Business Support Services to Overseas Group Company Qualify as Export, Not Intermediary Services: CESTAT Chandigarh

Esprit India Pvt Ltd Vs Commissioner of Central Excise (CESTAT Chandigarh)

Business Support Services to Overseas Group Company Qualify as Export, Not Intermediary Services: CESTAT Chandigarh

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh, allowed the appeal filed by Esprit India Pvt. Ltd. against the Order-in-Appeal dated 20.07.2016, which had upheld rejection of its refund claims for unutilized CENVAT credit. The refund claims, amounting to ₹12,94,486 for the periods October–December 2014 and January–March 2015, were filed under Notification No. 27/2012-CE(NT) dated 18.06.2012 in respect of input services used for providing taxable services.

The appellant, an Indian subsidiary of Esprit De Corp (Far East) Limited, Hong Kong, provided various business support services to its overseas group entity under a Service Agreement dated 13.07.2012, as amended on 11.03.2013. The services included market research, gathering pricing information, inspection of goods, coordination with vendors, providing information on applicable regulations, implementing shipping instructions, logistics arrangements and ensuring compliance with Indian laws. The agreement provided that the appellant rendered these services as an independent contractor and was compensated on a cost-plus 5% mark-up basis.

The Original Authority rejected the refund claims, and the Commissioner (Appeals) upheld the rejection on the ground that the services did not qualify as export of services but constituted intermediary services. The appellant challenged this finding before the Tribunal.

The appellant submitted that it provided services on its own account and not as an intermediary. It argued that it neither arranged nor facilitated supply between vendors and the overseas entity, had no authority to negotiate or conclude contracts on behalf of the overseas entity or its customers, and received consideration solely on a cost-plus mark-up basis independent of any supply of goods. It contended that the services satisfied Rule 6A of the Service Tax Rules, 1994 and did not fall within the definition of intermediary under Rule 2(f) of the Place of Provision of Services Rules, 2012. The appellant also relied upon several Tribunal decisions, some of which had been affirmed by the Supreme Court.

The Revenue supported the findings of the impugned order.

The Tribunal identified two issues for determination: whether the business support services qualified as exports or intermediary services, and whether the appellant was entitled to refund of ₹12,94,486 of unutilized CENVAT credit. After examining the Service Agreement, the Tribunal found that the relationship between the appellant and the overseas entity was expressly that of independent contractors and not principal and agent. The agreement also provided for remuneration on a cost-plus mark-up basis. On this basis, the Tribunal held that the appellant rendered services as an independent contractor and not as an agent, and therefore the services qualified as export of services under Rule 6A of the Service Tax Rules, 1994.

The Tribunal further observed that identical issues had already been decided in favour of assessees in earlier decisions involving similar service agreements and business support activities. Referring to those decisions, it noted that services rendered on a principal-to-principal basis, in the absence of any tripartite agreement or agency relationship, do not constitute intermediary services.

Following the earlier precedents, the Tribunal concluded that the impugned order rejecting the refund claims was not sustainable in law. It set aside the order, allowed the appeal, and granted consequential relief in accordance with law.

Cases Discussed

• M/s William E. Connor and Associates Sourcing Pvt. Ltd. vs. Commissioner of CGST, Gurugram (CESTAT Chandigarh), 2025-VIL-828-CESTAT-CHD-ST
• Commissioner of GST & CE, Coimbatore vs. SNQs International Socks Pvt. Ltd. (SC), (2024) 16 Centax 413 (S.C.)
• Chevron Philips Chemicals India Pvt. Ltd. vs. Commissioner (Tribunal), (2024) 15 Centax 102 (Tri.)
• Commissioner vs. Chevron Philips Chemicals India Pvt. Ltd. (SC), 2024 (388) E.L.T. 135 (S.C.)
• SNQs International Socks Pvt. Ltd. vs. Commissioner of GST & CE, Coimbatore (Tri.-Mad), (2024) 16 Centax 412 (Tri.-Mad)
• Genpact India Pvt Ltd. (Punjab & Haryana High Court), 2023 (77) GSTL 512 (P&H)
• M/s Airbnb Payments India Pvt Ltd., Final Order No. 60505-60506/2024 dated 04.09.2024

FULL TEXT OF THE CESTAT CHANDIGARH ORDER

The present appeal is directed against the impugned Order-in-Appeal dated 20.07.2016 passed by the Commissioner (Appeals) Gurgaon, whereby the learned Commissioner (Appeals) has rejected the appeal of the Appellant and upheld the order of the Original Authority rejecting the refund claims filed by the Appellant.

2. Briefly stated facts of the present case are that the Appellant M/s Esprit India Pvt Ltd (in short ‘M/s EI’) is registered with the Service Tax Department for providing the various services. The Appellant M/s EI is an Indian subsidiary of M/s Esprit De Corp (Far East) Limited, Hong Kong (in short ‘M/s EDCFE’), which in turn is a fellow subsidiary of M/s Esprit Macao. The Appellant filed the following refund claims of unutilized CENVAT Credit availed on input services used in providing taxable services under Notification No. 27/2012-CE(NT) dated 18.06.2012:

After following the due process, the Original Authority vide Order-in-Original dated 29.01.2016 rejected the aforesaid refund claims. Aggrieved by the said rejection, the Appellant filed an appeal before the Commissioner (Appeals), who vide the impugned Order-in-Appeal, has rejected Appellant’s appeal on the ground that it does not amount to ‘export of service’ and it falls under the category of ‘intermediary services’. Hence, the present appeal.

3. Heard both the parties and perused the material on record.

4. The learned Counsel for the Appellant submits that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts & the law and the binding judicial precedents on the identical issue.

4.1 She further submits that the Appellant is not an intermediary; the Appellant provides the services on their own account to M/s EDCFE and therefore, rejection of refund claims is not in accordance with law. She refers to the various terms of Service-Agreement dated 13.07.2012, amended by letter dated 11.03.2013 with M/s EDCFE, wherein it is specifically provided that the Appellant will provide various support services in relation to its business such as market research, inspection etc, in relation to price, quality and availability of the goods in India; the scope of services provided by the Appellant includes gathering relevant information from different suppliers in India and advice M/s EDCFE on the suitable supplier’s basis, the combination of price, quality and delivery of the goods being offered by them. Further, she submits that the Appellant provides these services as an independent contractor and on a cost plus mark-up basis. For this, she refers to clause of the Service-Agreement which provides that ‘the relationship between M/s EDCFE and M/s EI established by this agreement is that of independent contractor’.

4.2 She further submits that the Business Support Services provided by the Appellant qualify as ‘exports’ as per Rule 6A of the Service Tax Rules, 1994 and do not qualify as ‘intermediary services’ as defined under Rule 2(f) of the Place of Provision of Services Rules, 2012 (‘POPS Rules’). She also submits that pre-requisite to qualify as ‘intermediary’ is that the intermediary should arrange or facilitate services between two or more persons in the capacity of agent, broker and such services should not be provided on its own account; in the present case, the Appellant is not facilitating any service but is involved in providing the following services directly to M/s EDCFE on cost plus mark-up basis:

• Market research in relation to quality, availability and price of goods in India;
• Ensure that vendors adhere to trademark protection and sourcing principles as set by M/s Esprit Macao;
• Coordinate designing activity with identified vendor;
• Pass on information with respect to prices quoted by identified vendor in India;
• Provide information to M/s EDCFE/Esprit Macao on applicable regulations in relation to import, visa, export license and the Services in order to accurately advise EDCFE and/or fulfil all shipping instructions requested by EDCFE in relation to Esprit Macao;
• After order for procuring goods is placed by M/s EDCFE/Esprit Macao, inspect the Goods to ensure all requirements of Esprit Macao are adhered to;
• Implement shipping instructions, make logistics arrangement as received from M/s EDCFE, comply with applicable customs requirements; and
• Ensure compliance with requisite India laws.

4.3 She further submits that the Appellant is solely providing support services to M/s EDCFE by way of undertaking market research and providing information on potential vendors; such services did not require the Appellant to bring M/s EDCFE’s customers and the vendors together in executing binding contracts of supply of goods; thus, the Appellant is not involved in the arrangement between the vendors and M/s EDCFE or the transaction of sale between the customers of M/s EDCFE and the vendors in India. Further, she also submits that the Appellant does not have any authority to approve or conclude the contracts on behalf of M/s EDCFE and/or its customers; further, the consideration for the services is received by the Appellant on a cost plus mark-up basis and is not related to the supply of goods/services by M/s EDCFE and the vendors; therefore, there is no element of arranging or facilitating the supply of goods or services between M/s EDCFE, its customers and the vendors by the Appellant.

4.4 She further submits that the issue involved in the present case is no more res integra and has been decided by the Tribunal in favour of the taxpayers/assessees in a catena of decisions, some of which have also been affirmed by the Hon’ble Supreme Court. In this regard, she refers to the following decisions:

4.4.1 In the case of M/s William E. Connor and Associates Sourcing Pvt. Ltd. vs. Commissioner of CGST, Gurugram – 2025-VIL-828-CESTAT-CHD-ST, in respect of similar services, the Tribunal has held that the services do not qualify as intermediary services. In the said case, the assessee was engaged in providing support services to overseas entity such as market research, verifying sample products, attending pre-production meetings, tracking shipments etc., and the Department denied the benefit of exports on the ground that the services were intermediary services. In the said case, the Tribunal allowed the assessee’s appeal and held that the agreements between the assessee and overseas entity was on a principal-to-principal basis and the assessee did not have any authority to contract with manufacturers, suppliers, clients or third-parties on behalf of overseas entity and there was no tri-partite agreement between the assessee, overseas entity and their vendors and thus, the services do not qualify as intermediary services.

4.4.2 In the case of SNQs International Socks Pvt. Ltd. vs. Commissioner of GST & CE, Coimbatore – (2024) 16 Centax 412 (Tri.-Mad), decided by the Tribunal, the scope of services provided by the assessee and the nature of relationship between the assessee and overseas entity was similar to the facts of the present matter. In the said case, the Tribunal has held that the services are provided by the assessee on a principal-to-principal basis and there is no tripartite agreement between the assessee, the foreign entity and the vendors in India and thus, the services do not qualify as intermediary services rather the said services qualify as exports. The said decision of the Tribunal has been affirmed by the Hon’ble Supreme Court, titled as Commissioner of GST & CE, Coimbatore vs. SNQs International Socks Pvt. Ltd. – (2024) 16 Centax 413 (S.C.).

4.4.3 In the case of Chevron Philips Chemicals India Pvt. Ltd. vs. Commissioner – (2024) 15 Centax 102 (Tri.), the Tribunal has held that the sales promotion and other sales support services provided by Indian based service provider to its associated company located abroad amounts to export of services and not as intermediary services because relationship between service provider and recipient was of independent contractor-contractee and not as master agent as no service had been provided to its clients of such overseas entity in India on its behalf. The said decision of the Tribunal has been affirmed by the Hon’ble Supreme Court, titled as Commissioner vs. Chevron Philips Chemicals India Pvt. Ltd. – 2024 (388) E.L.T. 135 (S.C.).

5. On the other hand, the learned Authorized Representative for the Revenue reiterates the findings of the impugned order.

6. We have considered the submissions made by both the parties and perused the material on record as well as the decisions relied upon by the learned Counsel for the Appellant. We find that in the present case, following issues are involved which need to be decided:

(a) whether the business support services viz., market research, inspection etc provided by the Appellant to overseas entities qualify as ‘exports’ or the services are in the nature of ‘intermediary services’?

(b) whether the Appellant is entitled to refund of Rs.12,94,486/- being refund of unutilized CENVAT Credit on exports?

7. We have examined the scope of services mentioned in the Services-Agreement placed on record. We may refer to the terms of the Services-Agreement, which are reproduced herein below:

“(2) Services of EI:

EI shall perform the following services (“the Services”) for EDCFE:

(a) Market Research

(i) EI shall perform requisite market research in the Territory on behalf of EDCFE in relation to price, quality and the availability of Goods;

(ii) EI shall gather pricing information from different suppliers and advise on the best available combination of price, quality and delivery of the Goods for Esprit Macao.

(b) Trademark Protection and Sourcing Principles

EI shall use its commercially reasonable efforts to procure the suppliers or manufacturers of the Goods to:

(i) Execute all trademark confirmation letter as may be required by Esprit Macao;

(ii) Comply with the trademark protection procedures as may be prescribed by Esprit Macao from time to time;

(iii) Comply with the sourcing principles as may be adopted by Esprit Macao from time to time; and

(iv) Execute all other requisite documents as may be reasonably requested by Esprit Macao in order to protect the interest of Esprit Macao.

(c) Information on Applicable Regulations

EI agrees to make itself aware of any and all applicable international textile agreement, regulations in relation to import, visa, export licence and the Services in order to reasonably advise EDCFE and/ or fulfil all shipping instructions requested by EDCFE in relation to Esprit Macao.

(d) Inspection

After orders for the Goods are placed, EI shall take all conceivable measures in order to ensure that all requirements of Esprit Macao are adhered to. EI shall therefore, if reasonable, start with an inspection of the Goods as early as possible, also including the process of manufacture at the manufacturer/supplier in its controls, and shall furthermore control in good time that the Goods meet the specification, quality, delivery time and other requirement of Esprit Macao.

(e) Other Duties

(i) Upon Instructions from EDCFE, EI shall:

(1) Implement the shipping instructions necessary to facilitate the exportation of the Goods from the suppliers as specified by EDCFE;

(2) comply with the applicable Customs requirements and laws in relation to the Goods; and

(3) perform other tasks required for successful conclusion of business.

(ii) Whenever necessary and where possible, EI shall make logistic arrangements for the Goods in accordance with the instructions of Esprit Macao and assure that all documents relative to shipment of the Goods to Esprit Macao:

(1) are properly prepared;

(2) adhere to the shipping instructions from EDCFE in relation to Esprit Macao;

(3) comply with the governmental and other regulations of the country to which goods are to be exported;

(4) are dispatched expeditiously and via safest channels; and

(5) in the case of customs and commercial invoices, reflect accurately the contents of the relevant shipment and the needs of Esprit Macao.

(f) Disclosure of Information

EI shall disclose to EDCFE upon request by EDCFE all its correspondence and other information related to the Services.”

Further, we note that in the Services-Agreement, it is also provided that the services were provided by the Appellant to overseas entity M/s EDCFE as an independent contractor and on a cost plus mark-up basis. The relevant portion of the Services-Agreement is reproduced as under:

“(b) Contractor only:

The relationship of EDCFE and EI established by this Agreement is that of independent contractors and nothing contained in this Agreement shall be construed to create a partnership or the relationship of principal and agent, or the relationship of employer and employee between the parties.”

“Schedule A:

The operating cost of service provider, EI in relation to the provision of the Services to the principal, EDCFE plus a mark-up of 5%”

By analyzing the above-mentioned terms of the Services-Agreement, we find that the Appellant M/s EI provided the services to its overseas entity M/s EDCFE as an “independent contractor” and not as an “agent” and therefore, the services provided by the Appellant qualify as ‘export’ as per Rule 6A of the Service Tax Rules, 1994.

8. Further, we find that in the identical facts, the Tribunal has already decided this issue in favour of the assessees in various cases. In this regard, we may refer to some of those decisions:-

8.1 In the case of M/s William E. Connor and Associates Sourcing Pvt. Ltd. (supra), the Tribunal under the similar circumstances, has held that the services do not qualify as ‘intermediary services’. The relevant findings of the Tribunal are reproduced herein below:

“15. On going through the terms of the Agreement, we find that the Agreement is between two principals. There is nothing in the agreements even to remotely indicate that the appellants are agents of WECA HK. The Revenue also did not come up with any evidence in the form of tripartite agreements between the appellants, their principal WECA HK and their vendors. In view of the same, it is difficult to accept that the appellants are agents/ brokers of WECA HK so as to be covered under Rule 9 of POPS Rules.

16. This Bench has taken similar view in respect of M/s Airbnb Payments India Pvt Ltd. vide Final Order No. 60505­60506/2024 dated 04.09.2024. We find that in the instant case too, the appellants cannot be called intermediary as per the criteria laid down by the Hon’ble Punjab & Haryana High Court in the case of Genpact India Pvt Ltd. – 2023 (77) GSTL 512 (P&H). Therefore, we find that the impugned order incorrectly holds the appellants as intermediary and denies the benefit of export. Therefore, we find that the impugned order, confirming the demand holding that the appellants are an intermediary, cannot be sustained. When the impugned order does not survive on this issue, we find that it is a futile exercise to go into the elaborate submissions given by the learned Counsel for the appellants.”

8.2 Similarly, in the case of SNQs International Socks Pvt. Ltd. vs. Commissioner of GST & CE, Coimbatore – (2024) 16 Centax 412 (Tri.-Mad), the Tribunal has held that the services are provided by the assessee on a principal-to-principal basis and there is no tripartite agreement between the assessee, the foreign entity and the vendors in India and thus, the services do not qualify as ‘intermediary services’ rather the said services qualify as ‘exports’. The relevant findings of the Tribunal are reproduced herein below:

“11.4 The ld. adjudicating authority has held that the services provided by M/s. SNQS International Socks Pvt. Ltd. are not on principal-to-principal basis, which is erroneous in our view, since all these services are rendered by the appellant to its foreign client and as per the direction of the foreign client. Not only procurement of goods, but selection of vendors, monitoring quality of the goods produced, designing of samples, live testing of the samples produced and carrying out various other quality checks on the garments till their final dispatch to the foreign client – the appellant has thus undertaken a bouquet of services which is not mere selling or purchase of goods. It is an admitted fact that remuneration for the services rendered to the foreign client is computed on the basis of FOB value of the garments exported and that itself would not make the appellant an intermediary. All these services were rendered to the foreign client on principal-to-principal basis. Selection of vendors or making of the garments by these vendors are incidental services for procurement goods and as per the direction of the foreign client, who is the recipient of the services provided by the appellant. Thus, the appellant is the service provider and the overseas buyer is the service recipient and there is no oral or written agreement between the appellant and the vendors/exporters of garments. Also, the appellant had not received any consideration for the services provided in relation to export of goods from the vendors in India.

11.5 In view of the above, we find that the appellant does not satisfy the conditions to be an ‘intermediary’ for his services and as such, the impugned order 8-7-2019 cannot sustain and is required to be set aside accordingly.”

The said decision of the Tribunal has been affirmed by the Hon’ble Supreme Court, in the case titled as Commissioner of GST & CE, Coimbatore vs. SNQs International Socks Pvt. Ltd. (supra).

9. Keeping in view of our discussion above, we are of the considered opinion that the ratios of the above cited decisions are squarely applicable to the facts & circumstances of the present case and by following the same, we are of the considered opinion that the impugned order, rejecting the refund claims filed by the Appellant, is not sustainable in law and therefore, we set aside the same by allowing the appeal of the Appellant with consequential relief, if any, as per law.

(Order pronounced in the open court on 30.06.2026)