Commissioner of Central Goods and Service Tax and Central Excise Vs Grant Thornton Advisory Private Limited (CESTAT New Delhi)
Summary: The Customs, Excise and Service Tax Appellate Tribunal considered the department’s appeal against the Commissioner’s order dated 29 March 2018 dropping proceedings initiated by a show cause notice dated 21 October 2015 against Grant Thornton Advisory Private Limited for 2010-11 to 2014-15. The dispute arose from a Cost Reimbursement Agreement dated 5 May 2010 between the Indian company and Grant Thornton International Limited, London, for activities intended to develop and promote the Grant Thornton brand in India. The agreement provided for reimbursement of agreed expenditure, capped at US$1 million annually, with quarterly reimbursements of US$250,000 over five calendar years. The department alleged that the receipts were consideration for taxable business auxiliary services before 1 July 2012 and, thereafter, for services taxable under the negative-list regime. It contended that the Indian company acted as an intermediary and could not claim export-of-service treatment.
The Commissioner examined the periods separately. For the period up to 30 June 2012, the Commissioner found that the brand development and promotional activities did not fall within the business auxiliary service sub-clauses invoked in the notice. In any event, the services satisfied the applicable export conditions: the overseas entity was the service recipient, payments were received in convertible foreign exchange and, following the amendment effective 27 February 2010, the former requirement concerning use outside India no longer applied in the same form. For the period beginning 1 July 2012, the Commissioner concluded that the Indian company performed brand promotion on its own account, rather than arranging or facilitating a service between other persons. Outsourcing some promotional activities did not change its character into that of an intermediary. Accordingly, Rule 3 rather than Rule 9 of the Place of Provision of Services Rules, 2012 applied, placing the service at the overseas recipient’s location; the conditions of Rule 6A of the Service Tax Rules, 1994 were satisfied.
Before the Tribunal, the departmental representative specifically challenged the post-1 July 2012 finding and argued that intermediary services attracted Rule 9, making the supplier’s location the place of provision. The respondent supported the Commissioner’s findings and relied on the contractual provisions and judicial authorities. The Tribunal reviewed the agreement’s activities, including market-development campaigns, professional and risk-management support, training and infrastructure improvements, and the agreed reimbursement ceiling. It held that the company was itself responsible for promoting the brand and supplied that service on its own account. Merely outsourcing particular components did not amount to arranging the main service between two other persons. Rule 9 was therefore inapplicable, while Rule 3 located the service with Grant Thornton International in London. The undisputed receipt of convertible foreign currency fulfilled the export condition.
The Tribunal drew support from Sunrise Immigration Consultants Private Limited v. Commissioner of Central Excise and Service Tax, Chandigarh, concerning services rendered to overseas colleges and banks, and from Genpact India Pvt. Ltd. v. Union of India, which discussed the substantially similar intermediary definitions under service tax and GST. It also considered Ernst and Young v. Additional Commissioner, CGST, Medway Educational Consultant P. Ltd. v. Commissioner, Verizon Communication India Private Limited v. Assistant Commissioner, Paul Merchants Ltd. v. CCE and Vodafone Essar Cellular Ltd. v. CCE on the identity of the recipient and the export character of services. Applying the distinction between the contractual recipient and persons incidentally benefiting from performance, the Tribunal concluded that Grant Thornton, India was not an intermediary and that its supplies to Grant Thornton, London constituted exports of services. It found no infirmity in the Commissioner’s order, dismissed the department’s appeal and disposed of Cross-Objection No. 51239 of 2018. The order was pronounced on 25 September 2024.
Cases Discussed:
- Medway Educational Consultant P. Ltd. v. Commissioner, CGST Commissionerate, Delhi-West — 2024 (3) TMI 1178 (CESTAT New Delhi).
- Ernst and Young Limited v. Additional Commissioner, CGST — 2023 (73) GSTL 161 (Delhi High Court).
- Genpact India Pvt. Ltd. v. Union of India — 2023 (68) GSTL 3 (Punjab and Haryana High Court).
- Verizon Communication India Private Limited v. Assistant Commissioner, ST, Delhi — 2018 (8) GSTL 32 (Delhi High Court).
- Sunrise Immigration Consultants Private Limited v. Commissioner of Central Excise and Service Tax, Chandigarh — 2018-TIOL-1849-CESTAT-CHD.
- Vodafone Essar Cellular Ltd. v. CCE, Pune-III — 2013 (7) TMI 178 (CESTAT Mumbai).
- Paul Merchants Ltd. v. CCE, Chandigarh — 2012 (12) TMI 424 (CESTAT Delhi, Larger Bench).
FULL TEXT OF THE ORIGINAL JUDGMENT/ORDER OF CESTAT NEW DELHI
The department has filed this appeal to assail the order dated 29.03.2018 passed by the Commissioner dropping the proceedings initiated against M/s Grant Thornton Advisory Private Limited’. by the show cause notice dated 21.10.2015 issued for the period 2010-2011 to 2014-15.
2. The said show cause notice alleges that on scrutiny of the “Cost Reimbursement Agreement” executed between Grant Thornton Advisory Private Limited, In-dia2 and Grant Thornton International Limited, London3 and the “Note on Brand Development Activities” submitted by Grant Thornton, India, it appears that the services provided by Grant Thornton, India to develop the “Grant Thornton” brand name would not be ‘export of services’ under the Export of Service Rules, 20054 and the payment received by the respondent towards reimbursement of “Brand Development Expenses” would be covered under “business auxiliary service“5 made taxable under section 65 (105)(zzb) of the Finance Act, 19946. Further, with effect from 01.07.2012 “Brand development and other services” would be covered under section 66B of the Finance Act and would not be covered under the Negative List of services nor would any exemption be available under the Notification dated 20.06.2012. The show cause notice further alleges that Grant Thornton, India acted as an “intermediary”.
3. The respondent filed a detailed reply to the show cause notice and denied the allegations made therein.
4. The Commissioner accepted the contention of the respondent and dropped the proceedings initiated by the show cause notice. Grant Thornton, India has been referred to as ‘Assessee/Noticee and Grant Thornton, London has been referred to as ‘GTI’ by the Commissioner in the impugned order. The relevant observations of the Commissioner are reproduced below:
“22. In order to decide the merits of the present case, with regard to the services being rendered by the Assessee to M/s GTI, I find that following aspects are required to be examined and analysed:-
For the period upto 30.06.2012
i. Whether the said services are classifiable under the head “Business Auxiliary Services” for the period upto 30.06.2012.
ii. Whether the said services qualify as export of service as per the Export of Service Rules, 2005 for the period upto 30.06.2012.
For the period with effect from 01.07.2012
iii. Whether the said services are classifiable as “Inter-mediary Services” for the period from 01.07.2012.
iv. Whether the said services qualify as export of service as per the Place of Provision of Service Rules, 2012 for the period from 01.07.2012.”
5. After referring to Clause 2 of the Cost Reimbursement Agreement, the Commissioner observed:
“23.1 Hence, from the aforesaid Clause 2 of the said Cost Reimbursement Agreement, it can be seen that Clause 2.1 supra, provides the details/ list of the various activities to be undertaken by the As-sessee; and Clause 2.2 supra, provides the details of extent and manner of reimburse-ment to be made by M/s GTI to the Assessee in lieu of undertaking such activities.
23.2 From the said Clause 2.1 supra, it can be seen that the activities being undertaken by the Assessee are related to increasing mar-kets & industries support capacities, building a Privately Held Business focus and campaigns to build GT/GTI brand awareness; increasing capabilities of client service support functions- Professional Standards, Risk Management, HR/ talent development & Training; developing / improving of physi-cal infrastructure, financial control environment & technology infrastructure etc.
23.3 Hence, essentially speaking, the activities undertaken by the Assessee are basically developmental and promotional ac-tivities being undertaken with the sole intent and purpose to develop and pro-mote the brand name of “Grant Thornton” in India.”
(emphasis supplied)
6. The Commissioner, thereafter, divided the period involved in the show cause notice into two parts: one for the period upto 30.06.2012 and the other for the period from 01.07.2012.
7. In regard to the period upto 30.06.2012, the Commissioner examined the definition of BAS under section 65(19) of the Finance Act and observed:
“For the period upto 30.06.2012
24.1 I find that as per clause 2 of the agreement which has been relied upon in the SCN, the Noticee is to take all necessary steps for de-velopment of “Grant Thorton” brand name in India, whether directly or indirectly by se-curing resources and funding initiatives.
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24.2 I am not able to understand as to how the above activities are covered under sub-clauses (i) & (vi) ibid. As the pro-duction of any goods is not involved in the instant case, the question of coverage of the above activities under the said clause (i) is not tenable. Further, the Noticee has been entrusted with the activity of brand promotion. How such brand promotion would be covered under clause (vi) is also beyond comprehension.
25. Further, even if the proposal in the SCN re-garding the classification were to be accepted, the impugned services would not be tax-able as the same would be export of service in the light of the position as discussed be-low.
26. In this connection, this is to mention that BAS was a category (iii) service for which the conditions required for claiming export was that such services are provided in relation to business or commerce to a recipient outside India and such services are provided from India and payment for such services are received in convertible foreign currency.
27. However, I find that w.e.f. 27.02.2010, the provisions of Export of Services were amended and a condition that such service is provided from India and used outside India was amended by omitting the words “and used outside In-dia”.
28. As a matter of fact, prior to amendment dated 27.02.2010, there was a lot of litigation whereby the export benefit was being denied to the Assessee’s relying on the said condition and alleging that the services being used in India would not be export. However, all disputes and litigations were put to rest by the said amendment.
28.1 As regards the condition of receiving payment in convertible foreign exchange, no dispute has been raised vide the subject SCN. In fact, the subject SCN, vide Para 8, confirms the fact that payment has been made by M/s GTI to the Assessee in foreign currency. Hence, the said condition is un-doubtedly satisfied in the instant case.
29. Thus, I find that the conditions necessary for claiming export have been satisfied in the instant case. Therefore, there is no ground for denial of export benefit to the Noticee in the instant case.”
(emphasis supplied)
8. With regard to the period with effect from 01.07.2012, the Commissioner observed:
“For the period post 01.07.2012
32. I find that intermediary has been defined under Place of Provision of Rules, 2012 to mean a broker, an agent or any other person, by whatever name called who arranges or facilitates a provision of service between two or more per-sons, but does not include a person who provides the main service on his account,
33. I find that there is nothing in the agreement in the instant case which suggests that the Noticee was to act as an intermediary as de-fined under law. They have been entrusted with the responsibility of the brand promotion which can be done by them either directly or indirectly. Since, the Noticee has to provide the service on its own account, I find that they are not covered under the definition of intermediary.
34. As regards outsourcing of the services, I find that it is a common and well recognized practice in service industry that part of the activities may be outsourced. For example, for brand promotion advertise-ment in print or electronic media may be required and services of the respect ve service providers may be required for the same. Just because such services have been out-sourced, the Noticee would not become an intermediary.
35. Further limiting of the reimbursement indicates the quantum of the consideration. The service recipient has clearly indicated that the con-sideration cannot exceed the ceiling and thus the expense for brand promotion shall be done within the limit prescribed in the agreement.
36. Thus, I find that the transactions in the in-stant case are not governed by Rule 9 of the Place of provision of Service Rules, 2012 (POPS) as alleged in the SCN. Rather, the default rule viz Rule 3 of the POPS would apply in the instant case according to which the place of provision of service shall be the location of the service recipient, which, in the instant case, is outside India. Fur-ther, there is nothing in the SCN to dispute that the payment for the services had also been received by the Assessee in convertible foreign currency. Accordingly, I find the all the conditions required under Rule 6A of the Service Tax Rules, 1994 are sat-isfied in this case and the services being provided by the Noticee to GTI are fit to be de-scribed as export of services.”
(emphasis supplied)
9. Shri Rajeev Kapoor, learned authorised representative appearing for the department submitted that the Commissioner was not justified in dropping the proceedings for the period post 01.07.2012. In this connection, learned authorised representative submit-ted that the services rendered by the appellant would fall under the category of “interme-diary services” and, therefore, the place of provision of services would be the place of the service provider under rule 9 of the Place of Provision of Services Rules, 20127.
10. Shri Shubham Madan, learned chartered accountant appearing for the respondent assisted by Ms. Anchal Shrivastava, learned counsel, however, supported the order passed by the Commissioner and submitted that it does not call for any interference. In this connection, learned chartered accountant placed reliance upon various decisions to which reference shall be made at the appropriate stage.
11. To appreciate the contentions that have advanced by the learned authorised repre-sentative of the department and the learned chartered accountant appearing for the re-spondent, it would be appropriate to reproduce the relevant clauses of the Cost Reim-bursement Agreement dated 05.05.2010 executed between Grant Thornton, India and Grant Thornton, London. Grant Thornton, India has been referred to as ‘GTAPL’, while Grant Thornton, London has been referred to as ‘GTI’ in the said Agreement. The relevant Clauses are as follows:
“This agreement for reimbursement of the expenses (the
“Agreement”) executed as a deed is made on 5 May 2010 between:
(1) Grant Thornton Advisory Private Limited, a
private limited company incorporated under the laws of India with corporate identity number U74110DL2001PTC111284 whose registered office is at L 41 Connaught Circus, New Delhi 110001, India (“GTAPL”);
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(3) Grant Thornton International Limited, a private company limited by guarantee incorporated under the laws of England and Wales with registered number 05523714 whose registered office is at 338 Euston Road, 7th Floor, Regents Place, London NW1 3BG, UK (“GT International”),
Whereas:
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(B) The Parties have discussed and agreed that in order to develop the “Grant Thornton” brand name in India, GTAPL shall take all nec-essary steps, and accordingly, the parties agree and acknowledge that in order to devel-op the “Grant Thornton” brand name in India, GTAPL would incur cer-tain expenses which it would otherwise have not incurred.
(c) GTI has agreed to reimburse such expenses incurred by GTAPL, in accordance with the terms and conditions contained in this Agreement.
2. Reimbursement for Expenses In-curred
2.1 The parties agree that GTAPL shall take all necessary steps for development of the “Grant Thornton” brand name in India (whether directly or indirectly), by securing resources and funding initiatives including but not limited to:-
2.1.1 increasing markets & industries support capacities, including building a Pri-vately Held Business focus and campaigns to build GT/GTI brand awareness;
21.2 increase capabilities of client service support functions-Professional Standards, Risk Management,
HR/talent development & Training;
21.3 development/ improvement of physical infrastructure, financial control environment & technology infrastructure.
2.2 The Parties understand and specifically agreed that GTAPL would not have incurred these expenses otherwise than for the development of the “Grant Thornton” brand name in India, and therefore GTI agrees to reimburse all such expenses incurred by GTAPL. Provided however that:-
2.2.1 reimbursement of such expenses will be limited to US$ 1,000,000 (Unit-ed States Dollar One Million only) per annum irrespective of any higher quan-tum, expended, whether paid in advance or in arrears of the expenses being incurred;
2.2.2 the reimbursement are for incurring expenses on account of activities which have been agreed between the parties and which are listed in Clause 2.1 above, unless otherwise agreed between GTAPL and the Practice Mentor; and
2.2.3 such reimbursements shall be made for an amount equivalent to US$ 250,000, in respect of every quarter beginning 1 January 2010 to be received within 60 days following the date of each quarter commencement date for 5 calendar years (i.e. 2010, 2011, 2012, 2013 and 2014), with the payment for the first quarter of 2010 to be paid within 10 business days of signing of this agreement, and not on 1 January 2010 as would have normally been due.
2.3 It is agreed and understood that, GTAPL shall not reimbursed for any ex-pense that may be incurred by GTAPL (whether directly or Indirectly) for the follow-ing:
2.3.1 the repayment or reduction of capital of GTAPL; or
2.3.2 the repayment or reduction of any loans made by any shareholder of GTAPL; or
2.3.3 the payment of any Royalty to any person, including any shareholder of GTAPL.
2.4 The description in Clause 2.1 above description is intended to reflect the approximate class and quantum of development activities to be undertaken by GTAPL. It is acknowledged that GTAPL management need discretion and flexibility to be commercially effective and pragmatic. Accordingly, with the agreement of the Practice Mentor, the development activities described above may be varied from time to time, so long as they are appropriate to the needs of the business and in accordance with GTI strategy.”
(emphasis supplied)
12. A perusal of the aforesaid Cost Reimbursement Agreement would show that in order to develop the Grant Thornton brand name in India, Grant Thornton, India had to take all necessary steps and the expenses incurred would have to be reimbursed by Grant Thornton, London subject to a limit of US$ 1,000,000 per an-num.
13. For the period w.e.f. 01.07.2012, for which the dispute has been raised by the department, the two issues that will arise for consideration are:
(i) Whether the services would be classifiable as `intermediary’ services; and
(ii) Whether the services qualify as ‘export of service’ under the 2012 Rules.
14. ‘Intermediary’ has been defined in clause 2(f) of the 2012 Rules as follows:
“2(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 ac-count.”
15. The relevant clauses of the Cost Reimbursement Agreement do not indicate that Grant Thornton, India was to act as an ‘intermediary’. The activities under-taken by Grant Thornton, India are for promoting the brand name of Grant Thornton in India. Grant Thornton in India had to provides services on its own account and merely because Grant Thornton, India outsourced certain services would not mean that it became an ‘intermediary’.
16. The transaction would, therefore, not be covered by rule 9 of the 2012 Rules. Under rule 3 of the 2012 Rules, which would be applicable in the present case, the place of provision of service shall be the location of the recipient of service. The recipient of service is Grant Thornton, London, which is outside India. There is no dispute that the payment for the services had been received by Grant Thornton, India in covertable foreign currency. Thus, the conditions set out in rule 6A of the Service Tax Rules 1994 stand satisfied. Thus, there can be no manner of doubt that the services provided by Grant Thornton, India to Grant Thornton, London would be ‘export of services’.
17. This issue was examined by the Tribunal in Sunrise Immigration Consultants Private Limited Commissioner of Central Excise and Service Tax, Chandigarh8. The Tribunal considered whether the assessee would be an ‘intermediary’ with reference to the services provided to universities, colleges and banks and whether any service tax could be levied. The observations of the Tribunal are as follows:
“10. We find that the appellant is nowhere providing services between two or more persons. In fact, the appellant is providing services to their clients namely banks/colleges/university who are paying commission/ fees to the appellant. The appel-lant is only facilitating the aspirant student and introduced them to the college and if these students gets admission to the college, the appellant gets certain commission which is in nature of promoting the business of the college and for referring investors borrow loan from foreign based bank to the people who wishes settled in Canada on that if the deal matures, the appellant is getting certain commission. So the nature of service provided by the appellant is the promotion of business of their client, in terms, he gets commission which is covered under Business Auxiliary Service which is not the main service provided by the main service providers namely banks/university. As the appellant did not arrange or facilitate main service i.e. education or loan rendered by colleges/banks. In that circumstances, the appellant cannot be called as intermediary.”
(emphasis supplied)
18. The definition of ‘intermediary services’ in section 2(13) of the Integrated Goods and Service Tax Act, 2017 is pari-materia with the definition of ‘intermediary ser-vices’ in rule 2 (f) of the 2012 Rules. The meaning of ‘intermediary services’ has been considered by the Punjab and Haryana High Court in Genpact India Pvt. Ltd. vs. Union of India9. The issue that arose for consideration before the High Court was whether the services rendered by the petitioner under the agreement could be treated as ‘intermediary services’ under the provisions of the IGST Act. The observations of the High Court are as follows:
“28. As per definition of “intermediary” under Section 2(13) of the IGST Act the following three conditions must be satisfied for a person to qualify as an “intermediary”; –
29. First, the relationship between the parties must be that of a princi-pal-agency relationship. Second, the person must be involved in arrangement or facilitation of provi-sions of the service provided to the principal by a 3rd party. Third, the person must not actually perform the main service intended to be received by the service recipient itself. Scope of an “intermediary” is to mediate between two parties i.e. the principal service provider (the 3rd party) and the beneficiary (the agents principal) who receives the main service and expressly excludes any person who provides such main service “on his own account”.
30. A bare perusal of the recitals and relevant clauses of the MSA reproduced hereinabove do not in any manner indicate that petitioner is acting as an “intermediary” so as to fall within the scope and ambit of the definition of “intermediary” under Section 2(13) of the IGST Act. Such clauses cannot also be in-terpreted to conclude that the petitioner has facilitated the services. The said clauses are in relation to the modalities of how the actual work would be carried out and do not in any manner establish that the petitioner was required to arrange/facilitate a 3rd party to render the main service which has actually been rendered by the petitioner.
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36. In the pre-GST regime the term “intermediary services” was defined under Rule 2(f) of the Place of Provision of Service Rules, 2012. Under the 2012 Rules “intermediary services” were defined to mean 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 on his account.
37. A perusal of the definition of “intermediary” under the service tax re-gime vis-a-vis the GST regime would show that the definition has remained similar. Even as per circular dated 20-9-2021 issued by the Government of India, Ministry of Finance, Department of Revenue, Cen-tral Board of Indirect Taxes and Customs (GST Policy Wing), the scope of “in-termediary” services has been dealt in Para 2 thereof. In Para 2.2 it stands clarified that the concept of “intermediary” was borrowed in GST from the Service Tax Regime. The cir-cular after making a reference to the definition of “intermediary” both under Rule 2(f) of the Place of Provision of Service Rules, 2012 and under Section 2(13) of the IGST Act clearly states that there is broadly no change in the scope of “intermediary” services in the GST regime vis-a-vis the service tax regime except addition of supply of securities in the definition of “intermediary” in the GST law.”
(emphasis supplied)
19. The Delhi High Court in Ernst and Young vs. Additional Commissioner, CGST, Delhil also considered whether the services claimed were actually exported and convertible foreign ex-change was received by the party in lieu of the said export of services. The observations of the High Court are as follows:
“33. In terms of sub-section (8) of Section 13 of the IGST Act, the place of supply of certain services would be the location of the supplier of the services. In terms of clause (b) of sub-section (8) of Section 13 of the IGST Act, the place of supply of intermediary services is the location of the supplier of services. In the present case, the place of supply of services has been held to be in India on the basis that the petitioner is providing intermediary services. As discussed above, the Services rendered by the petitioner are not as an intermediary and therefore, the place of supply of the Services rendered by the petitioner to overseas entities is required to be determined on basis of the location of the recipient of the Services. Since the recipient of the Services is outside India, the professional services rendered by the petitioner would fall within the scope of definition of ‘export of services’ as defined under Section 2(6) of the IGST Act.
34. There is no dispute that the recipient of Services- that is EY Entities – are located outside India. Thus, indisputably, the Services provided by the petitioner would fall within the scope of the definition of the term ‘export of service’ under Section 2(6) of the IGST Act.”
20. This issue was also examined by the Tribunal in M/s Medway Educational Consultant P. Ltd. vs. Commissioner, CGST Commissionerate, Delhi-Westn and it was observed:
“13. Coming to “export of service” post 1st July, 2012, the basic prin-ciple to be seen is who is the recipient of the service, whether the place of provision of service is outside India and the party abroad is deriving benefit from the service in India. The High Court of Delhi in Verizon Communication India Private Limited vs. As-sistant Commissioner, ST, Delhil2 observed that the recipient of the service is determined by the contract between the parties and who has the contrac-tual right to receive the service and who is responsible for the payment for the service and the department has lost sight of this essential difference. The High Court of Delhi then considered the decision of the Larger Bench of the Tribunal in Paul Mer-chants Ltd. vs. CCE, Chandigarh13, which was rendered with reference to ESR, 2005 where the assessees were intermediary agents, providing money transfer services to foreign travellers, who were the end user on behalf of their principals and the contention of the department that this did not qualify as export of service was rejected referring to the CBEC clarification letter no. 334/1/2019- TRU dated 26.02.2010 that as long as the party abroad is deriving benefit from service in India, it is an export of service.”
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17. Needless to mention, as per the agreement between the appellant and the foreign university the services were delivered outside In-dia as the recipient of service is the foreign universities who are located outside India and the benefit of service rendered by the appellant also accrued outside India, coupled with the fact that the appellant received the payment against the services in convertible foreign exchange and the appellant and the recipient of service are independent legal identities and are not merely establishment of distinct person. It is thus evident that the appellant met the criteria under Rule 6A(1) of the ST Rules and therefore being “export of service” was not amenable to service tax.
18. We may now consider the stand of the department that the services rendered by the appellant has to be treated as “intermediary services” defined under Rule 2(f) of the Rules, 2012. From the definition of “intermediary services”, we find that activity between two parties cannot be considered as an intermediate service as inter-mediary essentially arranges or facilitates the main supply between two or more per-sons, which is not the case here. Further, the definition of intermediary service excludes any person who has provided the service on their own account. Here from the facts, it is evident that the appellant has provided the service on his own account to the recipient of service, i.e. the foreign university placed beyond the taxable territory of India. Refer-ring to Rule 6 of Rules, 2012, the learned Counsel submitted that they were providing services relating to specific event, i.e. recruitment of students for admission in educa-tional institution/universities, i.e. recipients located outside India and therefore the place of provision of service shall be the place where the event is actually held. On the other hand, “intermediary services” are broader category and is not applicable to spe-cific category. We find force in the submission of the learned counsel.”
21. In Verizon Communication India Private Limited the Delhi High Court had observed:-
“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 per-son 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 recipi-ent 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 provid-ed by the agents/sub-agents 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 ser-vices in question has to be treated abroad. The destination has to be decided on the ba-sis of the place of consumption, not the place of performance of Service.”
22. In Vodafone Essar Cellular Ltd. CCE, Pune-III14 the Tribunal explained the arrangement in the following words:
“Your customer’s customer is not your customer. When a service is rendered to a third party at the behest of your customer, the service recipient is your customer and not the third party. For example, when a florist delivers a bouquet on your request to your friend for which you make the payment, as far as the florist is concerned you are the customer and not your friend.”
23. The aforesaid discussion leads to the inevitable conclusion that Grant Thornton, India is not an ‘intermediary’ and that the services provided by it to Grant Thornton, London are ‘export of services’.
24. The impugned order dated 29.03.2018 passed by the Commissioner dropping the proceedings initiated against Grant Thornton, India by the show cause notice dated 21.10.2015 does not, therefore, suffer from any infirmity. The appeal is, accordingly, dismissed.
25. Cross-Objection No. 51239 of 2018 filed by the respondent for dis-missal of the appeal stand disposed of.
(Order pronounced on 25.09.2024)
Notes:-
1 the respondent
2 Grant Thornton, India
3 Grant Thornton, London
4 Export of Service Rules
5 BAS
6 the Finance Act
7 2012 Rules
8 2018-TIOL-1849- CESTAT-CHD 2012 Rules
9 2023 (68) GSTL 3 (P&H)
10 2023 (73) GSTL 161
11 2024 (3) TMI 1178 — CESTAT New Delhi
12 2018 (8) GSTL 32 (Del.)
13 2012 (12) TMI 424-CESTAT-DEL.-LB
14. 2013 (7) TMI 178 — CESTAT- MUMBA
