2026-VIL-1436-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Intermediary Services - Nature of Consultancy Service – Providing of consultancy and guidance services to Electro Motive Diesel, USA in accordance with an agreement under which it provided various recommendations and advice - Revenue initiated proceedings proposing that respondent had provided intermediary services to EMD, USA in its business dealings with Indian Railways and therefore place of provision of service was India thereby making it taxable - Whether consultancy services provided by respondent to help a foreign company deal with Indian Railways constitutes intermediary services covered under Rule 9 of Place of Provision of Services Rules, 2012 - HELD - For a service to constitute intermediary service there must be minimum of three parties namely the supplier of principal service, the recipient of the principal service and an intermediary facilitating or arranging the supply. The concept of intermediary service involves two distinct supplies namely the main supply between two principals and an ancillary supply which is the service of facilitating or arranging the main supply between the two principals - Where an agreement exists between only two parties and the service provider provides services directly to that single party, there is no intermediary service even if the services help the recipient in dealing with some other party. The service provider must act as a go-between or facilitator between two principals for the arrangement or facilitation of the main supply - In the present case the respondent had agreement with EMD, USA only and there was no contractual relationship between respondent and Indian Railways - The respondent was not acting as a facilitator for supply between EMD and Indian Railways but was only providing advisory services to EMD as a consultant. It is well-established that intermediary services require arranging or facilitating supply between two or more principals which is distinct from providing advisory or consultancy services to a single client even if such services relate to the client's dealings with third parties - The services provided were consultancy services and not intermediary services – The impugned order is upheld and the Revenue’s appeal is dismissed
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