TMI Blog2021 (12) TMI 481X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer pricing rules raise the question as to whether an arm s length price has been set between the producing, intermediary and selling companies , however he too do not speaks of the relevance of this document for determination of the issue of intermediary services under consideration. The authorized representative has vehemently argued stating that Commissioner (Appeal) has not considered the refund claim and issue on merits and have remanded back the matter to be decided by the original authority for consideration of issue. From the perusal of the decisions which have been referred by the authorized representative, we find that the decisions, were in the case where the appeals have been dismissed by the Commissioner (Appeal) on the ground of limitation or for failure to comply with the requirements of pre-deposit. However from the observations reproduced from the order of Adjudicating Authority and Commissioner (Appeal), it is quite evident that the only issue under consideration by both the authorities was in respect of the intermediary services . Appellant has filed this appeal challenging the impugned order claiming that the services provided by them do not qualify as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Refund Amount Jan 2016 to Mar 2016 29.09.2016 24.08.2018 88,65,730/- Oct 2015 to Dec 2015 29.09.2016 24.08.2018 99,7B,019/- 2.2 The Deputy Commissioner, vide his Order-in-Original No. 141 142/Refund/GST/Div.-East-11/2018-19 dated 08.05.2019, rejected the refund by holding that the services provided are Intermediary Services thus covered under Rule9 of the Place of Provision Rules,2012.Therefore, the place of provision of services would be the location of the service provider, which is within the taxable territory, and hence these services would not qualify as export of services as per Rule 6A of the Service Tax Rules, 1994. 2.3 Against the orders of the original authority rejecting their refund claims appellant filed appeal before the Commissioner (Appeal) which have been decided as per the impugned order referred in para 1, supra. 2.4 Aggrieved by the impugned order, Appellants have preferred this appeal. 3.1 We have heard Shri Prasad Paranjape, Advocate for the Appellant and the Shri H S Brar, Super ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count to the group entities (referred to as AEs in the Transfer Pricing reports). There is no third party involved and these services do not involve arranging or facilitating or procuring of goods or services for the group entities by the Appellant. Wherever these group entities are located outside India and the consideration for these services is received in foreign exchange, these services would qualify as export and are accordingly disclosed as export of services under Rule 3 of POPS Rules in the ST-3 returns filed by the Appellant. With respect to (c) above, it is submitted that certain expenses incurred by group entities on behalf of the Appellant are recovered from the Appellant. Since these are expenses in foreign exchange incurred by the Appellant, this is not claimed as export and therefore this does not have any bearing on the present matter. These expenses are independent of services provided under the service agreements with the group entities. With respect to (d) above, it is submitted that the Appellant has incurred certain expenses on behalf of group entities and recovered the same at actual. These expenses are typically towards certain tax reimbursements, meet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. Commissioner Appeals which stood upheld by the Hon ble Tribunal in the Orange Business case was passed within the same Commissionerate as that of the Appellant. Further, in the Appellant s own case by earlier Orders-in-Original dated 29.02.16 (Page 85 of Appeal) (Apr 12 to Mar 15) and dated 08.09.16 (Page 113 of Appeal) (Apr 15 to Sep 15) the Department has provided categorical finding with respect to the main service provided by the Appellant that it does not qualify as intermediary and that it qualifies as export. The Department even in the GST era has granted refunds to the Appellant in its Mumbai location for the period FY 2018-19 and FY 2019-20. In the absence of any contrary judgement or stay to the judgement of the Orange Business case or in Appellant s own case, it is submitted that the same will be binding and on this ground itself, the present appeal may please be allowed. In para 7 of the impugned Order-in-Appeal it is stated that the Appellant has only provided copy of one agreement. It is submitted that this is incorrect finding. The Appellant has indeed submitted all the agreements along with sample invoices to the Ld. Commissioner (Appeals) during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue learned authorized representative while reiterating the findings recorded in the impugned order submits that- The Appellant has claimed to be engaged in providing Business Support Services, Information Technology Software Services and Maintenance Repair Services to various Macquarie Group entities worldwide, i.e., for providing data processing, back office and IT enabled support services which counted as exports and sought refund of Cenvat credit of input services used in rendering the same under Rule 5 of the Cenvat Credit Rules, 2004. The adjudicating authority rejected the refund claim holding that based on the facts in Softex form and Transfer Pricing documents it was observed that certain expenses were incurred by the party on behalf of its associate entities, for which reimbursements were provided by associated entities and the functions performed by the party related to facilitating the payment on behalf of associated entities. Since, the Appellant had merely facilitated the provision of such services, therefore, the services provided by the party appeared to fall under the category of Intermediary Services and would be covered under Rule 9 of the Place of P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pla Ltd [2017 (348) E.L.T. 579 (Tri. - Del.)] Krishna Petrochemicals [2021-TIOL-542-CESTAT-MUM] Virmati Software and Telecommunications Ltd [2021 TIOL-520-CESTAT-AHM] M/s Agrasha Alloys Trading Pvt Ltd [2021-TIOL-571-CESTAT-MUM] The Standard Chartered Bank [2021-TIOL-579CESTAT-MUM] M/s Anantara Solutions Pvt Ltd [2021-TIOL-592-CESTAT-MAD] The above judgements/decisions lay down the following principles : An impugned order, not passed on merits, ought not to be taken up for adjudication on merits An issue not decided in the impugned order ought not to be taken up for adjudication by the appellate authority A non-speaking order ought not to be adjudicated upon by the appellate authority Documents not produced before the lower authority ought not to be taken cognizance of by the higher authority directly and same ought to be produced before the former and decided thereupon. 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments. 4.2 In the present case we are concerned with the refund claim filed by the Appellant, in terms of the Rule 5 of the CENVAT Credit Rules, 2004 as amended. These re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arified the meaning of intermediary as under: Para 5.9.6 what are intermediary services? .. Even in other cases, wherever a provider of any service acts as an intermediary for another person, as identified by the guiding principles outlined above, this rule will apply. Normally, it is expected that the intermediary or agent would have documentary evidence authorizing him to act on behalf of the provider of the main service. Thus, from the definition of 'intermediary' along with the Guidance Note, it can be surmised that: An intermediary arranges or facilitates a provision of a 'main service' between two more persons; An intermediary is involved with two supplies at any one time: (i) the supply between the principal and the third party; and (ii) the supply of his own service (agency service) to his principal, for which a fee or commission is usually charged; An intermediary cannot influence the nature or value of service, the supply of which he facilitates on behalf of his principal, although the principal may authorize to negotiate a different price; The consideration for an intermediary's service is separately identifiabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ITG Gurgaon which includes the following services: a. Database administration and support not involving any maintenance activity. Database administration and support to include monitoring of server, security monitoring and ensuring effective functioning of systems, migration of data and administration of storage maintenance of database; b. IT Infrastructure support services involving Level 2 and Level 3. IT infrastructure management and support and technical assistance in relation to IT Infrastructure; c. Software maintenance including Network maintenance, storage maintenance and unix and wintel maintenance. Maintenance services to performed in respect of IT infrastructure and software located outside India. Maintenance to specifically not cove on-site maintenance but to be in the form of remote maintenance performed through server located outside of India; d. Software support not involving any maintenance activity; e. Software development, provision of updates and enhancements and independent testing of Software (Not involving any maintenance activity); 2) Software quality assurance, application development, application support and infrastructure su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) Reconciliation of IFTI report files 3) Confirm IFTI'S (FICC MSG) for reporting 4) Escalation of discrepancies back to regional AML and On boarding teams Xvi. Transaction Monitoring 1) Triage and investigate transaction monitoring alerts that arise from detection scenarios or rules developed by RMG AML Compliance 2) Perform primary investigation 3) Escalate potentially suspicious transactions or transaction behaviour to RMG AML Compliance xvii. Bank requests for complete payer or sanctions clearance 1) Request incomplete payer or sanctions clearance information from originating MGL division 2) Provide complete or sanctions clearance information to remitting bank 3) Report incomplete payer and sanctions requests to RGM AML Compliance xviii. Third party payment processing 1) Review third party payment requests 2) Request more information from originating FICC/MSG division where applicable 3) Approve third party payment requests 4) Escalate potentially suspicious third party payment requests to regional RMG AML Compliance xix. Human resources services, including: 1) General administration and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... light of the law with respect to intermediary and give a detailed finding. I also observe that the services provided by the appellant has been termed to be in the nature of ITeS under Analysis of Transaction for the year 2016-17 by EY. The adjudicating authority shall also examine the nature of services being provided by the appellant and may like to peruse the FAQ released by the Government w.r.t IT/ITeS issued under the GST regime as the nature of classification of services under the erstwhile Service Tax law and the present GST regime is more or less the same. 8. It is pertinent to note that the adjudicating authority has stated in the old after considering the submissions of the appellant and the report of transfer pricing that From the above. It is clear that certain expenses were incurred by the party on behalf of its associated entities, for which reimbursements were provided by associated entities. It is also mentioned that the entities, for which reimbursements were provided by associated entities. Further, details of similar expenses were also been provided in the Transfer Pricing Documentation for the FY-2014-15. In view of the above, it has been observed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o observe that the Transfer pricing report for the year 2012-13, 2013-14, 2014 15 and 2015-16 as quoted by the adjudicating authority has concluded that the operating margin on the operating cost of the appellant can be considered to be at arm's length from an Indian Transfer Pricing perspective. So how does the same help the case of the respondent has not been spelled out in the O10. The adjudicating authority has highlighted para 7.36 of the OECD Guidelines but how does the same come to the help of the respondent has also not been spelled out. 4.4 The issue for consideration before both the authorities were the refund claims filed under Rule 5 of CENVAT Credit Rules, 2004, and not whether the services provided by them were the intermediary services or else. However the original authority misdirected himself, by considering the nature of the output services, to determine the eligibility of the refund claim. In the case of Evonik Energy Services [2016 (43) STR 137 (T-Mum)] held that 11. We agree with the contention raised by the ld. Counsel that the reclassification of the services as sought by the Adjudicating Authority in a refund claim filed by the assessee seems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 . Identity and title: The service provided by the intermediary on behalf of the principal is clearly identifiable. 10. From the above Guidance Note of C.B.E. C. dated 20-6-2012 and definition of intermediary, the following conclusion has drawn :- (a) An intermediary arranges or facilities a provision of a main service between two more persons; (b) An intermediary is involved with two supplies at any one time (i) the supply between the principal and the third party; and (ii) the supply of his own service (agency service) to his principal, for which a fee or commission is usually charged; (c) An intermediary cannot influence the nature or value of service, the supply of which he facilitates on behalf of his principal, although the principal may authorize to negotiate a different price; (d) The consideration for an intermediary is separately identifiable from the main supply of service that he is arranging and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to similar provisions under GST, stating as follow: Subject: Clarification on doubts related to scope of Intermediary reg. Representations have been received citing ambiguity caused in interpretation of the scope of Intermediary services in the GST Law. The matter has been examined. In view of the difficulties being faced by the trade and industry and to ensure uniformity in the implementation of the provisions of the law across field formations, the Board, in exercise of its powers conferred by section 168 (1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as CGST Act ), hereby clarifies the issues in succeeding paragraphs. 2. Scope of Intermediary services 2.1 Intermediary has been defined in the sub-section (13) of section 2 of the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as IGST Act) as under Intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cipal basis to another person cannot be considered as supplier of intermediary service. 3.3 Intermediary service provider to have the character of an agent, broker or any other similar person: The definition of intermediary itself provides that intermediary service provider means a broker, an agent or any other person, by whatever name called . . This part of the definition is not inclusive but uses the expression means and does not expand the definition by any known expression of expansion such as and includes . The use of the expression arranges or facilitates in the definition of intermediary suggests a subsidiary role for the intermediary. It must arrange or facilitate some other supply, which is the main supply, and does not himself provides the main supply. Thus, the role of intermediary is only supportive. 3.4 Does not include a person who supplies such goods or services or both or securities on his own account: The definition of intermediary services specifically mentions that intermediary does not include a person who supplies such goods or services or both or securities on his own account . Use of word such in the definition with reference to supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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; A simple reading of the aforesaid provisions makes it clear that to attract the said definition there should be two or more persons besides the service provider. In the present case, the appellants are providing services to their parent company at Japan and they did not involve in any manner in the activity of negotiation for sale and purchase of goods in India or collection of sale proceeds from customers on behalf of the parent company, hence cannot be called as an intermediary and, accordingly, do not fall under Rule 9(c) of the Place of Provisions of Service Rules, 2012. Thus law on the issue as laid down is that for a person to be said to be intermediary, there should be two distinct services and three persons involved. The intermediary should be the person who is facilitating the provision between the other two persons. While consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y refund treating the services provided not to be export of services. 4.8 Since we find the issue under consideration to be squarely covered by the decision of tribunal in the case of Orange Business Solutions Pvt Ltd, supra, we do not see any merits in the impugned order. The authorized representative has vehemently argued stating that Commissioner (Appeal) has not considered the refund claim and issue on merits and have remanded back the matter to be decided by the original authority for consideration of issue. From the perusal of the decisions which have been referred by the authorized representative, we find that the decisions, were in the case where the appeals have been dismissed by the Commissioner (Appeal) on the ground of limitation or for failure to comply with the requirements of pre-deposit. However from the observations reproduced from the order of Adjudicating Authority and Commissioner (Appeal), it is quite evident that the only issue under consideration by both the authorities was in respect of the intermediary services . Appellant has filed this appeal challenging the impugned order claiming that the services provided by them do not qualify as intermediary s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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