2026-VIL-114-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Data hosting services, Intermediary services or Export of services - Appellant is engaged in providing data hosting services and marketing services to Amazon Web Services, Inc. USA (AWSI) under the Data Services Agreement and Marketing Services Agreement - Department case that the appellant acts as an intermediary between AWSI and its customers located in India by temporarily holding and routing the data through the edge servers installed in India, and thereby facilitating the provision of cloud computing services by AWSI to its Indian customers - Demand of service tax on the data hosting services and marketing services provided by the appellant, treating it as an intermediary service - Whether the appellant is covered under the definition of 'intermediary' under Rule 2(f) of the Place of Provision of Service Rules, 2012 and therefore liable to pay service tax on the data hosting services provided to AWSI – HELD - As per the agreement, the appellant is rendering only one service, i.e. data hosting services to AWSI. The cloud computing services provided by AWSI to its customers is by virtue of a separate agreement between them, to which appellant is not a party. The role of the appellant is altogether for an independent activity in the nature of data hosting services, which is one of the inputs for provision of cloud computing services by AWSI. There is no scope for arranging or facilitating any provision of service by the appellant. the appellant is providing the data hosting service on his own account. The appellant is not an 'intermediary' as defined under Rule 2(f) of the Place of Provision of Service Rules, 2012 - The requirements and conditions to be an intermediary either under the POPS Rules or under IGST Act are absolutely same. There is no difference even in the meaning of the term ‘intermediary’ as defined under the two provisions. In this context, considering the definition under the two provisions, CBIC has taken the view that broadly there is no change in the scope of intermediary services in the GST regime vis-a-vis the service tax regime, except addition of supply of securities in the definition of intermediary in the GST law – In the clarification issued by the CBIC in Circular No. 232/26/2024-GST dated September 10, 2024, it was clarified that the data hosting service provider, who provides data hosting services to the cloud computing service provider on a principal-to-principal basis on its own account, cannot be considered as an 'intermediary' - The definition of intermediary in the GST regime which has been picked up from the service tax laws squarely covers the issue at hand and consequently, the appellant cannot be held to be an intermediary as the services provided are export of services. Accordingly, the demand of service tax on the data hosting services is set aside. The issue of penalty and interest on the marketing services is remanded to the Adjudicating Authority for a limited examination - The appeal is allowedrnrnIssue 2: Whether the appellant is liable to pay penalty and interest on the service tax paid on the marketing services before the issuance of the show cause notice – HELD – The matter is remanded the issue of penalty and interest on the marketing services to the Adjudicating Authority to examine whether the appellant had paid the interest amount before the issuance of the show cause notice. If the appellant had paid the interest amount along with the service tax before the issuance of the show cause notice, the provisions of Section 73(3) of the Finance Act, 1994 would apply, and no penalty would be leviable.
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