entire Trade, Commerce and Industry is engaged in supply of goods and / or services and host of services facilitates the same. For example, telecommunication services facilitate contact between two or more persons. Transportation services facilitate delivery of goods. Exhibition halls facilitate to reach the potential buyers. Banking facilitates transfer of money etc. All these services, in one way or other, facilitate supply of goods and /or services and therefore all such services should fall under 'intermediary' services and all the independent provisions incorporated for determination of place of supply in such services would be rendered redundant. They argued that the courts should avoid a construction which renders a part of statute devoid of any meaning. Kind attention is invited to the judgment of Hon'ble Supreme Court in J K. Cotton Mills Vs. State of U. P., AIR 1961 SC 1170 = 1960 (12) TMI 77 - SUPREME COURT wherein the Hon'ble Supreme Court stated, In applying the rule however we have to remember that to harmonies is not to destroy. In the interpretation of statues, the courts always presume that the legislatur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Lord Reid, such cases are rare because the English language is a flexible instrument (Ballrooms v. Zenith Investments, (1970) 2 All ER 871). The Courts are, therefore, not readily prepared to concede as plain language which involves absurdity or practical inconvenience: (Maxwell, 11th Edition, p. 6). The real role that is played by the consideration of consequences in the process of construction is correctly appreciated by Max Radin as follows: It is ... ... ... ... true that the consideration of the consequences of a decision has at all times been a controlling factor in the judicial process. Those Courts who declare vigorously that they are completely indifferent to the consequences of what they decide, and would decide as they do though the heaven fell, merely mean that they do not really believe that the consequences will be seriously harmful. If they meant what they said, and acted on it, they would be taking a long step towards the destruction of our judicial system. (33 Calif. L. Rev. 219, p. 228). If Clause (3) of Article 228A had used the words any question, whether arguable or not there would have been no room for construction. However, as the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As already submitted, the appellant come into picture only after finalization of Purchase / Sale deals by the clients. They said 'Business Support Services' is provided by applicant to its client on Principle to Principle basis. Therefore, the instant case is covered by exclusion clause in definition of Intermediary . 16. It is submitted that the term 'Intermediary' was also defined in Service Tax Regime. In Service Tax the term was defined in Rule 2(f) of the Place of Provision Rules, 2012 which read as under. (f) intermediary means 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 main service or supplies the goods on his account; 17. From the above, it is clear that the definition of 'intermediary' in GST Law is identical to its definition under Service Tax. The above definition also contains an identical exclusion clause. CBEC in the Educational Guide released by it had explained the concept o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and oversight of services of third party Call Centers are ancillary and incidental to the provision of main service, i.e., business support service. Further, applicant would provide said services as a package and the payment for the entire package would be a consolidated lump sum payment. Applicant submits that in view of all these indicators, service provided by them to GoDaddy US is a bundle of services, which is bundled in normal course of business. This point has not been controverted by the Revenue. We agree with the submissions of the applicant that proposed services are a bundle of services, bundled in normal course of business and not intermediary service. 21. It observed that business support services are proposed to be provided by the applicant to GoDaddy US on principal to principal basis. It is the main service. Further, applicant is not concerned in respect of services provided by GoDaddy US to Indian Customers, which relates to domain name registration, transfer services, web hosting services, designing services, etc. In case, applicant was providing service to Indian Customers, he would have received consideration from Indian Customers. Fact is tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, in the instant case, the buyers / sellers are not limited to India, but are spread across the Globe. Thus, the case of applicant is at much better footing. The Ld. Advance Ruling Authority also failed to appreciate that the services provided by the Appellant were also on Principle to Principle basis. In the agreement, it was specifically mentioned that both the parties commit not to represent each other as Agent / Principal of other party. The Ld. Advance Ruling authority also failed to appreciate that the appellant has no role to play till the deal of purchase / sale is brokered. 24. It is correct that the Ruling of Authority for Advance Ruling is binding only in respect of Applicant. However, it certainly has persuasive value. It should also be taken into consideration that Authority for Advance Ruling under Service Tax was consisting of very senior Tax Officers and was headed by a retired Supreme Court Judge. Therefore, interpretation of law by such a senior body should be given due regard. Attention is also drawn to the relevant portion of judgment of Hon'ble Supreme Court in Columbia Sportwear Co. Vs. Director of Income Tax, 2012 (283) E.L.T. 321 (S.C.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e person. In the instant case Appellant, the supplier of service, and overseas recipient of service are different corporate entities, therefore, the said condition have no application. 26. In view of the above and submissions already made, it was prayed that the Services being provided / proposed to be provided be treated as 'Zero Rated Supplies'. Personal Hearing 27. A personal Hearing in the matter was conducted on 29.01.2019, wherein Shri Bharat Bhusan, Advocate, representative of the Appellant, reiterated their written submissions. Shri Sachin Jadhav, appearing as jurisdictional officer, reiterated the submissions, which had been made earlier before the Advance Ruling Authority. Discussion and Findings 28. We have gone through the facts of the case, the entire records, and submission, oral as well as written, made by the Appellant as well as the concerned officer. We have also gone through the ruling pronounced by AAR wherein the members of the AAR decided the services being rendered by the Appellant in the nature of intermediary services and hence taxable as per the provisions of the pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk undertaken by the Appellant, reproduced herein below: The party B (which in this case is the Appellant) will coordinate with buyers, sellers and other necessary parties for execution of purchase and sale contracts entered into by the Party A (in this case M/s. Vikudha Overseas Corporation Ltd.). The Party B will also maintain accounting of all these transactions. The Party A will provide access to its software VOSS to the Party B for rendering the agreed services. The major service activities to be undertaken by the Party B for, and on behalf of Party A are mentioned below: (a) Get SDF (Sales Detail Form) PDF (Purchase Detail Form) from concerned party; (b) Generate order no. in VOSS; (c) Create (P.O.) Purchase Order SC (Sales Contract) in VOSS; (d) Send SC (Sales Contract) PI (Proforma Invoice) to customer get Sl (Shipping Instructions) as well; (e) Send PO (Purchase Order) to supplier seek PI (Proforma Invoice) share Sl (Shipping Instructions); (f) Liaise with supplier for Cargo Readiness; (g) Liaise with Inspection Authorities if pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods are being supplied on FOB; (vii) Seeking carrier booking details and sharing the same with the suppliers and customers;(viii) Following up for smooth SOB (Shipped on Board) with supplier and forwarder;(ix) Getting Draft BL (Bill of Lading) prior to sailing;(x) Following up, for full shipping documents, with supplier;(xi) Arranging Inspection Certificates if applicable; (xii) Notifying ETA - reminder to customer (Expected Time of Arrival) are all beyond the scope of back office work and are in the nature of facilitation of the supply of the goods between the two parties i.e. their Client and the suppliers and customers of the Client, as the case may be, as all these above mentioned services are essential for the smooth supply of the goods between the aforesaid two parties. Further, there is no confusion regarding the fact that the goods which are being supplied between the two parties i.e. their client and suppler or customer, as the case may be, do not belong to the Appellant confirming that the Appellant are not providing the supply of goods on their own account. 34. The other remaining services, enumerated in the para 32 above, namely, (i) Ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of goods. 35. Since, the Appellant is doing the above work on behalf of their client and the said supply of goods is invariably between two persons, i.e. between their client and its buyers/suppliers of goods, thereby, satisfying the second criterion of the intermediary. 36. Further, the Appellant is not providing the goods in question, either to its client's buyers or to its client's suppliers on his own account. The goods in the question invariably belong either to its client or to its client's supplier. Thus, the above goods are, clearly, not provided on their own account, thereby, satisfying the third criterion of the intermediary services. 37. Thus, all the criterion applicable to the intermediary, as discussed above are being satisfied adequately by the Appellant. Hence, while performing all the above mentioned activities, the Appellant is clearly acting as intermediary. 38. The argument of the appellant that the impact of AAR ruling will result in subjecting the back office operations to GST which will affect the industry engaged in supplying such services to its overseas clients, is ill-found and mis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and expect the services being received by them as one package for better enjoyment of the services being offered by the service providers operating in that particular industry, then those services may be considered as naturally bundled in the ordinary course of business. In the instant case, the Appellant during the course of personal hearing have emphasized that their clients also expect the entire gamut of services to be provided in one package so as to suit their business needs. Applying this parameter, it may verily be inferred that entire set of services is a composite supply. Majority of similar service provider in the industry provide similar bundle of service: As regards this very indicative parameter, the Appellant has himself submitted in para 20 above, theirs is not the peculiar case, as this practice of bundling the various services offered by them is being followed by majority of the service providers operating in this very service industry. Applying this criterion in the present case, it is deduced that the entire set of services is a composite supply. One service is the main service and other services provided in the bundle ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or frequent practices followed in the area of business to which services relate and the same will be determined by the principles of the natural bundling as stipulated under Education Guide on Service tax. 43. The claim of the Appellant about principal supply being 'Back office Support' and 'Accounting' and other services being ancillary is not tenable as the services detailed in para 33 above cannot be considered as ancillary services to the 'Accounting Services' and/or 'Back Office Support' services. 44. As regards the submission made by the Appellant in para 18 above, wherein they are asserting that they are providing services to clients on own account, and therefore cannot be categorized as intermediary, it is observed that Appellant have misconstrued the definition of intermediary as provided in Section 2(13) of the IGST Act, 2017. It is seen that the services they are rendering are in relation to the goods in question which belong to either their overseas client or the client's supplier, as the case may be. Hence the above contention made by the Appellant is clearly not tenable. 45. Thus, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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