The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed service tax demand and observed that procuring orders for supply of garments for exports to foreign clients is intermediary services.
On verification of accounts of M/s. SNQS International Socks Pvt. Ltd., Tirupur by the Audit Officers of Coimbatore, it was noticed that the appellant had received commission for procuring export orders from various buyers in foreign countries for the manufacturers who supplied garments.
The Department is of the view that these services are rightly classifiable under ‘intermediary’ service as per Rule 2(f) of the Place of Provision of Services Rules, 2012, as amended with effect from 01st October, 2014. The appellant was registered for Service Tax under business auxiliary service which would constitute the services of commission agents and consequently, would fit into the description of ‘intermediary’ and so, liable to Service Tax as defined under the amended Place of Provision of Services Rules, 2012 with effect from 01.10.2014 read with Rule 9.
It was submitted by the appellant that their services would be falling under support services of business or commerce by adverting to the decision rendered in the case of M/s. Tata Autocomp Systems Ltd. v. Commissioner of Central Excise, Pune wherein payment of service charges as a percentage of total turnover of the service recipients of the service provider, for the services by way of marketing support, arranging for loans from financial institutions, liaisoning with Government agencies, etc., was involved and such services were held to be support services of business or commerce.
The counsel for the Revenue submitted that the contention of the appellant that they are not an intermediary but providers of support services is not acceptable since for the period from 01.07.1994 to 30.06.2012, Chapter V of the Finance Act, 1994 had not provided any specific definition for the term ‘service’, but provided for levy of Service tax on specified services only.
A Two-Member Bench comprising Vasa Seshagiri Rao, Technical Member and CS Sulekha Beevi, Judicial Member observed that “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.”
“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 08.07.2019 cannot sustain and is required to be set aside accordingly.”
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