TMI Blog2024 (1) TMI 887X X X X Extracts X X X X X X X X Extracts X X X X ..... ween the appellants and the Business Partners. Service level monitoring takes place in terms of the Performance Level agreement (PLA). Even here, as provided in the PLA, the terms of the subcontracting agreement shall always prevail in case of any conflict. The responsibility and liability is only between the appellant and the group entity - HGRL from whom compensation is received on cost-plus basis in convertible foreign exchange. It is well settled in terms of the decisions cited by the learned Counsel in Genpact [ 2022 (11) TMI 743 - PUNJAB AND HARYANA HIGH COURT] and Singtel [ 2023 (9) TMI 304 - DELHI HIGH COURT] that where the relationship between the parties is on principal to principal basis, such an arrangement cannot come within the purview of intermediary services. In view of the Board Circular and the precedent decisions it is not possible to accept the view expressed by the Commissioner in Para 31 of the First Order and Para 16 of Second Order on the interpretation of Rule 2(f) of the POPS. The finding that principal-agency relationship is not essential for terming a service provider as intermediary, is clearly contrary to law - Also, the elements of service, na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of costs incurred by the appellant. Both the appeals are disposed of by this common order. 2. In the First Order, the Learned Commissioner has confirmed the proposals in the show cause notice with respect to appellant providing accommodation and travel services to the personnel of their customers, after dropping the demand in respect of accommodation service for the period upto 30.06.2012, holding that short-term accommodation service can be taxed only when it is provided by hotels, etc. or entities engaged in provision of such services . The following demands were confirmed in the First Order (I) Rs. 1,03,95,608/- being the Service Tax payable on Accommodation service by M/s HSBC Electronic Data Processing India Pvt. Ltd., in terms of Section 73(2) of the Finance Act,1994; (II) Rs. 18,29,072/- being the Service Tax payable on Rent a cab service by M/s HSBC Electronic Data Processing India Pvt. Ltd., in terms of Section 73(2) of the Finance Act, 1994; (III) Rs. 6,36,38,134/- being the Service Tax payable on Intermediary services by M/s HSBC Electronic Data Processing India Pvt. Ltd., in terms of Section 73(2) of the Finance Act,1994; (IV) Payment of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovide to Business Partners in terms of Master Services Agreement (Intra-Group Services Agreement). The appellant has performance level agreements with the Business Partners and provides the 4.4 It is submitted that the appellants are answerable in terms of the subcontracting agreement only to HGRL, UK and the compensation provided is on cost-plus basis. There is no principal-agent relationship since it is provided in the sub-contracting agreement that the appellants render services to HGRL as independent contractors i.e. on principal-to-principal basis. Therefore, there is no service provided as intermediary and the export of services even for these elements of services will also be determined under Rule 3 of the POPS and not under Rule 9(c) as claimed by the department. 4.5 In support of his contentions he has relied upon the following Orders/Judgments Commissioner of Goods and Services Tax, Gurgaon II Vs. Orange Business Solutions Private Limited [2019-VIL-332-CESTAT-CHD-ST] Macquarie Global Services Private Limited Vs. CCE ST, Gurgaon I [2021- VIL-704-CESTAT-CHD-ST] Genpact India Private Limited Vs. UOI Ors [2022-VIL-751-P H] Verizon Communication I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing judgments GD Goenka Private Limited Vs. COGST, Delhi South [2023-VIL-798- CESTAT-DEL-ST] Tata Steel Limited Vs. CCE ST, Jamshedpur [2019-VIL-1303-CESTATKOL- ST] Advance Steel Tubes V COC ST [2019-TIOL-3353-CESTAT-All] Emami Paper Mills Limited Vs. COCGST, Bhubaneshwar [2022-VIL-835- CESTAT-KOL-CE] 4.13 He prayed that the extended period of limitation cannot be invoked and finally prayed that the appeals be allowed. 5. On the other hand learned Authorized Representative appearing for the Revenue stated that, as per the show cause and the Order-in-original, the elements of service namely, expenses for providing accommodation and rent-a-cab for foreign customers during their visit to India, should be taxed under the respective categories and not treated as export of services. The outbound call and debit/credit card collections have been rightly held as intermediary services. In this regard, he has reiterated the findings in the impugned Orders based on the show cause notices 6. Heard both sides at length and examined the case records. 7. The following issues arise for determination Whether the services provided by the appellant in connec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Master Services Agreement, comprising additional terms relevant to the provision of services generally to the Business Partner to which the Schedule D relates, including such terms as are necessary to ensure that such services are provided in accordance with such Business Partner's Legislative and Regulatory Requirements; (ii) ''Agreement'' means this agreement together with its schedules (as may be amended by the parties from time to time); (iii) ''Business Partner'' means each of the HSBC Group Members to which HGRL has agreed to provide services and in respect of which (i) HGRL has entered into a Master Services Agreement; and(ii) HGRL wishes to sub-contract such services to the GSC; (iv) ''Business Partner Representative'' means in the case of each Business Unit of a Business Partner, the officer or person specified in paragraph 2 of the relevant Schedule B (or such other officer or person as the Business Partner may designate in writing from time to time) who is responsible for the day-to-day liaison with the HGRL Representative and the GSC Representative(s) and for monitoring the performance of the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations and expertise necessary to perform the Services. (m) The GSC shall enter into Performance Level Agreements directly with each Business Partner or designated Business Unit with respect to the provision of the Services as agreed between the GSC and the Business Partner (or its designated Business Unit). The Performance Level Agreement(s) will reflect the levels of service and performance that HGRL has undertaken to the Business Partner that it will meet with respect to the provision of the Services, and in turn, the levels of service and performance that the GSC undertakes to HGRL to meet with respect to the provision of the Services. Upon execution of each Performance Level Agreement, its terms are deemed acceptable by HGRL. Accordingly, the GSC shall provide the Services in accordance with the levels of service and performance set out in such Performance Level Agreement(s) and shall be directly liable to HGRL for any failure to meet such performance levels in accordance with the provisions of Clause 8 of this Agreement, as if references to the Business Partner or its designated Business Unit in such Performance Level Agreement(s) were references to HGRL. The GS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the charges payable and expenses recoverable for the previous month in such currency /currencies as the parties may agree from time to time. HGRL shall arrange for payment of the amount specified in each invoice within 35 calendar days of receipt of the invoice by crediting the amount, or arranging for the amount to be credited, to such account as the GSC may specify from time to time. Payment of the charges may also be effected, in any other manner as may be agreed between the GSC and HGRL from time to time. (f) Save as expressly provided under the terms of this Agreement, payment by HGRL to the GSC hereunder shall be made without any deduction or withholding and free from any set off or counterclaim. Should any applicable law at any time require any deduction or withholding to be made from a payment then (i) HGRL's liability in respect of the payment shall be for a revised amount such that after the making of such deduction or withholding the net payment shall be equal to the amount which the GSC would have received had no such deduction or withholding been made, (ii) HGRL shall make such deduction or withholding, and iii) HGRL shall pay the full amount deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to use immovable property, services for carrying out or coordination of construction work, including architects or interior decorators, shall be the place where the immovable property is located or intended to be located. Rule 9 Place of provision of specified services The place of provision of following services shall be the location of the service Provider : (c) Intermediary services; Rule 11 Place of provision of passenger transportation service The place of provision in respect of a passenger transportation service shall be the place where the passenger embarks on the conveyance for a continuous journey. 10. It is also necessary to take into account some of the Orders/ Judgments relied upon by the learned Counsel for the Appellants. In Commissioner of Goods and Services Tax, Gurgaon II Vs. Orange Business Solutions Private Limited [2019-VIL-332-CESTAT-CHD-ST], the facts were that the Respondents in that case had rendered services to the Orange Group of Companies on direction of Group entity. The role of the Respondent was to provide outsourced services and there was no privity of contract with any customer of O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar view has been affirmed vide the Circular No 159/15/2021GST dated 20th September, 2021, issued by the Board though in relation 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 securiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and is clearly identifiable and distinguished from the main supply. A person involved in supply of main supply on principal to principal 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 supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 . Intermediary Service has been defined under Rule 2(f) of the Place of Provision of Service Rules, 2012 reads as follows : (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 . It was therefore held that there is no intermediary in this case. The next decision referred to is in the case of Genpac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndered. Clause 16 provides that if the petitioner fails to perform any of the obligations under the MSA or under the Customer Statement of Work, GI may then terminate the contract. The MSA bears out the arrangement between GI and the petitioner and the same may be summarized as below: i) GI has service agreement for providing BPO services with respective GI customers at global level. GI issues invoices and receives remittance from the GI customers. ii) GI under the MSA subcontracted the execution of the BPO services to the petitioner. iii) Petitioner executes the delivery of BPO services to the customers of GI under the MSA. iv) Petitioner issues invoices to GI and receives payment from GI in convertible foreign exchange as its service fee. The MSA dated 01.01.2013 (Annexure P1) entered between the petitioner and GI is clearly for the purpose of subcontracting services to the petitioner by GI. These are the very services which GI was contractually supposed to provide to its own customers A perusal of the definition of intermediary under the service tax regime visavis the GST regime would show that the definition has remained sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 51. In the considered view of the Court, the judgment of the CESTAT in Paul Merchants Ltd v. CCE, Chandigarh (supra) is right in holding that The service recipient is the person on whose instructions/orders the service is provided who is obliged to make the payment from the same and whose need is satisfied by the provision of the service. The Court further affirms the following passage in the said judgment in Paul Merchants Ltd v. CCE, Chandigarh (supra) which correctly explains the legal position: It is the person who requested for the service is liable to make payment for the same and whose need is satisfied by the provision of service who has to be treated as recipient of the service, not the person or persons affected by the performance of the service. Thus, when the person on whose instructions the services in question had been provided by the agents/subagents in India, who Is liable to make payment for these services and who used the service for his business, is located abroad, the destination of the services in question has to be treated abroad. The destination has to be decided on the basis of the place of consumption, not the place of performance of Service. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod 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. In Commissioner of Central Tax Vs. M/s Singtel Global India Private Limited [2023-VIL-606-DEL-ST], where the Respondents were providing global telecommunication and ancillary support services to Singapore based entity, the question was whether such services would qualify as intermediary services. After consideration of Rule 6A of the Service Tax Rules and Rule 2(f) of the Place of Provision of Service Rules, the Hon ble High Court held as follows 18. On a careful perusal of the terms and conditions of the aforesaid Agreement dated 14 July 2011 between SingTel and SGIPL, we find no legal infirmity or irrational approach adopted by the learned CESTAT when it comes to conclude that SGIPL is not providing intermediary services . The plea that SGIPL is not providing any services on its own account i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incipal basis, such an arrangement cannot come within the purview of intermediary services. 12. Also, the sub contracting agreement shows that the compensation is on cost-plus basis In similar case, such an arrangement, it was held in Lubrizol Advanced Materials India Private Limited Vs. CCEx., Belapur [2019-VIL-38-CESTATMUM- ST (SM)] also referred to in Chevron Philips Chemicals India Private Limited Vs. Commissioner of Central Tax and Central Excise, Navi Mumbai [Order No. A/86318/2022 (DB)] that there is no intermediary service. In Lubrizol (supra) it was observed as follows: 6. I find that the learned Commissioner (Appeals) has denied the benefit of export with effect from 1.10.2014 under the Place of Provision of Services Rules, 2012, holding that the appellant had facilitated supply of goods between its foreign counterpart and processing of goods and thus, it should be considered as an intermediary. On perusal of the contracts, I find that the service fee charged by the appellant to its overseas group entities for provision of service has no direct nexus with the supply of goods by the overseas group entities to its customers in India. Further, the appellant had pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how cause notice issued vide O. R. No. 15/2016-ADJN (COMMR) ST dated 28.01.2016, at Para 3.2 stated that the services in question namely accommodation and rent-a-cab are separately discernible from the main service i.e. back office services and has no connection or relation with such main service (emphasis supplied). However, the Learned Commissioner at Para 15 of the First Order held that the purpose of the visits is connected with the original service. Again at Para 16 of the First Order, the learned Commissioner has recorded the finding that these agreements require certain level of contact and coordination or liaison between the parties concerned . 16. As long as there is a connection with the terms of the sub-contracting agreement, these expenses are to be recovered in terms of Schedule B of the sub-contracting agreement. Ultimately, it is for the HGRL, UK to agree for payment and we find that there is no dispute that these invoices have been recovered in convertible foreign exchange. It is also seen from the sample invoices shown to us for reimbursement of expenses, that these have been submitted to the Software Technology Parks of India (STPI) authorities and the Softw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eign exchange. The reimbursement cannot be treated in isolation but is very much in connection with the export of services. Therefore in my view refund of the service tax on reimbursement which has been realized by the appellant from Foreign Service recipient in convertible foreign is admissible . 21. In view of the above, we have no hesitation in holding that the costs towards rent-a-cab claimed from HGRL, UK which is remitted by the HGRL UK to the appellants in convertible foreign exchange cannot be taxed for the period from 01.10.2010 to 30.06.2012 under Rule 3(1)(ii) of the Export of Service Rules, 2005 and Rule 11 of the POPS post 01.07.2012. Similarly, the costs towards accommodation claimed from HGRL, UK cannot be taxed for the period from 01.07.2012, in terms of Rule 5 of the POPS. 22. Accordingly, we set-aside the finding on the levy of service tax in the First Order on accommodation services and rent-a-cab services. This ground is not in 2nd Order. 23. As the appeal(s) are allowed on merits, we leave the ground of limitation open. 24. In view of our aforementioned, we allow the appeals and set-aside the First Order and Second Order ( impugned Orders ) with c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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