TMI Blog2023 (3) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... unication service and other services provided by the respondent qualify for export service since it is providing services to Jindal LLC which is located outside India and is receiving convertible foreign exchange for such services. The Commissioner (Appeals) relied upon the decision of the Delhi High Court in VERIZON COMMUNICATION INDIA PVT. LTD. VERSUS ASSISTANT COMMISSIONER, SERVICE TAX, DELHI III, DIVISION-XIV ANR. [ 2017 (9) TMI 632 - DELHI HIGH COURT ] to hold that the respondent is not an intermediary. It is seen from a perusal of the aforesaid judgment that Verizon India had entered into a Master Supply Agreement with Verizon US for rendering connectivity services for the purpose of data transfer. Verizon US was engaged in the provision of telecommunication services for which it entered into contracts with the customers located globally. Since Verizon US did not have the capacity to provide such services across the globe, it utilized the services of Verizon India to provide connectivity to its customers. The issue, therefore, that arose before the Delhi High Court was whether the telecommunication services provided by Verizon India during the period April 2011 to Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Revenue dismissed. - Service Tax Appeal No. 53892 of 2018 and Service Tax Appeal No. 53893 of 2018 - FINAL ORDER NO. 50135-50136/2023 - Dated:- 2-2-2023 - MR. DILIP GUPTA, PRESIDENT AND MS. HEMAMBIKA R PRIYA, MEMBER (TECHNICAL) Dr. Radhey Tallo, Authorised Representative of the Appellant Shri Karan Kanwal, Advocate, for the Respondent ORDER Both these appeals have been filed by the Department to assail the order dated July 14, 2018 passed by the Commissioner of Central Tax, Appeals-II, Delhi [the Commissioner (Appeals)] that upholds the two orders dated January 12, 2018 and January 31, 2018 passed by the Assistant Commissioner. The order dated January 31, 2018 sanctions refund of Rs. 1,73,06,354/- in respect of the refund claim filed by M/s Jindal Poly Films Limited [the respondent] for the months of February 2016, March 2016, May 2016, August 2016, November 2016 and March 2017, while the order dated January 12, 2018 sanctions refund of Rs. 57,13,851/- in respect of the refund claim filed by the respondent for the months of August 2015, October 2015 and December 2015. The Commissioner (Appeals) has held that the respondent would be entitled to the refund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the service is outside India, (e) the payment for such service has been received by the provider of service in convertible foreign exchange, and (f) the provider of service and recipient of service are not merely establishments of a distinct person in accordance with item (b) of Explanation 3 of clause (44) of section 65B of the Act (2) Where any service is exported, the Central Government may, by notification, grant rebate of service tax or duty paid on input services or inputs, as the case may be, used in providing such service and the rebate shall be allowed subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification. 5. As noticed above rule 6A of the 1994 Rules deals with export of services and sub-clause (d) of sub-rule (1) provides that the provision of any service shall be treated as export of service when the place of provision of service is outside India. The place of provision of service is determined under the 2012 Rules. Rule 3 deals with place of provision generally. It is as follows: 3. Place of provision generally.- The place of provision of a service shall be the location of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .7 What are Intermediary Services ? An intermediary is a person who arranges or facilitates a supply of goods, or a provision of service, or both, between two persons, without material alteration or further processing. Thus, 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. For the purpose of this rule, an intermediary in respect of goods (commission agent i.e a buying or selling agent) is excluded by definition. In order to determine whether a person is acting as an intermediary or not, the following factors need 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. Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmission . In regard to identity and title , it provides that the service provided by the intermediary on behalf of the principal are clearly identifiable and example of a travel agent, a tour operator, stock broker, commission agent and a recovery agent have been given. 15. The agreements executed between the respondent and Jindal LLC would, therefore, have to be examined to determine whether the respondent is an intermediary . The relevant clauses of one such agreement dated August 20, 2014 are reproduced below: 7.1 JPFL will provide the Services as specified in Exhibit-I this SOW to Jindal Films in accordance with the terms of the SOW either directly or through third party Contractors/Service s Providers. JPFL shall provide to Jindal Films Services of SAP Implementation Service pursuant to the SOW. The terms and conditions as contained in the Agreement shall apply to the SOW. In case there is any conflict in the provision of SOW and the Agreement, the provision of SOW shall prevail . 7.2 JPFL shall provide to Jindal Films Services related to its SAP software. The scope of such services are described in Exhibit 1. It is mutually understood that business requirements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service, the respondent have received some input services from other service providers and after paying applicable Service Tax on these services, the respondent have claimed rebate of such Service Tax. The appellant Revenue has placed reliance on the agreement between the respondent and their Service receiver to bring home the plea that the service provided by the respondent falls within intermediary service. However, on perusal of the portion of the agreement (relied upon by the appellant), I find nothing which supports this plea. On the other hand, the impugned orders clearly show that the service provided by the respondent is information technology software service; that the respondent have provided this service on their own account. For the provision of main service, the respondent have used the input services provided by some of the service providers. However, this fact cannot change the factual position that the respondent have provided the main service on their own account to their foreign based Service receiver . The judgment in the case of M/s Verizon Communication India Pvt. Ltd. Vs ACST [2018 (8) GSTL 32 (Del)] clearly holds so. With regard to service under dispute, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omers. The issue, therefore, that arose before the Delhi High Court was whether the telecommunication services provided by Verizon India during the period April 2011 to September 2014 to Verizon US would qualify as export of services . The department believed that the said services would not qualify as export of services . 19. The Delhi High Court noted that in the process of gathering the data from the entities in India for transmission to Verizon US, Verizon India availed services of Indian telecommunication service providers like Vodafone and Airtel. These service providers raised invoices on Verizon India and Verizon India paid these service providers the requisite charges. Verizon India thereafter raised an invoice on Verizon US for the export of services provided by it to Verizon US. Since the recipient of the service (Verizon US) was outside India, Verizon India treated it as an export of service and understood that it was exempted from service tax under the Export of Service Rules 2005. Verizon US, in turn, raised invoices on its customers in the US. The refund claims of Verizon India pertained to the period January 2011 to September 2014. The Delhi High Court pointe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subscribers to the services of Verizon US may be users of the services provided by Verizon India but under the Master Supply Agreement it was Verizon US that was the recipient of such service and it was Verizon US that paid for such service. That Verizon India and Verizon US were related parties was not a valid ground, in terms of the ESR or the Rule 6A of the ST Rules, to hold that there was no export of service or to deny the refund. (v) The Circular dated 3rd January, 2007 of the C.B.E. C. had no application to the case on hand. It did not pertain to provision of electronic data transfer service. It was wrongly applied by the Department. With its total repeal by the subsequent Circular dated 23rd August, 2007, there was no question of it applying to deny the refund for the period January, 2011 till September, 2014. (vi) Even for the period after 1st July, 2012 the provision of telecommunication service by Verizon India to Verizon US satisfied the conditions under Rule 6A(1)(a), (b), (d) and (e) of the ST Rules and was therefore an export of service . The amount received for the export of service was not amenable to service tax. (emphasis supplied) 22. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsumed in India, is directly in conflict with the ruling of this Tribunal in the case of Paul Merchants Ltd. (supra). Accordingly, we hold that the appellants have rendered services to Verizon US as principal service provider and not as an intermediary. Accordingly, we hold that the appellants are entitled to refund under Rule 5 of the Cenvat Credit Rules, 2004 read with the notification. Thus, these appeals are also allowed with consequential benefit and the impugned orders are set aside. (emphasis supplied) 24. Learned counsel for the respondent also placed reliance upon a decision of the Chandigarh Bench of the Tribunal in Service Tax Appeal No. 61877 of 2018 decided on 08.08.2022 [M/s. Black Rock Service India Private Limited vs. Commissioner of CGST]. After reproducing the definition of intermediary , the Bench observed : 5. A plain reading of the aforesaid provision 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 ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority allowed the refund claim of the appellant, but without looking into those orders and without giving any reason for not following the earlier orders, this time the concerned Authorities held otherwise by denying the credit. (emphasis supplied) 25. The aforesaid view also finds support from the decision of the Tribunal in Principal Commissioner, CGST Delhi South Commissionerate vs Comparex India Pvt. Ltd. [MANU/CE/0016/2020] and the decision of the Tribunal in Commissioner of Central Tax, Central Excise Service Tax vs M/s Singtel Global India Private Limited [Service Tax Appeal No. 52609 of 2019 decided on December 07, 2022]. It needs to be noted that the Department had filed an appeal before the Supreme Court against the decision of the Tribunal rendered in Comparex India Pvt. Ltd. and the Civil Appeal was dismissed on February 08, 2021 on the ground of delay. 26. In this connection, it would also be useful to refer to the Circular dated September 20, 2021 issued by the Central Board of Indirect Taxes and Customs regarding the scope of intermediary and the relevant portion is reproduced below : 2.3 From the perusal of the definition of intermediary under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Circular No. 159/15/2021-GST 3 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 of goods or services refers to the main supply of goods or services or both, or securities, between two or more persons, which are arranged or facilitated by the intermediary. It implies that in cases wherein the person supplies the main supply, either fully or partly, on principal to principal basis, the said supply cannot be covered under the scope of intermediary . 3.5 Sub-contracting for a service is not an intermediary service: An important exclusion from intermediary is sub-contracting. The supplier of main service may decide to outsource the supply of the main service, either fully or partly, to one or more sub-contractors. Such sub-contractor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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