Place of Service of Business /commerce should be the location of Service of Recipient: CESTAT [Read Order]

The Chennai bench Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the place of Service of business or commerce should be the location for the service of recipient.

The Assessee, M/s. SNQS International Socks Private Limited is engaged in providing design and product development, evaluation and vendor development, quality monitoring and other related services to its foreign client.

In the procurement of goods and receiving remuneration for the above services as a percentage of the value of merchandise exported to the client by the vendors developed. The assessee has filed a refund claim for the Service Tax amount of Rs.27,32,953/- paid by them under business auxiliary service.

The assertion of the Revenue is that the appellate had acted as an intermediary between the foreign client and various suppliers for a certain consideration and is liable to pay Service Tax on the consideration received from the intermediary services and the place of provision of service is the location of the service provider in terms of Rule 9 of the Place of Provision of Services Rules, 2012. It appeared to the Department that the Service Tax paid by them was proper and the refund claim filed by the appellant appeared to be unsustainable.

On appeal before the Commissioner of Customs, Central Excise and Service Tax (Appeals-I), Coimbatore, the same was rejected on the ground that the services rendered by the appellant were classifiable as that of an intermediary and in respect of intermediary services, in terms of Rule 9 of the Place of Provision of Services Rules, 2012, the place of provision, shall be the location of the service provider.

The appellant argued that its services are covered under the description of both business auxiliary service and support services of business or commerce but more appropriately, fall under support services of business or commerce by referring the case of Fifth Avenue v. Commissioner of Service Tax, Chennai and GECAS Services India Pvt. Ltd. v. Commissioner of Service Tax, New Delhi.

Relying on the decision of the Tribunal in the case of M/s. Provincial Life Style Retail Services v. Commissioner of Central Excise, Nagpur [2014 (36) S.T.R. 305 (Tri. – Mumbai)], the appellant has argued that its services would not be classifiable as that of a commission agent as, in the above decision, the assessee who was involved in undertaking the activities of display and sale of stock, design, maintenance of showrooms, appointing additional agents, bearing expenses of running showrooms and management fee as a percentage of turnover received, was held to be not a commission agent.

In view of the above decision, it was also submitted that the mode of quantification of remuneration for the services rendered by them is not relevant for the determination of the description of the services, but only the activities performed are relevant for arriving at the appropriate description of service.

The two-bench member comprising of P. Dinesha (Judicial member) and Vasa Seshagiri Rao (Technical member) held that the activities of the appellant will be coming under business support services and would not be falling under intermediary services, the place of provision of the services applicable to the appellant, is the location of the service recipient, in terms of Rule 3 of the Place of Provision of Services Rules, 2012.

The Rule 9 is not applicable to the appellant as the services rendered by him in relation to the procurement of goods to the foreign client are on his own account. The appellant is not said to be acting as an intermediary i.e. the services were performed by the appellant on a principal-to-principal basis and at an arm’s length basis. Therefore, the appeal was allowed with consequential relief.

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