Case Law Details
Commissioner of G.S.T. and Central Excise Vs SNQS International Socks Private Limited (Supreme Court of India)
Commission received from foreign buyers for services and procurement of goods do not fall under the definition of ‘intermediary services’
The Hon’ble Supreme Court in the case of Commissioner of Goods and Services Tax and Central Excise v. SNQS International Socks Private Limited [Civil Appeal Diary No(s). 8343/2024 dated March 19, 2024] dismissed the Commissioner of Goods and Services Tax and Central Excise (“the Appellant”) appeal.
During the audit, the Appellant noted that the M/s. SNQS International Socks Private Limited (“the Respondent”) had received an export sales commission for procuring export orders from foreign buyers for the manufacturers who supplied garments. Thereafter, a show cause notice (“SCN”) was issued alleging that these services were classifiable under ‘intermediary’ service as per Rule 2(f) of the Place of Provision of Services Rules, 2012, as amended with effect from October 1, 2014. Subsequently, an Order was passed raising the demand.
An appeal was made against the said order before the Customs Excise and Service Tax Appellate Tribunal (“the CESTAT”). The CESTAT passed an Order (“the Impugned Order”) and held that the services rendered by the Respondent to its foreign client as per their directions are not only the procurement of goods, but also the selection of vendors, monitoring the 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. Thus, the Respondent had undertaken a bouquet of services that are not mere selling or purchase of goods. Further, the CESTAT added that the remuneration for the services rendered to the foreign client is computed based on the Free on Board (“FOB”) value of the garments exported, which itself does not make the Respondent an intermediary and all the services were rendered to the foreign client on the principal-to-principal basis.
Hence, aggrieved by the Impugned Order passed by the CESTAT, the Appellant appealed before the Hon’ble Supreme Court, wherein the Hon’ble Court held that the Respondent does not fall within the scope and ambit of any of the definitions of ‘Business Auxiliary Service’, ‘Business Support Service’ as well as ‘Intermediary’. Hence, the appeal was dismissed.
Conclusion: The Supreme Court’s ruling clarifies that commissions received from foreign buyers for services and procurement of goods do not qualify as intermediary services. This judgment provides clarity in tax classification and has implications for businesses engaged in similar activities.
In essence, the case underscores the importance of understanding the nuances of service provisions and reaffirms the principle of taxation based on the actual nature of services rendered. It sets a precedent for future cases and guides businesses and tax authorities in interpreting and applying relevant laws accurately.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
Delay condoned.
We have heard learned senior counsel for the appellant and we have also perused the definitions of ‘Business Auxiliary Service’, ‘Business Support Service’ as well as ‘Intermediary’.
The respondent-Company does not fall within the scope and ambit of any of the aforesaid definitions. This is having regard to the scope of its mandate to act on behalf of the principal namely primark.
Hence, the appeals are dismissed.
Pending application(s), if any, shall stand disposed of.
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