TMI Blog2022 (12) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... lackberry Singapore from time to time. The terms of the Agreement also per se do not create any relationship of principal and agent or employer and employee. An agent is a person employed to do any act for another or to represent another in dealing with third persons. The persons for whom such act is done, or who is so represented, is the principal. A broker is a middleman or an agent who, for a commission on the value of the transaction, negotiates for others the purchase or sale of stocks, bonds, commodities, or a property. These two situations do not arise in the present case. An intermediary is a person who arranges or facilitates provision of the main service between two or more persons. The appellant is not involved in the arrangement or facilitation of the supply of service. The service provided by the appellant qualify for export since it is providing services to Blackberry Singapore, which is outside India and is receiving convertible foreign exchange for such services. The refund claimed by the appellant under rule 5 of the Credit Rules could not have been rejected by the Commissioner (Appeals). Decided in favor of assessee. - Service Tax Appeal No. 50281 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement effective September 3, 2006, as amended and restated effective as of March 4, 2007 ( the Amended Restated MAA ), whereby Service Provider performs various promotion and marketing services as more particularly set out in Schedule A hereto or as otherwise requested by RIM from time to time (the Services ). C. RIM and Service Provider desire to amend and restate the terms and conditions of the Amended Restated MAA as hereinafter set forth. xxxxxxxxx 3.3 Services. The scope, quality and timeliness of the Services offered and provided by Service will conform to the guidelines that RIM and Service Provider may agree and establish from time to time. xxxxxxxxx 3. RIM's Assistance. RIM will provide Service Provider, at Service Provider's request, with promotional and technical materials, training and assistance to perform the Services, including, but not limited to, access to the product, marketing and business development groups to help Service Provider perform the Services. Service Provider acknowledges that RIM may subcontract third party service providers to provide any such materials, training or assistance, in whole or in part. RIM will be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the other party; or constitute the parties as employer and employee, franchisor and franchisee, partners, joint venturers, co-owners or otherwise as participants in a joint undertaking . Service Provider has no right or authority to assume or create any obligation of any kind, express or implied, on behalf of RIM, or waive any right, interest or claim that RIM may have against any other person. (emphasis supplied) SCHEDULE A 1. Service: The Services are: promotion and marking; technical marketing assistance; and other related services. 2. Cost Plus Fee: 10%of the Costs 3. Cost Period: Quarterly, with RIM s fiscal quarters and with the first quarter commencing on the first of RIM s quarters that commences on or after of Effective Date. xxxxxxxxxx 4. It would be seen from the aforesaid that the appellant is required to provide the services to Blackberry Singapore in relation to technical marketing assistance of Blackberry products. The said services would involve the following activities: (i) To create awareness and promotion of BlackBerry products and services packages in India; (ii) To recommend appropriate advertising an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eign firms and, therefore, the activity performed by the appellant would be that of an intermediary . The relevant portion of the order passed by the Commissioner (Appeals) is reproduced below: 12. I note, from the terms of the above said agreement, that service provider i.e. the appellant have provided the services, as mentioned in Schedule-A, to the various clients / customers in India and these services receivers are in India. In the present case, I note that the appellant has facilitated the services between Indian customers and foreign firm. Appellant has provided the services in terms of the agreement as directed by the foreign firm. In the present case, the appellant arranged for a provision of service, between the customers and foreign company, without material alteration in terms of the agreement. Thus, from the above, I find that the appellant acted as an intermediary between the service consumers in India and foreign company and in this way two kinds of services were involved at a moment. I further note that the territory for rendering the said services is clearly mentioned as India in the said agreement. Further, under Rule 2(f) of Place of Provisions of Servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , reproduced below: 5. Refund of CENVAT Credit: A manufacturer who clears a final product or an intermediate product for export without payment of duty under bond or letter of undertaking, or a service provider who provides an output service which is exported without payment of service tax, shall be allowed refund of CENVAT credit as determined by the following formula subject to procedure, safeguards, conditions and limitations, as may be specified by the Board by notification in the Official Gazette: Refund amount=(Export turnover of goods+ Export turnover of services)/ Total turnover x Net CENVAT credit xxxxxx xxxxxx xxxxxx Explanation 1: For the purpose of this rule,- (1) export service means a service which is provided as per rule 6A of the Service Tax Rules, 1994. 13. Since export service means a service which is provided as per rule 6A of the Service Tax Rules 1994 [the 1994 Rules], the said rule is reproduced: 6A. Export of services.- (1) The provision of any service provided or agreed to be provided shall be treated as export of service when,- (a) the provider of service is located in the taxable territory, (b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s except yachts, upto a period of one month. 17. In view of the provisions of rule 9 (c) of the 2012 Rules, the place of provision for intermediary services would be the location of the service provider. 18. Rule 3 of the 2005 Export Rules is reproduced below: 3(1) Export of taxable services shall, in relation to taxable services,- (i) (ii) (iii) Specified in clause (105) of section 65 of the Act, but excluding,- (a) Sub-clauses (zzz) and (zzzv); (b) Those specified in clause (i) of this rule except when the provision of taxable services specified in sub-clauses (d), (zzzc), (zzzr), and (zzzzm) does not relate to immovable property; and (c) Those specified in clause (ii) of this rule, When provided in relation to business or commerce, be provision of such services to a recipient located outside India and when provided otherwise, be provision of such services to a recipient located outside India at the time of provision of such service: 19. Business Auxiliary Service is defined in section 65(19) of the Finance Act and it has been made taxable under section 65(105)(zzb) of the Finance Act. 20. The first issue that arises for considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed to be considered:- Nature and value: An intermediary cannot alter the nature or value of the service, the supply of which he facilitates on behalf of his principal, although the principal may authorize the intermediary to negotiate a different price. Also, the principal must know the exact value at which the service is supplied (or obtained) on his behalf, and any discounts that the intermediary obtains must be passed back to the principal. 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 . Identity and title: The service provided by the intermediary on behalf of the principal are clearly identifiable. In accordance with the above guiding principles, services provided by the following persons will qualify as intermediary services:- (i) Travel Agent (any mode of travel) (ii) Tour Operator (iii) Stockbroker (iv) Commission agent [an agent for buying or selling of goods is excluded (v) Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecipient of the service as provided under rule 3 of the 2012 Rules. 29. In the present case, what transpires from the Agreement is that the appellant, which is a service provider in India, performs various promotion and marketing services more particularly set out in Schedule A of the Agreement or as requested by Blackberry Singapore from time to time. In Schedule A, the services that are included are promotions and marketing; technical marketing assistance; and other related services. Under clause 2.4 of the Agreement the service provider could sub-contract the services, in whole or in part, to third party service providers provided it did not impose any additional liability on Blackberry Singapore and was consistent with the terms and conditions of the Agreement. Clause 4.1 of the Agreement provides that in exchange for providing the services, Blackberry Singapore will pay to the service provider i.e. the appellant a fee equal to the sum of all costs and expenses that the service provider incurred in providing such services plus Cost Plus Fee as set out in Schedule A. For this purpose, the service provider has to submit an invoice and Blackberry Singapore is required to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nother in dealing with third persons. The persons for whom such act is done, or who is so represented, is the principal. A broker is a middleman or an agent who, for a commission on the value of the transaction, negotiates for others the purchase or sale of stocks, bonds, commodities, or a property. These two situations do not arise in the present case. 32. An intermediary is a person who arranges or facilitates provision of the main service between two or more persons. The appellant is not involved in the arrangement or facilitation of the supply of service. The service provided by the appellant qualify for export since it is providing services to Blackberry Singapore, which is outside India and is receiving convertible foreign exchange for such services. The appellant is not privy to the Agreement entered into between Blackberry Singapore and its end customers. Merely because the appellant is charging Costs Plus on Blackberry Singapore would not mean it is an intermediary. 33. It would be pertains to refer to the decision of the Delhi High Court in Verizon Communication India Pvt. Ltd. versus Asstt. Commr., S.T. Delhi-III [2018 (8) G.S.T.L. 32 (Del.)]. It is seen from a per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, the Circular dated 24.02.2009 was relied upon which is as follows: For the services that fall under category III [Rule 3(1)(iii)], the relevant factor is the location of the service receiver and not the place of performance. In this context, the phrase used outside India is to be interpreted to mean that the benefit of the service should accrue outside India. Thus, for Category III service [Rule 3(1)(iii)], it is possible that export of service may take place even when all the relevant activities take place in India so long as the benefits of these services accrue outside India... 36. The summary of the conclusions noted by the Delhi High Court are as follows:- 54. To summaries the conclusions: (i) It made no difference that Verizon India may have provided telecommunication service and not business support services since to qualify as export of service both had to satisfy the same criteria. (ii) The provision of telecommunication services by Verizon India during the period January, 2011 till 1st July, 2012 complied with the two conditions stipulated under Rule 3(1)(iii) of the ESR to be considered as export of service . In other words, the paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble High Court in its aforementioned judgment particularly in para-54 (supra). Further, admitted facts are that the appellants have provided output services and raised invoices on principal to principal basis. The appellant has not been acting as intermediary between another service provider and Verizon US. This fact is also supported from the fact that the appellant has raised their bills for the services provided on the basis of cost plus 11% mark-up . As the services have been provided by the appellant under contract with Verizon US, who are located outside India and have raised their invoices, for such services and have received the remittance in convertible foreign exchange, the appellant satisfies all the conditions, as specified under Rule 6A of Service Tax Rules, 1994, inserted w.e.f. 1-7-2012. xxxxxxxxxxxx 31. From perusal of the aforementioned ruling, it is evident that the services of the appellant to Verizon US do not merit classification under the category of intermediary services . Further, the Hon ble High Court has held in the appellant s own case (supra) that the agreement between the related parties does not have any impact on the export of services. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereof and does not merely arrange or facilitate the main supply between the principal supplier and his customers and therefore clearly not an intermediary. xxxxxxxxxxx 6. What we have gathered from the perusal of the agreement as well as submission of the learned Counsel is that the Support Services in relation to creation of clients account is limited to the performing of services on HLX systems and that too as a backend process. It is the specific case of the appellants that HLX does not have any clients in India. Maintenance, support or troubleshooting function, if any, the appellant is required to perform on requisition from HLX in order to ensure seamless access of services which means there is no requirement of any interaction, whatsoever with the clients of HLX and for performing all these services on behalf of HLX, the appellant receives a pre-agreed consideration from HLX in convertible foreign exchange. Commission is being paid to an intermediary not the transfer pricing, whereas the appellant herein was getting transfer pricing. There is nothing on record to show that the appellant is liasioning or acting as intermediary between the HLX and its clients. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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