TMI Blog2021 (12) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... time are not separate activities and these are the benchmarks or methodology based on which consideration for actual service such as installation / up-gradation of machine or training in respect of machines would be determined but appellant have not put forth any argument how the travelling hours, working hours or overtime are not separate activities - The appellant may received the one consolidated charges for their service provided to customer considering it as one supply and not more than one. However, in the contract held between appellant and SPA hourly rate is fixed for each work i.e. working hours, travelling hours and overtime hours. Therefore, the appellant is providing more than two services and contention of the appellant that they are providing only one service is not correct. Indian customer as service recipient for the present transaction - HELD THAT:- A reading of the definitions given in Section 2(93) and 2(31) of the CGST Act, indicates that the person who is required to make a payment for getting a job done is the recipient of service. Accordingly, the recipients of the service supplied by the appellant will be the manufacturer as it is at their behest that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to the CGST Act would also mean reference to the corresponding similar provisions in the GGST Act. 2. The applicant M/s. Stovec Industries Ltd. filed an application for advance ruling before the Gujarat Authority for Advance Ruling (herein after referred to as the GAAR ). The applicant has submitted that they are engaged in manufacturing Rotary screen printing machine, installation and servicing of the machines, and also offers products for conventional and digital engraving methods. They have entered into a contract with SPG Prints Austria GMBH (herein after referred as SPA ) to provide particular services to customers of SPA in India, as per SPA s instruction. Such services shall include installation / up-gradation of machines sold by SPA, training at SPA s customers site etc. The relevant extract from the contract relating to scope of service is as under: Services Stovec has agreed that it shall on behalf of and as per the instruction from SPA shall provide services with respect to: a) Installation and/or upgrades of machines sold by SPA and shall also give training at SPA s customer site in co-ordination with SPA b) Machines sold by SPA in India a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Applicant could be categorized as that of an intermediary as per Section 2(13) of The Integrated Goods and Service Tax Act, 2017? Ans . The specified transaction of the Applicant is categorized as an intermediary as per Section 2(13) of The Integrated Goods and Service Tax Act, 2017. Question 4. Whether, in the facts and circumstances, the specified transaction qualifies to be Export of service as per Section 2(6) of The Integrated Goods and Services Tax Act, 2017? Ans . Negative as per the above discussion. 4. Aggrieved by the aforesaid advance ruling, the appellant has filed the present appeal on 03.11.2020. During the course of personal hearing held on 22.01.2021, the appellant reiterated the submissions made in the appeal. 5. The appellant in the ground of appeal has submitted that the advance ruling issued by GAAR has failed to appreciate the facts, legal provisions and rules of interpretation of law. The appellant has put forth their argument on each and every question of Ruling passed by the Advance Ruling of Authority. The brief of the grounds of appeal in respect of each question of the appellant are as under: Submission against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conjunction with each other in the ordinary course of business is against the basic understanding of contract as there are no more than one service is provided at one time. There should be one principal supply 6.4 The appellant has submitted that GAAR has observed that they are supplying the service of installation/up-gradation training and said supply of service is a principal supply as such they are charging per hour for the said service under the head working hours and other service like travelling hours and overtime hour are naturally bundled service to the main service. As discussed above, they would provide independent services and therefore, the question of principal supply does not arise. Further, the services to be rendered by the Appellant would be as per the requirement of each of the customers and would be offered independently. Since the activities are individual, there is no principal supply as predominant element. The Appellant has submitted that considering the above discussion present supplies are individual / independent supplies and there is no composite supply. Submission against contemplation of Indian customer as service recipient fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) is followed by ; and the word or . Therefore, each of the sub-clauses is independent provision and condition of 90% participation would not be applicable to clause (i). 7.4 The Appellant has submitted that considering the above discussion clause (a) is independent of latter part of definition and therefore, when the consideration is payable in any transaction, the service recipient would be the person who is liable to pay consideration. The appellant has relied upon the decision of the following cases: Paul Merchants Limited Vs. Commissioner of C. Ex., Chandigarh [2013 (29) STR 257 (Tri.-Del.)] GAP International Sourcing (India) Pvt. Ltd. vs. Commr. of S.T., Delhi 2015 (37) S.T.R. 757 (Tri. - Del.) Universal Services India Private Limited [2016 (5) TMI 750] The appellant has submitted that based on above discussion, it could be stated that a person would qualify as recipient of supply if the following ingredients are satisfied: Ingredients / attributes Present set of facts On whose instructions the services are provided SPA Who wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ters of trade, commerce, or navigation, for a compensation commonly called brokerage. They are no different from each other and both are having representational feature or doing activity on behalf of other with third party. 8.2 The Appellant has submitted that the rule of Ejusdem Generis would also be applicable in present case. The application of this Rule is necessitated because of the use of a general phrase preceded by specific words. The words ejusdem generis mean of the same kind or nature . Ejusdem generis is a rule of interpretation that where a class of things is followed by general wording that is not itself expansive, the general wording is usually restricted things of the same type as the listed items. The rule of Ejusdem Generis is applied in the following cases : The statute enumerates the specific words; The subjects of enumeration constitute a class or category; That class or category is not exhausted by the enumeration; The general terms following the enumeration; and There is no indication of a different legislative intent. The appellant has placed reliance on the following case laws: CIT v. Rani Tara Devi [201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich if provided by a broker or an agent or by any person (by whatever name called) would be covered under the services provided by an intermediary . This second condition needs to be cumulatively fulfilled, i.e. it should entail arrangement or facilitation of a main supply of goods or services between the service recipient, i.e. the overseas entity and its customers in India. In other words, an intermediary is expected to play an active role in arranging or facilitating the actual provision of service or supply of goods between the real service provider and real service recipient. Hence, there should be an interaction or facilitation with the feature of supply of the (main) service and the intermediary should have a role in the main supply of goods or services being rendered by the service recipient to its customer in India. 8.8 The appellant has submitted that in the present case, there is no performance of service by SPA and actual services are performed by the Appellant itself. To mean, there is no facilitation but actual doing / undertaking of activity on their own. Moreover, the Appellant does not arrange the supply by organizing or making plans but as discussed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be passed back to the principal. (ii) Separation of Value: The value of an intermediary s service is invariably identifiable from the main supply of service that he is arranging. It can be based on an agreed percentage of the sale or purchase price. Generally, the amount charged by an agent from his principal is referred to as commission . (iii) Identity and title : The service provided by the intermediary on behalf of the principal is clearly identifiable. 8.11 The appellant has submitted that in light of the above parameters of the definition of intermediary, it is to be evaluated now whether the services to be provided by the Appellant to SPA under the present agreement fulfils the parameters of intermediary or not. S.No. Nature of service/activity Criteria to qualify as intermediary Applicability in case of the Appellant Nature and Value 1 Relation of principal and agent Yes Not fulfilled - Relationship between the Appellant and SPA is that of independent contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson nor arranging or facilitating supply of service between SPA and the customer in India. Further, the services are provided by the Appellant on their own account and therefore, they would not fall within the purview of intermediary . The Appellant receives fixed consideration based on number of hours spent and does not receive any commission amount as in the case of intermediary 8.13 The appellant has further submitted that the observation of the GAAR that the nature of consideration whether on hourly basis or any other method does not have bearing on intermediary service. There is nothing in the definition to state that if the person supplying service receives the consideration other than as commission or brokerage would exclude him from intermediary. Further, there is nothing in the definition that if applicant does not negotiate on behalf of the principal would not be covered as an intermediary. The appellant has submitted that the said argument put forth by GAAR is baseless. Though the definition does not state such condition, the method of consideration helps in determining the role of the service provider. Generally, the commission is paid as a result of success ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, then the activity will not qualify under the definition of intermediary. In this regard the appellant has placed reliance on the following case laws : Chevron Philips Chemicals India Private Limited [2020-TIOL-178-CESTAT-MUM Commissioner of Goods and Service Tax Gurgaon-II Vs. Orange Business Solutions Pvt. Ltd. [2019-TIOL-1556-CESTAT-CHO] M/s. Evalueserve. Com Pvt. Ltd. Versus CST, Gurgaon2018 (3) TMI 1430 - CESTAT CHANDIGARH Sunrise Immigration Consultants Private Limited v. CCE ST, Chandigarh2018VIL-539-CESTAT-CHD-ST M/s Godaddy India Web Services Pvt. Ltd. [2016-TIOL-08-ARA-ST] 8.17 Appellant has submitted that considering the above discussion they are not broker, agent or any other person who arranges or facilitates the supply. Also, the Appellant is providing the services to SPA on their own account and hence, the Appellant would not qualify as intermediary for the services under question. Submission on non-qualification of the specified transaction as export of service 9.1 The appellant has submitted that the observation of GAAR that 3 out of 5 conditions are not fulfilled and hence, the services under question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellant submits that where the person has a branch or agency or representational office outside India then such branch, agency or representational office would be considered as an establishment of that person. Further, these establishments would be treated as distinct person as per above explanation. However, the condition to qualify as export service states that the two entities should not be distinct persons merely because of above referred explanation. In present case, the Appellant and SPA are not branch, representational office or agency of each other. Both are separate legal entities and even they are not holding subsidiary companies as well. In this regard the appellant has relied upon the decision of Hon ble Gujarat High Court in the case of M/s. Linde Engineering India Pvt. Ltd Vs. Union of India [2020-VIL-349-GUJST]. 9.3 The appellant has submitted that they and SPA are not mere establishment of distinct persons and therefore, they would not be covered within the restriction stated in the definition of export of service. Hence, the Appellant submits that the 5th condition referred above is also fulfilled. 9.4 The appellant has submitted the additional sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e have carefully gone through and considered the appeal and written submissions filed by the appellant, submissions made at the time of personal hearing, Advance Ruling given by the GAAR and other material available on record. 11. We find that the appellant has contended all the four Rulings given by the Authority for Advance Ruling in his ground of appeal. Accordingly, we examine the contentions of the appellant in respect of all the four Rulings. First Ruling : qualification of the specified transaction as composite supply 12.1 The appellant has contended that the observation of the GAAR that conditions specified for composite supply in Section 2(30) of the CGST Act, 2017 are fulfilled in respect of the specified transactions are not correct. Hence, first we refer to the definition of Composite Supply defined in sub-section (30) of Section 2 of CGST Act, 2017, which is read as under: Composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof which are naturally bundled and supplied in conjunction with each other in the ordinary course of busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinary course of business is against the basic understanding of contract as there are no more than one service is provided at one time. We have examined the said argument and find that the appellant has not explained how the travelling, regular work or overtime are not naturally bundled service because to provide service of installation/up-gradation or training, engineer has to travel at the place of customer and may work overtime to complete the service. Thus without travelling and overtime how would appellant provide the service of installation/ up-gradation of machine and training. Therefore, we are of the opinion that service of installation/up-gradation or training and travelling, regular work or overtime are naturally bundled service. 12.4 The appellant has argued that the services to be rendered by them would be as per the requirement of each of the customers and would be offered independently. We have examined and find that the appellant is supplying the service of installation/up-gradation training and said supply of service is a principle supply as such they are charging per hour for the said service under the head Working hours and other service like travellin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply; 13.2 A reading of the definitions given in Section 2(93) and 2(31) of the CGST Act, indicates that the person who is required to make a payment for getting a job done is the recipient of service. Accordingly, the recipients of the service supplied by the appellant will be the manufacturer as it is at their behest that the appellant has undertaken the activity of installation/up-gradation of the machine, service of machines which are under service contract with SPA and machine which are under warranty period to the customer. The payment received from SPA is in the nature of consideration paid by the manufacturer to the Appellant for carrying out the service. The appellant has make an argument that clause (a) and (b) of the definition ends with semi colons (;) whereas clause (c) ends with a comma (,) followed by and . The punctuation semi colon indicates separation of clauses wherein comma connects the clauses para used in the definition; that clause (a) is independent of latte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efined in Section 2(5) of the CGST Act 2017 which is read as under : a person including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another . 14.4 The above definition of agent includes a broker but it is not necessary that every broker is an agent . The term broker has not been defined in the GST Act but as per Black Law s Dictionary, the term broker is defined to mean an agent employed to make bargains and contracts between other persons, in matters of trade, commerce, or navigation, for a compensation commonly called brokerage . From the above definition and meaning of term broker and agent , the basic difference between them is that broker is a person who acts as middleman between two parties and whose job is only to facilitate whereas an agent acts on behalf of the Principal. In the agreement held between applicant and SPG Print (SPA) it is mentioned in Service clause that, Stovec (Applicant) has agreed that it shall on behalf of and as per instruction from SPA, shall provide s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 159/15/2021-GST dated 20.09.2021 we agree with contentions of the appellant that their services will not fall under the category of intermediary services. Since there is no performance of service by SPA and actual services are performed by the appellant itself they are outside the purview of the definition of intermediary . Further as per CBIC circular dated 20.09.2021 referred above, subcontracting of services whether a part or whole cannot be included within the purview of intermediary services. In the present case, SPA has sub-contracted the services like installation/ upgradion of machines sold by SPA, training at customer s site etc. to the appellant. Such services would be provided by the appellant to SPA as part of sub-contract agreement, by providing services to the customers of SPA. The supply of service by the appellant where it has been subcontracted to it by the recipient will fall under the exclusion part of the definition of intermediary as per the provisions of Section 2(13) of the IGST Act 2017. Hence in view of the above discussion we agree with the appellant that the specified transactions are not intermediary in nature and they fall under exclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as such their service is performance based and location of performance of service is within India. They fall within the category as described under Section 13 (3) (4) of IGST Act, 2017. In view of same it is concluded that the place of supply of service is not outside India. 15.4 The fifth condition is that the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8. We refer to Explanation 1 in Section 8. Explanation 1 in Section 8 has been reproduced hereunder: Explanation 1. For the purposes of this Act, where a person has, (i) an establishment in India and any other establishment outside India; (ii) an establishment in a State or Union territory and any other establishment outside that State or Union territory; or (iii) an establishment in a State or Union territory and any other establishment being a business vertical registered within that State or Union territory, then such establishments shall be treated as establishments of distinct persons. 15.5 The aforementioned condition to qualify as export of service states that the two entities should n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of and as per the instruction from SPA shall provide services with respect to: a) Installation and/or upgrades of machines sold by SPA and shall also give training at SPA s customer site in co-ordination with SPA b) Machines sold by SPA in India and which are under warranty period c) Machines which are under service contracts with SPA d) Machines which are not having warranty and/or service contracts The aforesaid clause of the agreement clearly states that Stovec (appellant) shall provide the service at SPA s customer site i.e. in India. This clearly shows that the appellant service is performance based as such the appellant can perform service only at SPA s customer in India and not outside India. We strongly hold that the contention of the assessee that their service is recipient base is baseless and against the law. 16.1 Hence in view of above discussion the specified transaction do not qualifies the export of service because all the conditions which are stipulated under Section 2(6) of IGST Act, 2017 are not fulfilled which is the foremost condition for any transaction to be qualified Export of Service . 16.2 The appellant has relied upon the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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