Testing and Technical Support Not Intermediary Services: CESTAT Grants Relief to Wacker Chemie on Refund Denial [Read Order]
The Tribunal noted that Recipient of Service was located Outside India and place of Provision was accordingly Outside the Taxable Territory, making Assessee Eligible for Refund of Accumulated Credit
The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal ruled that services provided by an Indian subsidiary to its foreign group company amounted to export of services and could not be categorized as intermediary activity, overturning the denial of a refund claim resulting from accumulated CENVAT credit.
The appeal, filed by Wacker Chemie India Pvt. Ltd., sought refund under Rule 5 of the CENVAT Credit Rules, 2004 read with Notification No. 27/2012-CE (NT) for the accumulated credit earned while providing technical testing, evaluation and marketing support services to its German parent.
The impugned order of the Commissioner (Appeals) had upheld the original rejection on the ground that the Indian entity functioned as an intermediary and therefore did not fulfil the conditions for export under the Place of Provision of Services Rules, 2012.
The appellant contended that the benefits of the services were fully realized outside of India and that its operations were carried out directly for the foreign business. It was argued that the business lacked the authority to enter into contracts and neither organized nor facilitated services between two parties.
It was said that the work, which included technical evaluations and laboratory testing, was done only on behalf of the foreign beneficiary, and that the payment was made in convertible foreign currency.
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After examining the service agreements, the Bench comprising S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member), examined the service agreements and noted that the nature of the engagement showed a principal-service provider relationship and did not meet the statutory attributes of an intermediary as defined in Rule 2(f) of the POPS Rules.
The Tribunal observed that, in accordance with Rule 3, the place of provision was outside the taxable territory since the service recipient was not in India. In these cases, the services met the requirements for export, which qualified the assessee for a Rule 5 refund of accrued credit.
The Tribunal further held that established jurisprudence that separates intermediary services from substantive service delivery carried out under contract was in conflict with the lower authorities' approach of treating back-end support, testing, and evaluation functions as mere facilitation. As a result, the non-export conclusion was unsustainable.
The Bench ordered that the reimbursement be given in compliance with the law, overturning the decisions made by the Commissioner (Appeals) and the adjudicating authority.
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