Commission on Services to Foreign Universities Not ‘Intermediary Service’ under Rule 2(f): CESTAT Sets Aside Service Tax Demand [Read Order]
The Tribunal observed that an ‘intermediary’ under Rule 2(f) of the POPS Rules, 2012, does not include a person who provides the main service on his own account
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Bench at Chandigarh has set aside the demand of service tax holding that commission received from foreign educational institutions for services rendered does not fall under “intermediary services” but qualifies as export of service.
M/s Auscan Consultants India Ltd. had filed Service Tax Appeal against Order-in-Appeal dated 28.08.2019 passed by the Commissioner (Appeals), Central Goods & Service Tax, Chandigarh. The order confirmed the demand of service tax along with interest and penalty of Rs. 50,000 on the Managing Director, Sunil Jaggi. A connected appeal was filed by the Managing Director.
The appellant is engaged in providing services to overseas educational institutions and receives commission on the basis of agreements with foreign colleges and universities. The Department was of the view that the appellant was providing “intermediary services” in terms of Rule 2(f) of the Place of Provision of Services Rules (POPS), 2012. Hence, liable to pay service tax, as the place of provision of service was the location of the appellant under Rule 9.
A show cause notice dated 02.06.2017 was issued alleging that the appellant had provided intermediary services to foreign educational institutions and was liable to pay service tax for the period 01.04.2012 to 31.03.2016. The Joint Commissioner confirmed the demand along with interest and penalty. The Commissioner (Appeals) upheld the order, leading to the present appeals.
The Tribunal observed that the issue as to whether such services amount to intermediary services or export of services has been consistently decided by various Benches of the Tribunal in favour of the assessee. Reliance was placed on decisions including M/s Sunrise Immigration Consultants Private Limited v. CCE & ST, M/s Pioneer Immigration and Education Consultancy Private Limited v. CCE & CGST, Ludhiana and other similar cases.
Referring to the definition of “intermediary” under Rule 2(f) of the POPS Rules, 2012, the Tribunal noted that an intermediary means a broker, agent or any other person who arranges or facilitates the provision of a service between two or more persons, but does not include a person who provides the main service on his own account.
It was observed in earlier decisions that where the assessee promotes the business of foreign universities and receives commission for such promotion, it does not arrange or facilitate the main service of education and therefore cannot be treated as an intermediary.
The Tribunal further noted that in identical matters it had been held that such services qualify as export of service and the demands were set aside. In view of the settled position, the Tribunal held that the impugned order confirming service tax demand is not sustainable in law.
Accordingly, the impugned order was set aside and both appeals were allowed with consequential relief.
The order was pronounced by Bench comprising S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member).
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