Services Rendered with Procurement of Goods for Exports are not to be categorized as intermediary services: Supreme Court Dismisses Appeal [Read Judgement]
The Court held that the respondent company doesn't fall under the definitions of 'Business Auxiliary Service', 'Business Support Service' as well as 'Intermediary'.
Services Rendered – Procurement of Goods for Exports – categorized intermediary services – Supreme Court Dismisses Appeal – TAXSCAN
Services Rendered – Procurement of Goods for Exports – categorized intermediary services – Supreme Court Dismisses Appeal – TAXSCAN
The Supreme Court of India has held that services rendered with the procurement of goods for exports are not to be categorized as intermediary services and dismissed the appeal. The appeal arose out of impugned final judgment and order passed by the Customs, Excise And Service Tax Appellate Tribunal,(CESTAT) Chennai Regional Bench.
The assessee, M/s. SNQS International Socks Private Limited, challenged the Order-in-Original of the Commissioner of G.S.T. and Central Excise, Coimbatore, confirming the demand of Service Tax of Rs.2,88,95,118/-, along with interest, under Section 73(2) of the Finance Act, 1994 read with Section 174 of the Central Goods and Services Tax Act, 2017 invoking the extended period of limitation and also imposing penalty under Section 78(1) of the Finance Act read with Section 174 of the C.G.S.T. Act, 2017.
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 ibid.
An intermediary cannot alter the nature or value of the service, the supply of which he facilitates on behalf of his principal, although the principal may authorize the intermediary to negotiate a different price. Also, the principal must know the exact value at which the service is supplied (or obtained) on his behalf, and any discounts that the intermediary obtains must be passed back to the principal.
There is no service provider and service recipient relationship between the appellant and the vendors who were developed by him as there is no consideration received from these and the supply of goods by these vendors is incidental to the service of the appellant. Reportedly, the appellant has not entered into any agreement with the vendors either on their own or on behalf of the overseas client.
The Tribunal observed that there is no evidence on record to show that he is receiving any consideration from the vendors developed by him and as such, the services could not be termed as falling under the category of “intermediary”.
A two-judge bench Justice B V Nagarathna and Justice Augustine George Masih perused the definitions of ‘Business Auxiliary Service’, ‘Business Support Service’ as well as ‘Intermediary’. The court held that the respondent company does not fall within the scope and ambit of any of the aforesaid definitions.
To Read the full text of the Order CLICK HERE
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