Verizon India Pvt. Limited Vs Commissioner of Service Tax (CESTAT Delhi)
The case of Revenue is that the location of service provider/appellant is in India and further in terms of Rule 9 of POPS, the service provided, being intermediary services, the location of the service provider under Rule 9 of POPS, shall be the place of provision of services, provided to Verizon US. Further, case of Revenue is that as location or place of provision of service is in India, it does not amount to export of service and accordingly, the appellant is not eligible for export benefits (Refund of Input tax ) and is liable for tax in India.
CESTAT find that the said stand of Revenue is wholly misconstrued and erroneous. Firstly, no demand notice was issued on the appellant refusing or questioning the status of the export of service to Verizon US, as declared in their ST-3 Returns. Further, we find that the Hon’ble Delhi High Court has held, that its findings applied to post-Negative List also i.e. from July, 2012 onwards, as held by the Hon’ble High Court in its aforementioned judgement particularly in para-54 (supra). Further, admitted facts are that the appellants have provided output services and raised invoices on principal to principal basis.The appellant has not been acting as intermediary between another service provider and Verizon US. This fact is also supported from the fact that the appellant has raised their bills for the services provided on the basis of cost plus 11% markup. As the services have been provided by the appellant under contract with Verizon US, who are located outside India and have raised their invoices, for such services and have received the remittance in convertible foreign exchange, the appellant satisfies all the conditions, as specified under Rule 6 A of Service Tax Rules, 1994, inserted w.e.f 1.7.2012. Reliance was placed by the appellant on the following judgements supporting their contentions:-
(1) M/ Evalueserve. Com Pvt. Ltd. Vs. CST, Gurgaon [Order No.A/60151/2018 ]dated 27th February, 2018.
(2) M/s. Sunrise Immigration Consultants Pvt. Ltd. Vs. Commissioner of Central Excise and Service Tax, Chandigarh [2018-TIOL-1849-CESTAT-CHD dated 16th March, 2018]
(3) GoDaddy India Private Limited as Commissioner of Service Tax, Delhi-IV [AAR/ST/08/2016] [‘GoDaddy’]
(4) Universal Services India Private Limited Vs. The Commissioner of Service Tax, Delhi-IV [AAR/ST/07/2016].
From perusal of the aforementioned ruling, it is evident that the services of the appellant to Verizon US do not merit classification under the category of „intermediary services’. Further, the Hon’ble High Court has held in the appellant’s own case (supra) that the agreement between the related parties does not have any impact on the export of services. Further, the findings of the Commissioner (Appeals) that the service provided by the appellant do not qualify as export, as such services provided to the customers, have been consumed in India, is directly in conflict with the ruling of this Tribunal in the case of Paul Merchants Ltd. (supra). Accordingly, we hold that the appellants have rendered services to Verizon US as principal service provider and not as an intermediary. Accordingly, we hold that the appellants are entitled to refund under Rule 5 of the Cenvat Credit Rules, 2004 read with the notification. Thus, these appeals are also allowed with consequential benefit and the impugned orders are set aside.
FULL TEXT OF THE ORDER OF CESTAT DELHI
The issue in these appeals is (i) whether the appellants have exported their services and (ii) whether the appellants have provided services on „principal to principal‟ basis, or as an „intermediary‟ as defined in Rule 2(f) “Place of Provision of Service Rules, 2012 (POPS Rules for short) read with Rule 9 of the said Rules. The appellant, Verizon India, is registered as a Company and also registered with Service Tax Authorities providing output services under the category of Information Technology Software Service, Consultancy Engineering Service, Repairs and Maintenance Services, Business Support Services, etc. The appellants have been filing their returns regularly and maintaining proper records in the ordinary course of business.
2. The appellant has entered into a “Service Agreement” dated 14th December, 2007 in relation to the provision of “Business Services” („the Agreement‟) with „MFS Globnet Inc‟ (Globnet). Subsequently, Globnet has entered into a Novation Agreement with MCI Communication Services, Inc (USA) („MCICS/Verizon US‟) whereby Globnet has novated the agreement in favour of Verizon US and Verizon US has assumed all of Globnet‟s rights and obligations under the Agreement. In terms of the Agreement, the Appellant (referred to as OpCo in the Agreement) is rendering Business Services including sales support, marketing, advertising, billing, etc. to Verizon US. The services provided by the appellant to Verizon US are reported as “Business Support Services” („BSS‟) in the service tax returns and claimed as exports, in terms of the provisions of Rule 6A of the Service Tax Rules, 1994 („ST Rules‟).
3. In respect of the Business Support Services exported, the appellant filed periodical refund claims of proportionate input service tax credit under Rule 5 of the Cenvat Credit Rules 2004 read with Notification No.27/2012-CE (NT). All these appeals relate to rejection of refund claim on export of service, as it appeared to Revenue that the appellant is providing the services to their principal located outside India as an „intermediary‟ as defined under Rule 2 (f) of POPS Rules read with Rule 9(c) of POPS Rules, which provides – the place of provision of following services shall be the location of the service provider –
(a) ….
(b) ……..
(c) Intermediary services
4. Further, Rule 2(f) defines intermediary – means broker, an agent or any other person , by whatever name called, who arranges or facilitates a provision of a service (hereinafter referred to as the “Main Service”) or supply of goods, between the two or more persons, but does not include a person who provides the main service or supplies the goods on his own account”. The details of the appeals and the period involved is as follows:-
