Promotion And Marketing Services Not “Intermediary Services”, Australian Company Eligible For 'Export Of Services Benefits': CESTAT

The Chandigarh Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the promotion and marketing services provided by the Australian company to foreign educational universities and institutions do not fall under the category of “intermediary services,” and the assessee is eligible for the benefit of the export of services.

The bench of S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that Intermediary Service has been defined by Rule 2(f) of Place of Provision of Service Rules, 2012, which was introduced by Notification No. 28/2012-ST dated 20.06.2012. The term “intermediary” means a broker, an agent, or any other person, by whatever name called, who arranges or facilitates a provision of service or supply of goods between two or more persons but does not include a person who provides the main service or supplies the goods on his account.

The appellant/assessee has been engaged by M/s Oceanic Consultants Pvt. Ltd., Australia (OCA) to promote and market the services provided by the Australian Company to foreign educational universities and institutions. In terms of the agreement, the appellants were required to provide all necessary information about the course, fee, and level of English proficiency to the prospective students in India and to assist them in completing application forms and their submissions to the foreign universities/institutions. The appellant was to be reimbursed marketing and operating expenses and a management fee calculated at 10% of the expenses.

On the basis of an inquiry conducted, the Department was of the opinion that as the appellant is rendering services that culminate prior to the proceeding of Indian students for study in Australia, the services are very much rendered in India. Therefore, it cannot be held as an export of service, and the appellants are liable to pay service tax under the category of “business auxiliary service” under Section 65(105) (zzb) read with Section 65 (19) of the Finance Act, 1994, for the period up to 30.06.2012. For the period from 01.07.2012, the appellants are required to pay service tax in terms of Section 66B of the Finance Act, 1994.

A Show Cause Notice covering the period 2009-10 to 2013-14 was issued to the appellants. Similarly, a statement under Section 73 (1A) alleging that the services rendered by the appellants are intermediary services and as such the appellants are liable to pay service tax and they are not eligible to claim the same as export of services was issued to the appellants for the year 2014-15. Both the show cause notices were decided by a common adjudicating order confirming the service tax of Rs. 6,69,40,313/- along with interest and penalties.

The appellant contended that the services provided to Oceanic Consultants, Australia, constitute an export of service. The Commissioner wrongly observed that the appellant has performed the services in India, and therefore, the condition, as provided in Rule 3(2)(a) of the Export of Service Rules, 2005, was not satisfied. The appellant entered into an agreement/MOU with M/s OCA for marketing and promotion of the services provided by M/s OCA to foreign universities/institutions.

The department contended that the assessee was providing services directly to the third parties located outside India, and as per the terms of the master services subcontracting agreement, various services were to be provided by the petitioner.

The court found that Circular No. 159/15/2021-GST dated 20.09.2021 issued by CBIC envisages that in respect of intermediary services, there should be a minimum of three parties and two distinct supplies, i.e., main supply and ancillary supply. It clarifies that a person involved in supply of main supply on a principal-to-principal basis to another person cannot be considered a supplier of intermediary service. The appellants and M/s OCA are rendering the same service, i.e., helping the students get admission to Australian universities, and the appellants are rendering the same main service as M/s OCA. Whereas M/s OCA gets the remuneration from the universities on the fees paid by the students, the appellants get their remuneration.

The tribunal allowed the appeal and held that the services rendered by the appellants to M/s OCA during the period 01.07.2012 to 31.03.2015 do not fall under the category of “intermediary services,” and thus, the appellants are eligible for the benefit of export of services.

Counsel For Petitioner: B.L. Narasimhan

Counsel For Respondent: Siddharth Jaiswal

Case Title: M/s Oceanic Consultants Pvt. Ltd. Versus Commissioner or Central Excise And Service Tax, Chandigarh-I

Case No.: Service Appeal No.60473 Of 2019

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