Remanded

M/S Excelpoint Systems (India) Pvt. Ltd. v. Commissioner of Service Tax

Karnataka HC27 Sept 2021CEA/22/2018

Case brief

AI extract

What is this about?

The High Court allowed an appeal against a CESTAT order. It set aside the impugned order and remanded the matter to the Tribunal to reconsider whether the appellant acts as an 'intermediary' facilitating supply of goods or services under the amended Rule 2(f) of the Place of Provision of Service Rules.

What did the court decide?

The order of the Tribunal was set aside and the matter remanded for reconsideration on specific aspects regarding the definition of 'Intermediary'.

M/S Excelpoint Systems (India) Pvt. Ltd. Vs… — Company and Corporate | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 27^TH DAY OF SEPTEMBER, 2021

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PRESENT

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THE HON’BLE MRS. JUSTICE S. SUJATHA

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AND

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THE HON’BLE MR. JUSTICE RAVI V. HOSMANI

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C.E.A. NO.22/2018

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BETWEEN:

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M/s EXCELPOINT SYSTEMS (INDIA) PVT. LTD., HAVING ITS OFFICE AT 304, 305, 306, 2^ND FLOOR OXFORD TOWERS, OLD AIRPORT ROAD BENGALURU-08. …APPELLANT

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[BY SRI. RAVI RAGHAVAN, ADVOCATE A/W SRI. SYED M.PEERAN, ADVOCATE (PHYSICAL HEARING)]

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AND:

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COMMISSIONER OF SERVICE TAX (APPEALS 1), BANGALORE TTMC, BMTC BUILDING 4^TH FLOOR ABOVE BMTC BUS STAND DOMLUR, OLD AIRPORT ROAD BANGALORE-560 071. … RESPONDENT [BY SRI. VIKRAM ADITYA HUILGOL, ADVOCATE (PHYSICAL HEARING)]

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THIS CENTRAL EXCISE APPEAL IS FILED UNDER SECTION 35G OF THE CENTRAL EXCISE ACT, ARISING OUT OF ORDER DATED: 28.09.2017 PASSED IN FINAL ORDER NO.22332 TO 22337/2017 DATED: SEPTEMBER 28, 2017 PASSED BY THE APPELLATE TRIBUNAL IN APPEAL No.ST 20003 TO 20008/2017 AND ETC.,

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THIS APPEAL COMING ON FOR HEARING, THIS DAY, S.SUJATHA J., DELIVERED THE FOLLOWING:

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JUDGMENT

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This appeal is filed by the Assessee under Section 35G of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994, assailing the final order No.22332 to 22337/2017 dated 28.09.2017 passed by the Custom’s, Excise and Service Tax Tribunal (‘Tribunal’ for short) in Appeal Nos. ST 20003 to 20008/2017.

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The appeal was admitted on 08.04.2019 to consider the following substantial question of law:

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“Whether in law, the appellant is liable to pay service tax on the services rendered by it to Excelpoint SG”?

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The appellant-Assessee is a company incorporated under the Companies Act, 1956 in India carrying on business in the name and style of Excelpoint Systems (India) Private Limited (“Excelpoint" for short), inter alia engaged in providing marketing support services and technical support services to Excelpoint Systems (Pvt. Limited), Singapore and having its office in India.

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The adjudicating authority analyzing the

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service agreement entered into by the appellantAssessee with Excelpoint SG for the provision of the services, held that the appellant is an ‘Intermediary’ under the definition clause to Rule 2(f) of the Place of Provision of Service Rules, 2012 (for short ‘Rules, 2012’). It was further held that in terms of Rule 9 of Rules, 2012, the appellant is not coming within the ambit of Rule 6(A) of Service Tax Rules 1994. Having held so, the claim for refund of the unutilized Central Value Added Tax (‘CENVAT’ for short) credit paid in respect of input services used for providing output services exported claimed by the assessee under Rule 5 of the CENVAT Credit Rules 2004 was rejected.

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Being aggrieved by the said order, the appellant preferred an appeal before the Appellate Authority unsuccessfully and on further appeal before the Tribunal, having regard to the clauses of the agreement and the concurrent findings of the authorities, it was held that the appellant would come within the definition of “Intermediary” under the Rules,

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2012 to facilitate services to Singapore Company and it could not be considered as Export services and therefore, rejected the appeal. Being aggrieved, the Assessee is before this Court.

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Learned counsel for the appellant-Assessee placing reliance on the judgment of the High Court of Bombay in the case of M/s Chevron Philips Chemicals India Pvt Ltd., Vs. Commissioner of CGST & Central

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Excise, Mumbai East, 2019 - VIL - 763 - CESTAT - MUM - ST, submitted that para 5.9.6 of the Education Guide issued by the Central Board of Customs and Excise inasmuch as ‘ Intermediary Services’ particularly prior to 01.10.2014 and post 01.10.2014 has not been appreciated by the authorities as well as by the Tribunal. The Tribunal has proceeded to confirm the orders of the authorities without application of mind sans providing valid reasons for the same. No valid reasons are reflected in the order of the Tribunal, the same being cryptic requires to be set aside and remanded back to the Tribunal to reconsider the matter

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in the light of the amendment brought out to the Service

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Tax Rules with effect from 01.07.2012.

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Learned counsel submitted that the foreign company was dealing with supply of goods. Hence, neither the authorities nor the Tribunal have given any finding whether the provision for facilitating supply of goods would come within the definition clause of Rule 2 (f) of the Rules, 2012 prior to amendment, but denied refund. There being no finding on this aspect, the matter certainly calls for interference. Thus, prayed for remand to the Tribunal by setting aside the impugned order.

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Learned counsel for the Revenue placing reliance on the clauses of the agreement entered into between the petitioner and Foreign company submitted that the clauses would ex-faci e demonstrate that the petitioner is an ‘ intermediary’ . These aspects having been critically analyzed by the Assessing Officer and thereby confirmed by the CIT (Appeals), the Tribunal has considered and confirmed the same. Such confirmation of the concurrent findings of the

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authorities by the Tribunal on further examination of the clauses of the agreement vis-à-vis, the tenor of Rule 2(f) of the Rules 2012 cannot be faulted with. Learned counsel submitted that the arguments of the learned counsel for the petitioner inasmuch as Rule 2(f), rather runs counter to the legislative intendment. If the provision to facilitate services or supply of goods is restricted to broker or an agent for receiving the commission, the purport and object of the provisions itself gets defeated. The activities of the petitioner certainly come within the meaning of Rule 2(f) of the Rules, 2012, having regard to these aspects, no further remand is necessary.

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Learned counsel further submitted that even if the order of remand has to be passed, it should be limited to consider whether the appellant was engaged in provision of facilitating services of supply of goods having regard to the amendment brought to Rule 2(f) with effect from 01.10.2014.

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We have carefully considered the rival submissions of the learned counsel appearing for both

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the parties and perused the material on record.

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Rule 2(f) of Rules, 2012, pre and post amendment reads thus:

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(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) between two or more persons, but does not include a person who provides the main service on his account ;

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(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 ;”

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Rule 3 of the said Rules, 2012 contemplates a

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place of provision generally, which shall be the location of the recipient of service. However, in terms of Rule 6A of the Service Tax Rules, 1994, the provision of any

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service provided or agreed to be provided shall be

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treated as export of service, when-

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(a) the provider of service is located in the taxable territory,

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(b) the recipient of service is located outside India

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(d) the place of provision of the service is outside India.

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In terms of Rule 9 of the Rules, 2012 place of provision of the following services shall be the location of the service provider:-

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(a) Services provided by a banking company , or a financial institution, or non-banking financial company, to account holders;

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(b) xxx

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Having considered these provisions, the

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Department has come to the conclusion that the provision of facilitating the services by the appellant is not export service in terms of Rule 6A(d) of the Service Tax Rules 1994.

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To analyse on this aspect, the authorities as well as the Tribunal have considered the clauses of the

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agreement entered into between the appellant and the foreign company to arrive at a finding that the appellant is an ‘ intermediary’ within the ambit of Rule 2(f) of the Rules, 2012.

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Arguments of the learned counsel for the appellant is that the authorities have not applied their mind to arrive at such a finding, the definition clause of ‘ Intermediary ’ in Section 2(f) of the Rules, 2012, has not been properly appreciated with respect to the activities carried out by the appellant. It was argued that it is a contract of the assessee/appellant with the foreign company on one to one basis. It is only facilitating the services of supply of goods to the Foreign company. Its marketing fee is not dependant on the transaction held by the foreign company with customers in India. It being independent, the appellant cannot be construed as an ‘ intermediary’. Though the Tribunal has referred to the clauses and findings of the authorities, the reasoning provided to arrive at a finding in confirming the order of the authorities below is not satisfactory, we are of the considered opinion that certainly the matter

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requires re-examination by the Tribunal to analyze on the factual aspects to arrive at a finding, as to whether the activities of the appellant relates to provision to facilitate services or supply of goods, as the same is not forthcoming either in the orders of the authorities or of the orders of the Tribunal, in the wake of the amendment to rule 2(f) of the Rules 2012, with effect from 01.10.2014.

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It was mandatory on the part of the authorities to consider the scope and effect of the amended provisions and its application to the case on hand. The Tribunal ought to have examined on this aspect also. In the absence of such finding forthcoming in the orders impugned, we are of the considered view that the matter requires to be re-examined on this aspect. Accordingly, we set aside the order of the Tribunal impugned sans answering the question of law and remand the matter `to the Tribunal to reconsider the same on these aspects. It is made clear that we have not expressed any opinion on the merits or demerits of the case. The Tribunal shall reconsider the matter in terms

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of the provisions of the Rules and the clauses of the agreement as well as implementation of the clauses of the agreement and thereby decide the mater in accordance with law in an expedite manner.

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All the rights and contentions of the parties are left open .

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With these observations and directions, appeal stands disposed of.

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Sd/JUDGE

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Sd/JUDGE

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Psg*

M/S Excelpoint Systems (India) Pvt. Ltd. v. Commissioner of Service Tax

Case brief

What is this about?

What did the court decide?

M/S Excelpoint Systems (India) Pvt. Ltd. v. Commissioner of Service Tax

Case brief

What is this about?

What did the court decide?

What the court decided

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