Dismissed

"Esprit India Private Limited, Gurugram"

GST AAAR22 Nov 2018HAAAR/2018-19/02

Case brief

AI extract

What is this about?

Appeal against an Advance Ruling under the GST Act was filed by M/s Esprit India Private Limited. The Appellate Authority dismissed the appeal, holding that the Lower Authority correctly ruled on jurisdiction under Section 97(2), applied the law, and identified the service description correctly. The impugned order was upheld.

What did the court decide?

The appeal was dismissed and the Advance Ruling dated 11.04.2018 was upheld.

"Esprit India Private Limited, Gurugram" — GST and Indirect Tax | GST AAAR (2018)

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EFORE TH PPELLATE ORITY R ADVANCE G FOR OODS AND TAX PAN

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Appeal case HAR/HAAAR/2018-L9lO2

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dated :22.tL.2OtB

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GSTINNumber	O6AACCE9909R1ZX
LegalNameof ppellant	M/sEsprit India Private Limited
Registered Add while obtaining Address provided	M/sEspritlndia^privateLimited,BuildingNo. 98,16thFloor,DLFCyberCity,^phase-il1, Gurgaon,Harya na-L22OO2
Appellantr	5h.NitinAgrawal, PowerofAttorneyHolder, M/sEsprit India Pvt.Ltd.
	Sh.Amreshwar Gautam, Asstt. Commissioner Sh.S.K.Saini,Jt. Director(Legal)

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Order u er section 101 of the central Goods and services Tax Act, zoLT/the Haryana Goods nd Services Tax Act,20t7.

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The pres nt appeal has been filed under section 100 (1) of the central Goods and Services x Act, 2ot7/the Haryana Goods and services Tax Act, 2or7 [hereinafter^re rred to as "the CGST Act and HGST Act respectively"] by M/s Esprit India Private Li ited [hereinafter referred to as the "Appeilant"] against the Advance Ruling No. H AAR/R/20 L8-t9 / 6, dated 11.04.2018.

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A copy f order dated LL.04.20t8 of the Advance Ruling Authority was received by the pellant on t2.07.2018 and the appeal has been filed on 13.09.201g which is in time. (11--12.08. 18 being holidays)

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L. The ap lant namely M/s Esprit India^pvt. Ltd. is a subsidiary of M/s Esprit De aorp.(Far East mited, Hong Kong (EDCFE) which in turn is a fellow subsidiary of M/s ice GmbH, Germany ('Esprit Germany'). EDCFE is a limited company Hong Kong, acts as sourcing service provider for Esprit Germany. EDCFE assists E it Germany in sourcing (on a worldwide basis) of goods which includes wearin apparel, shoe & accessories and fabric.

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aorp.(Far East I M;::i:i;

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EDCFE s engaged Esprit India Pvt. Ltd. as a sub-contractor to provide sourcing servic for the goods on a non-exclusive basis in India for Esprit Germany. Pursuant to th said arrangement, EDCFE has entered into an agreement dated t8.07,20L6 with Esprit India Pvt. Ltd. in terms of which Esprit India pvt. Ltd. has undertaken to ide various sourcing support services to EDCFE in relation to performance of e obligations under EDCFE's contract with Esprit Germany.

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Under agreement, Esprit India Pvt. Ltd. is appointed by EDCFE to provide services to E in relation to goods and merchandise including wearing apparel,

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shoes & accessories and fabric. A brief description of the functions/responsibilities of EDCFE and Esprit Germany and Esprit lndia pvt. Ltd. is listed below:

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	RoleofEDCFE/Esprit	RoleofEsprit India
Marketresearch	Norole	EspritIndiaconductsmarket researchtounderstandmarket dynamics,gatherpricing informationfromdifferent suppliersandadviseonthe bestavailable combination of price,qualityanddeliveryof thegoodsforEsprit Germany.
Purchaseofgoods andtrademark protection	EspritGermany directlypurchases goodsfromIndian suppliers	EspritIndiaperformsits functionsassubsourcing contractorofEDCFEanddoes notpurchasethegoodsor tradein itsownname. Itassistsinprotectionof trademarkwhichincludes ensuringthat allsuppliers execute all trademark confirmationletters,comply withthetrademarkprotection proceduresandcomplywith thesourcingprinciplesas adopted by Esprit
		Germany/EDCFE.
ldentification of suppliers	EDCFEprovide guidelinesand instructionstoEsprit India regarding vendorselection process.	Espritlndiaresponsiblefor collecting dataforthepurpose ofvendor evaluation.Esprit India undertakesvendor evaluationon various parameters including experience,reputation, quality of product,price etc.based on which the vendorisselected. Esprit Indiaisalsoresponsible formaintaining theexistingand newsupplierbaseinIndia
Negotiationwith thesuppliers	EspritGermany directly negotiateand contractwithsupplier inrespect ofgoods sourcedfromlndia	. Esprit Indiaonlycommunicates thetermsandconditionstothe extentofinstructionsand requirementsreceivedfrom EspritGermany(through EDCFE)but is notinvolvedin negotiation.
Inspectionand quality control	Esprit Germanyand EDCFEframe guidelinesforquali	Espritlndiabasedonthe guidelinesreceivedfromEDCFE conductsqualitychecksat

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	controlproceduresto beadopted during manufacturing,stock keepinginwarehouse andtransportation. Productsare dispatchedbythe supplierstoEsprit Germany.	variousstagesof productionJt alsocheckswhetherthegoods meetthespecification,quality, deliverytime,andother uirementofEspritGermanv. arrangementforthegoodsin accordancewith the instructionsofEspritGermany receivedthroughEDCFE and assurethat alldocuments relatedtoshipmentofthe goods EspritGermanyare proper. EspritIndiamakeslogisticJ
Contract conclusion	Norole	Esprit India doesnotparticipate inactivitieswhichbring supplierandEspritGermany intobinding contractof purchaseofsoods.
Involvingand payment	Suppliersdirectly invoicetoEsprit Macao anditmakes payment directlyto thesuppliers	Noroleintheinvoicingand paymentprocessasallinvoices aresentdirectlyby suppliersto EspritGermanywithoutany involvementofEsprit lndia.

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After notice and opportunity, the Advance Ruling Authority passed the impugned order. Being aggrieved with the impugned order dated Lr.04.20lg, the appellant M/s Esprit tndia private Limited has filed the present appeal.

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Pleadings

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Of the Appellant

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The present appear has been fired on the foilowing grounds:-

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lmpugned order lacks application of mind and is non-speaking. Various submissions of the Appellant were convenientty ignored by the Learned Authority for Advance Ruling (Ld. AAR).

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The support services provided by the Appellant were composite supply and could not be vivisected into different categories.

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C. The Ld' AAR had arbitrarily and erroneously held that the questions asked by the Appellant were out of the scope of the Section 97(2) of central Goods and Services Tax Act 2017 (CGST Act) fHaryana Goods and Services Tax Act 2o!7 (HGST Act) and the questions could not be taken up by the AAR due to lack of jurisdiction.

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Services provided by the Appellant were not ,intermediary, services.

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' The Appellant in no manner 'arranged' or 'facilitated, sale of Goods from vendors in lndia to Esprit Germany

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. The Appellant does not qualify as an^,agent, or a ,broker, for EDCFE

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E, The services performed by the Appellant are in nature of ,,support services,,

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Ar
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I
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F. services in the present case are indeed exported. services provided by the Appellant would qualify as 'exports' in terms of secti on 2 (6) of Integrated Goods and Services Tax Act 2017 (the IGST Act).

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G. The remuneration of the Appellant for support services to EDCFE is independent of purchase of goods by Esprit Germany from India.

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H. The Ld' AAR has erred both in law and facts while passing the lmpugned order on assumptions and presumptions which is against the facts and the provisions of law.

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sh' Nitin Agrawal, Power of Attorney, is present today on behalf of the appellant M/s Esprit India Private Limited. He has reiterated the grounds taken in the memorandum of appeal.

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It is pleaded that the Ld. AAR has not applied mind while passing the impugned order and the order is non-speaking. The appellant is providing services under the sub sourcing agreement between the appellant and the EDCFE, for which the appellant only charges a lump sum consideration from EDCFE and as such the services provided by the appellant are composite supply. lt is argued that the AAR has wrongly given findings that the questions asked by the appellant are out of the scope of section 97(2) of CGST/HGST Act. lt is pleaded that the services provided by the appellant are in the nature of support services. The appellant pleaded that his services fall in the ambit of export services treating the same as zero rated supply of services.

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In support of his arguments, Sh. Nitin Agrawal has referred to following judgments of the Hon'ble courts and the decisions of the Authorities under the Goods and Services Tax Act:-

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1'. csr v. Ernst & Young pvt. Ltd., 2oL4 (34) s.T.R. 3(Del.)on_25-Februa ry 20L4.

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2' Commissioner of Service Tax, New Delhi v. Menon Associates (2015 77 VST 168 Del.)

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Commissioner of Service Tax, Bangalore v. Menon Associates (2015 77 VST 168 Del.)

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Sunrise Intermediary services-case law.

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ARA ruling Global Reach Education 2018-vrL-06-AARIwB _2017-tg Qz (West Bengal)

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AAR ruling Gogte lnfrastructure Development Corporation Ltd. (201g-VlL30-AAR02) Karnataka.

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7 ' Evalueserve.com pvt. Ltd. v.csr, Gurgaon 2otg AcR 390 CESTAT Chandigarh.

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With these arguments he pleaded that the impugned order of Ld. AAR may be set aside. $L d.

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Of the Department :

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The representatives of GGST/HGST Authorities have defended the impugned order' stating that the Authority for Advance Ruling has passed a detailed and selfspeaking order answering all the questions raised by the appellant in his application. It is pleaded that the AAR has rightly answered all the three questions covered within the ambit of section 97(2), wherein the Act has limited the powers of Authority for Advance Ruling' ln this regard, they have referred section 97(2)which is as under:-

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"(2) The question on which the advance ruling is sought under this Act, shall be in respect of,^_

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(a) crassification of any goods or services or both;

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(b) applicability of a notification issued under the provisions of this Act;

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(d) admissibility of input tax credit of tax paid or deemed to have been paid;

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(e) determination of the liability to pay tax on any goods or services or both;

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(f) whether applicant is required to be registered;

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(g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.,,

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To controvert the cited authorities of other States, it is pleaded by the department that the same are not binding on the appellant and in support of this argument, the provisions of Section 103 have been refereed to, which read as under:-

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'!03' (1) The advance ruling pronounced by the Authority or the Appellate Authority under this Chapter shall be binding only_

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(a) on the applicant who had sought it in respect of any matter referred to in sub-section (2) of section 97 for advance ruring.

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(b) on the concerned officer or the jurisdictional officer in respect of the applicant.

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(2) The advance ruling referred to in sub-section (1) shall be binding unless the law, facts or circumstances supporting the original advance ruling have chan ged.',

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It is argued that the Question No. l- raised by the applicant/appellant has rightly been answered by the AAR and euestions No. z and 3 (of the applicant/appellant) have also been rightly refused because they do not fall within

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the ambit of section 97(2) of the cGsr/HGSTAct. with these arguments, it is prayed that the impugned order of AAR is legal which deserves to be sustained.

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We have heard both the parties in detail, and have also perused the record of the case. The case laws cited by the appellant have also been gone through.

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It is observed that the appellant is side tracking the facts by submitting that the appellant is not an agent or broker, as no such question was asked before the AAR. The appellant had requested for advance ruling on the following questions :-

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(i) Taxability of above stated services provided by Esprit India to its associate concern in Hong Kong EDCFE under GST regime.

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(ii) Whether the above stated services provided by Esprit India are covered under Export of services having Zero rated taxability.

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(iii) Whether Esprit India is eligible for seeking refund of GST for the taxes paid on input services or goods or both.

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The ld. AAR has answered all the Questions raised, in term of relevant provisions of the GST Act and by giving detailed reasons. The plea of the appellant, that the AAR has given SAc & description alongwith tax rate which was not asked for, does not hold water because AAR has clarified each and every aspect raised in the application for Advance Ruling by giving self-explanatory findings. Thus the arguments raised by the appellant are untenable.

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The case laws cited by the appellant are distinguishable as the facts and circumstances of the present case are different. The appellant has himself admitted that he has been providing services to the Esprit Germany in terms of the contract between Esprit Germany and Esprit Hong Kong and for that purpose an agreement !! made between Esprit Hong Kong and Esprit India (appellant). The appellant is providing the services of market research and assisting in trade mark protection, identification of supplies and inspection and quality control of the goods/services. Therefore, we find that the AAR has rightly identified the sAC description with rate of tax while answering Question No. L raised by the appellant. we have carefully perused the provisions of Section 97(2) of the CGST/HGST Act which deal with the subject on which Advance Ruling could be given. After perusing the provisions of Section 97(2) and going through the findings of AAR, we are of the view that euestion 2 and 3, raised by the applicant, have rightly been declined by the AAR.

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ln view of the above discussions and findings, we have no hesitation in

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fl<br>t'

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dismissing the appeal and the Advance Ruling dated ILo4.2oLg does not suffer from any infirmity or iilegarity and the same is upherd. Yl ^ )^*U, J le---tz:o--7'"

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ar Agrawal)

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(Manoranjan tYaur Virk)

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Member

"Esprit India Private Limited, Gurugram"

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"Esprit India Private Limited, Gurugram"

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