2026-VIL-1322-CESTAT-BLR-ST
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SERVICE TAX CESTAT Cases

Service Tax - Export of Services or Intermediary Services – Appellant is engaged in the business of offering products and services to its group entities through International Service Agreement, Manufacturing Support Services Agreement and other agreements. Appellant also rendered services relating to Products and Spares under cost plus markup basis - The adjudicating authority held that the services qualified as intermediary services under Rule 2(f) of Place of Provision of Services Rules 2012 and were chargeable to service tax - Whether the services rendered by the Appellant to overseas entities through various service agreements qualify as export of services or intermediary services chargeable to service tax – HELD – The services do not fall under the category of intermediary services as contemplated under Rule 2(f) of Place of Provision of Services Rules 2012 since the concept of intermediary can be alleged only if there are three parties namely the supplier of principle service, recipient of services and intermediary facilitating or arranging the said supply - In the present case, service provider is not involved in the activity of negotiation of sale and purchase of goods in India and the agreements specifically restrict the service provider from acting as an agent or broker; further the services rendered are on principal to principal basis on service provider's own account - The meaning of facilitation and arrangement cannot be extended to cover agreements where main services are rendered by the service provider on its own account - Even though the agreements stipulate that there are two distinct supplies and minimum three parties, the condition of the contract for providing service based on cost plus basis cannot be considered as connected with main supply of goods as the main supply may or may not happen and cannot be directly correlated with the service provided - The concept of intermediary requires that the service provider merely arranges or facilitates the main supply between two or more other persons and does not himself provide the main supply – Further, it is settled law that if the service provider does not receive consideration from the customer of the entity to which render service, the service provider is providing the main service which was sub-contracted to it and receives consideration from the main contractor and cannot be termed as an intermediary - The impugned orders confirming the demand and penalty are set aside and the appeals are allowed
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