TMI Blog2023 (5) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... e, either fully or partly, to one or more sub-contractors. Such sub-contractor provides the main supply, either fully or a part thereof and does not merely arrange or facilitate the main supply between the principal supplier and his customers and therefore clearly not an intermediary. Who is an intermediary and what is intermediary service has been clarified by Central Board of Indirect Taxes and Customs (CBIC) vide Guidance Note dated 20.06.2012 and under GST regime also a clarification has been issued by CBIC on 20.09.2021 both of which are in line with the discussions made hereinabove about intermediary . On perusal of the agreements as well as submission of the learned Chartered Accountant for appellants, it is found that the Product development Services in relation to creation of new generic drug is limited to the performing of various services by the appellant on Formulation development, Bio-Chemical research, Bio-study research, Bio-equivalent study, clinical study and Active Pharmaceutical Ingredient (API) development as detailed in the agreement dated 02.02.2008 and 10.8.2012, and that too as a backend process - There is nothing on record to show that the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Order-in-Appeal No. MUM-SVTAX-002-APP-371-375-2016-17 dated 24.03.2016 (referred as impugned order) passed by the Commissioner (Appeals), Service Tax-II, Mumbai Zone, as a common order, against five appeals filed by the department in respect of five Orders-in-Original passed by the Assistant Commissioner of Service Tax (Refund), Mumbai-Vas detailed in the Table-1 below. Table-1 Amount of refund involved in the orders-in-original and Order-in-Appeal S. No. Order-in-Original No. Date Appeal No. Date Period of refund Amount of Refund sanctioned by original authority Amount of Refund Rejected by original authority Amount of Refund Rejected by Commr. (Appeals) (1) (2) (3) (4) (5) (6) (7) 1 Refund/EVM/35/20 15 dt. 21.4.2015 ST/87557/ 2016 July, 2012 Sept.2012 25,61,312 29,141 25,61,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Watson Laboratories Inc., USA and Arrow No.7 Limited, UK on 2nd of February 2008 and 10th August 2012 respectively, for providing research and product development services. The detailed scope of the services include product identification, analytical research and formation development, scaleup/ manufacturing of samples, stability study, bio equivalent study, compilation with Regulatory Filing, Regulatory Filing and Submission etc. 3.2. The appellants had filed various refund claims for different periods in the prescribed form under notification No. 27/2012-C.E.(NT) dated 18.06.2012, on the ground that they have exported the output services without payment of service tax during the relevant period under Rule 6A of the Service Tax Rules, 1994; and that they were not in a position to utilize the CENVAT credit of duty taken on inputs or input services used in providing taxable services exported without payment of service tax. On going through various documents submitted in respect of five refund claims, the Department observed that the appellants had availed CENVAT credit on certain specified services mentioned therein, which seemed to have no nexus with output services exported by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Being aggrieved against the impugned order, the appellants have filed these appeals on the following grounds: (i) the impugned order is beyond the scope of appeal filed by the department and review order, and therefore it is required to be set aside (ii) the impugned order has travelled beyond the scope of show cause notice as well as the review order, and therefore is not sustainable (iii) services cannot be treated as rendered as an intermediary and thus the place of provision is not covered under Rule 9 and services are export of services. The appellant is not the agent of the foreign service recipient; the transaction of intermediary services involves three parties and therefore the appellants cannot be considered as an intermediary; Research and Development activities cannot be treated as services of an intermediary; the appellants provides the main services itself and therefore it cannot be covered under the category of intermediaries services (iv) Principles of natural justice have been violated, as appellant were not to notice before the classification of the services as an intermediary (v) findings of the Commissioner (Appeals) are factually incorrect as the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement as contractor) or is an intermediary in respect of service is exported. According to the learned Chartered Accountant for the appellants, they are engaged in providing product development services such as conduct of contract development, as directed by foreign service recipient and to provide necessary support to those activities to be performed by the contractor, in the fields of Formulation development, Bio- Chemical research, Bio-study research, Bio-equivalent study, clinical study and Active Pharmaceutical Ingredient (API) development etc., as detailed in the agreement dated 02.02.2008 and 10.8.2012. The appellants are not an employee of the Foreign Service recipient, neither are working under the control of such service recipient. The appellants are providing the services on principal to principal basis, as specifically provided in section 7.1 and 8.1 of the said agreements dated 02.02.2008 and 10.8.2012, respectively. Thus they provide the main services itself and therefore it cannot be covered under the category of intermediary services . However, the Commissioner (Appeals) had made out a new case treating the appellant as an intermediary in the impugned order. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices India P Ltd. Vs. Commissioner of CGST, CX ST, Gurgaon, Haryana 2022 (8) TMI 874 CESTAT Chandigarh 5. Learned Authorised Representative reiterated the findings of the Commissioner (Appeals) in the impugned order and contended that the legal provisions in Rule 9 of Place of Provision of Services Rules, 2012 has been rightly invoked for treating the location of service provider as the place of provision of service and thus justified in the impugned order in denying the credit of CENVAT, treating the services provided by the appellants, that are not export of services. 6. We have heard the learned Chartered Accountant appearing for the appellants and the learned Authorised Representative for the Revenue, and perused the case records including the compilation filed by the appellant. 7. In order to appreciate the contentions, it would be appropriate to refer the specific findings of the impugned order wherein the Commissioner (Appeals) have come to the conclusion for rejecting the orders passed by the Original authority: 8. On going through the agreement, I find that the respondent was into the development of product on behalf of their contractors. As per the agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice as intellectual property right was created within the taxable territory as its business premises in India even though the recipient of services are located outside India .consequently, the bar under clause (f) above would not apply to their case. Therefore, the services, in question, cannot be taters exported. I therefore accept the appellant department s contention and reject the impugned orders of the adjudicating authority. 8. We find that the term intermediary has been defined under Rule 2(f) of Place of Provision of Services Rules, 2012 which is reproduced as under:- 2. In these rules, unless the context otherwise requires,- . (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 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 intermed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed consideration from foreign service recipient in convertible foreign exchange. There is nothing on record to show that the appellant is liasioning or acting as intermediary between the foreign service recipient and any other person. Therefore, the finding of the Commissioner (Appeal) that the appellants are an intermediary is misplaced. In view of the facts involved herein, we find that the appellants cannot be termed as an intermediary and their services provided to Foreign Service recipient cannot be termed as intermediary services . 10. We are surprised to notice that although the Commissioner (Appeals) had concluded that Rule 8 of Place of Provision of Services Rules, 2012 is not applicable in this case by differing with the grounds of appeal claimed by the department; but without putting the appellants on notice or without giving reasonable opportunity of personal hearing, he had gone ahead in classifying the services as intermediary services for applying the Rule 6A(1) of Service Tax Rules, 1994 treating the services as not export of services by denying the CENVAT credit refunds. One of the reasons for rejecting the refund claim of the Appellants as proposed bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and services exported under bond or undertaking. This rule is very specific and lays down how to determine the quantum of admissible refund from the accumulated CENVAT credit. It cannot be considered to be a proceeding for denial of CENVAT Credit available in the account of the claimant and therefore even if the refund is denied, then also the amount continues to remain in the CENVAT account of the claimant. If the Revenue is not in agreement with the claims of the appellants and if, according to Revenue, the services in issue do not fall within the ambit of export of service then the Revenue ought to have initiated the proceedings against the appellants for demanding the Service Tax in respect of taxable service provided by the appellants. Admittedly no such proceedings have been initiated by the Revenue as borne out from the records of the case and therefore in a way Revenue itself has allowed this taxable service provided by appellants as export of service. If that is so then in the proceeding under Rule 5 ibid revenue cannot deny refund by treating the service provided not to be export of service. Same principle has been followed by the Tribunal in the matter of JFE Steel Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X
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