Custom, Excise & Service Tax Tribunal
Commissioner Of Service Tax Mumbai-Ii vs Lamhas Satellite Services Ltd on 4 June, 2019
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, MUMBAI
WEST ZONAL BENCH
COURT No.
Appeal No. ST/90037/2014
(Arising out of Order-in-Appeal No. 647 & 648/ST-II/2014 dated
21.07.2014 passed by Commissioner of Central Excise & Service Tax
(Appeals-IV), Mumbai zone-I)
Commissioner of Service Tax, Mumbai-II Appellant
4th floor, New Central Excise Bldg.,
M.K. Road, Churchgate,
Mumbai 400 020.
Vs.
Lamhas Satellite Services Ltd. Respondent
Tower No.1, 6th floor,
International Infotech Park,
Above Vashi Rly Station,
Vashi, Navi Mumbai 400 703.
WITH
Appeal No. ST/88704/2018
(Arising out of Order-in-Appeal No. 647 & 648/ST-II/2014 dated
21.07.2014 passed by Commissioner of Central Excise & Service Tax
(Appeals-IV), Mumbai zone-I)
Commissioner of Central Excise, Belapur Appellant
CGO Complex, 10, CBD Belapur,
Navi Mumbai 400 614
Vs.
Lamhas Satellite Services Ltd. Respondent
th
Tower No.1, 6 floor,
International Infotech Park,
Above Vashi Rly Station,
Vashi, Navi Mumbai 400 703.
AND
Appeal No. ST/88925/2018
(Arising out of Order-in-Appeal No. SK/GST (Audit-II)/MUM/24 & 25 /
Appeals Raigad/2018 dated 12.02.2018 passed by Commissioner of
CGST & Central Excise (Audit-II), Mumbai)
Lamhas Satellite Services Ltd. Appellant
Tower No.1, 6th floor,
International Infotech Park,
Above Vashi Rly Station,
Vashi, Navi Mumbai 400 703.
Vs.
2 ST/90037/2014,88704,88925,89582/2018
Commissioner of Service Tax, Mumbai-I Respondent
4th floor, New Central Excise Bldg.,
M.K. Road, Churchgate,
Mumbai 400 020.
AND
Appeal No. ST/89582/2018
(Arising out of Order-in-Appeal No. SK/GST (Audit-II)/MUM/24 & 25 /
Appeals Raigad/2018 dated 12.02.2018 passed by Commissioner of
CGST & Central Excise (Audit-II), Mumbai)
Lamhas Satellite Services Ltd. Appellant
Tower No.1, 6th floor,
International Infotech Park,
Above Vashi Rly Station,
Vashi, Navi Mumbai 400 703.
Vs.
Commissioner of Central Excise, Belapur Respondent
CGO Complex, 10, CBD Belapur,
Navi Mumbai 400 614
Appearance:
Shri Aditya Kumar, Advocate with Shri Vinay Bhushan, C.A. for
the Appellant/Assessee
Shri M. Suresh, Authorised Representative for the
Respondent/Revenue.
CORAM:
Hon'ble Mr. S.K. Mohanty, Member (Judicial)
Hon'ble Mr. Sanjiv Srivastava, Member (Technical)
FINAL ORDER NO. A/86064-86067/2019
Date of Hearing: 14.02.2019
Date of Decision: 04.06.2019
PER: SANJIV SRIVASTAVA
The appeals under consideration are detailed in the
table below:
Appeal No Order in OIO Date Period Refund
Appeal
ST/90037/2014 21.07.2014 16.01.2014 July 12 8271193
to Sep
12
ST/88704/2018 18.03.2014 Jan 13 6642636
to Mar
3 ST/90037/2014,88704,88925,89582/2018
13
ST/88925/2018 12.02.2018 25.08.2015 July 13 7828745
to Dec
13
ST/89582/2018 20.08.2015 Jan 14 5759660
to Mar
14
1.2 Since by the order dated 21.07.2014, Commissioner
(Appeal) had allowed the appeals filed by the appellant
against the orders of jurisdictional Assistant/ Deputy
Commissioner rejecting the refund application filed by the
Appellants in terms of Rule 5 of the CENVAT Credit Rules,
2004, revenue has filed the first two appeals.
1.3 Since by the order dated 12.02.2018, Commissioner
(Appeal) had rejected the appeals filed by the appellant
against the orders of jurisdictional Assistant/ Deputy
Commissioner rejecting the refund application filed by the
Appellants in terms of Rule 5 of the CENVAT Credit Rules,
2004, assessee (Claimant) has filed the last two appeals.
1.4 As the issues involved in all the four appeals are
identical all four appeals have been taken up together.
2.1 Lamhas Satellite Services Ltd (herein after referred
as "claimant") had been filing refund claim in terms of Rule
5 of CENVAT Credit Rules, 2004, for claiming the refund of
accumulated credit against the export of services.
2.3 After consideration of the refund claim after issuing
the show cause notice and taking into consideration the
submissions of the claimant, jurisdictional Assistant/
Deputy Commissioner rejected the four claims filed by the
claimant vide his orders dated 16.01.2014, 18.03.2014,
20.08.2015 and 25.08.2015.
2.4 Against these four orders claimant filed the Appeals
before Commissioner (Appeal). Commissioner (Appeal) has
vide his order dated 21.07.2014 allowed appeals filed by
the claimant against the orders dated 16.01.2014 and
18.03.2014. However by the order dated 12.02.2018 he
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had rejected the appeals filed against orders dated
20.08.2015 and 25.08.2015.
2.5 Aggrieved by the order dated 21.07.2014 revenue is
in appeal and aggrieved by the order dated 12.02.2018
claimant is in appeal.
3.1 In their appeal, revenue has assailed the order of
Commissioner (Appeal) stating that-
i. Though the services provided by the claimant to
Globe cast can be treated as export services, the
services provided by them under agreement, in
relation to distribution of Russia Today Channel, in
India, cannot be considered as export of services, as
in this case, the assessee had raised the export
invoices for recovery towards Broadcasting charges
under the category of Broadcasting Services. From
the copies of invoices submitted it is apparent that
both service provider and service recipient are
located in India. Thus the place of provision of
services is from within India and not outside India,
hence it does not fulfill the conditions of Export of
Services as per Rule 6A of Service Tax Rules, 1994.
ii. These services cannot be considered as export of
services as they are provided in India for use in
India, notwithstanding the fact that the claimant
undertakes the activities on behalf of a person
located outside India. In this consideration is paid by
M/s Globecast to the claimant for actual recipient of
channel. As far as distribution of Russia Today
Channel is concerned both, the provider and the
recipient of services are situated in India. This view
has been upheld by Bombay High Court in case of
Tech Mahindra Ltd [2014 (36) STR 341 (BOM)]
iii. Reliance placed by the Commissioner (Appeal) on
the order in case of Gap International Sourcing
(India) Pvt Ltd [2014-TIOL-465-CESTAT-DEL] is
incorrect and improper.
5 ST/90037/2014,88704,88925,89582/2018
iv. Thus the order of Commissioner (Appeal) allowing
the appeals is not legal and proper and needs to be
set aside.
3.2 In their appeal, claimant has assailed the order of
Commissioner (Appeal) stating that-
i. They are conducting their business on their own
behalf only and do not qualify as intermediary as
defined under Place of Provision Rules, 2012 and
held by Commissioner (Appeal). Since they do not
qualify as "intermediary", the place of provision of
services will have to be determined as per Rule 3
and not as per rule 9(c) ibid.
ii. They satisfy all the conditions prescribed by Rule 6A
of Service Tax Rules, 1994, for determining whether
the service provided is 'export of service' or not.
Since they fulfill all the conditions as laid down by
Rule 6A, the services provided by them to Globecast
should be considered as Export of Services and
benefit of Rule 5 of CENVAT Credit Rules, 2004 be
allowed to them.
iii. They rely on the decisions of Tribunal In case of Paul
Merchants [2013) 29 STR 257 ()T) and that of Delhi
High Court in case of Verizon Communications India
Pvt Ltd [2018 (8) GSTL 32 (Del)] in their favour.
iv. Thus the order of Commissioner (Appeal) is
erroneous not sustainable.
4.1 We have heard Shri Aditya Kumar Advocate for the
Claimant and Shri M Suresh, Assistant Commissioner,
Authorized Representative for the revenue.
4.2 Arguing for the claimant learned advocate submitted
that-
i. Commissioner (Appeal) has gone beyond the scope
of show cause notice and determined that the
services provided by them were not export of
services, by holding them as "intermediary". There
was no such charge in the show cause notice.
6 ST/90037/2014,88704,88925,89582/2018
ii. The finding rendered by the Commissioner (Appeal)
holding them as intermediary is without any basis.
iii. Commissioner (Appeal) has completely ignored vital
clauses binding the parties in terms of agreement
entered between them and the service recipient. He
has ignored the clauses at 3A, 4A, 4B, 4D, 6A and
6B
iv. A proper analysis of these clauses will show that they
are providing a whole gamut of valuable services to
the foreign service recipient. As per the definition of
intermediary as per the rules, intermediary must
only be arranging for the facilitation of service
between the service provider and service recipient
and must not be providing the service on his own
account. They are providing the service recipient
located outside India the services on their own
account and not on behalf of somebody else, nor
they are acting as agent or broker, so as to fall
within the mischief of "intermediary".
v. As per paragraph 4.1 of AS 9 "In an agency
relationship, the revenue is the amount of
commission and not the gross inflow of cash
receivables or other consideration." From their
balance sheet of the relevant period it is quite
evident they have shown the gross receivables in
their book of accounts and not the commission.
vi. Even all the permission and licenses granted to them
by Ministry of Information and Broadcasting has
been granted to them in individual capacity and not
in capacity of agent.
vii. In Re Godaddy India Web Services Private Limited
[2016 (46) STR 806 (AAR)] it has been held in
similar circumstances that the service provider
located in India cannot be considered to be
intermediary in terms of Rule 2(f) of the Rules.
viii. Eligibility to CENVAT Credit of service tax paid by
them has never been disputed by the department, as
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no demands have been issued denying the credit.
They could have always utilized the credit for paying
the service tax in respect of services provided in
India. However as they were exporting services they
were not in position to utilize the credit.
ix. They rely on the decisions in case of Verizon
Communication India Private Limited [2018 (8) GSTL
32 (DEL)] and Paul Merchants Ltd [2012 (12) TMI
424 -CESTAT Delhi (LB)], wherein the issue has
been squarely decided in their favour.
4.3 Arguing for the revenue learned Authorized
Representative while reiterating the order of Commissioner
(Appeal) and the submissions made in the department
appeal, stated-
i. In the present case for carrying the Russia Today
channel various Channel Distribution Partners like
Tata Sky DTH, Airtel DTH and various Hotel were
receiving the consideration for providing the
services. They were also charging service tax for
providing the activity of transmission of 'Russia
Today' channel in their DTH Network and Hotel
Rooms. For providing the services they received
consideration along with service tax from the
claimant.
ii. Thus in terms of the definition of service as defined
by Section 65B(44), the actual service provider are
Channel Distribution Partners like Tata Sky DTH,
Airtel DTH and various Hotel. Limited role assigned
to the claimant was to receive the consideration from
Globecast d in turn pay the same to Channel
Distribution Partners.
iii. Based on the agreement entered into between the
parties and various laws in force following is evident:
a. TV Novosti an autonomous nonprofit
organization owns the channel "Russia Today." They
have retained Globecast France (GCF) to arrange
the distribution of the satellite delivered channel in
8 ST/90037/2014,88704,88925,89582/2018
India on free to air basis via TV Broadcasting
system. GCF has nominated Globecast Asia Services
Pvt Ltd (Globecast) as a limited agent.
b. As per Indian laws, the down linking and
distribution of channel in India via TV broadcasting
system can only be implemented locally through a
distributor partner arrangement between the channel
owner (TV Novosti) and a domestic licensed entity
(Indian Distributor). Thus on recommendation of
GCF, claimant has been appointed as an Indian
Distributor by channel owner. Thus claimant is the
exclusive distribution partner for the channel in the
matters relating to downlink and distribution of the
channel in India on a free to air basis.
c. As per the channel distribution agreement
between Globecast and claimant, claimant has enter
into distribution agreements with each of the Indian
distribution partners (Channel Distribution Partners)
like Dish TV, Reliance Big TV, Sun Direct TV etc and
other TV Broadcast system networks like Hotels.
Form and substance of the television distribution
agreement shall be approved by Globecast in writing
prior to execution by the party and relevant channel
distribution partner.
d. As per the agreement, Globecast shall forward
the carriage fees payable by claimant to each
channel distribution partner under relevant channel
distribution agreement. Each such payments by the
Globecast to claimant, and by the claimant to
respective channel distribution partner is deemed as
"Globecast Carriage Fee Payment." And "Lamhas
Carriage Fee Payment" and together as "carriage fee
payment".
e. All carriage fee payment are inclusive of all
services and other applicable Indian Taxes.
f. From the agreement and the arrangement
discussed above it is quite evident that claimant only
9 ST/90037/2014,88704,88925,89582/2018
acts a intermediary between Channel Owner, GCF,
Globecast and various channel distribution partners.
g. As per rule 9 of Place of Provision of Service
Rules, 2012, place of provision of service in case of
intermediary services is in India. Thus in terms of
sub clause (d) to Rule 6A, the services provided by
the claimant cannot be called as export of service.
h. In the above factual matrix the services
provided by the claimant do not constitute export of
service and hence the benefit under Rule 5 of
CENVAT Credit Rules, 2004 will not be admissible to
them. Thus the order of Commissioner Appeal dated
18.07.2014 allowing the appeal needs to be set aside
and order dated 12.02.2018 be upheld.
i. Same issue has been decided in favour of
revenue in case of Tech Mahindra Ltd [2014 (36)
STR 241 (Bom)] and M/s Excelpoint Systems (India )
P Ltd [2018 (10) GSTL 254 (T-Bang)]
j. The decisions relied upon by the claimant are
in respect of the law as was in force prior to
1.07.2012 and the entire scheme of law has been
changed with effect from that date with introduction
of Place of Provision of Service Rules, 2012. Hence
these decisions are not applicable as the entire
period involved is after this date.
5.1 We have considered the impugned order along with
the submissions made in the appeals filed along with the
submissions during the course of arguments and the
written submissions filed.
5.2 The issue for our consideration in the present case is
"Whether the Services provided by the claimant to
Globecast, located outside in respect of Broadcast of
"Russia Today" channel in India is export of service or
otherwise."
5.3 Claimant had filed refund claim as provided for in
terms of Rules 5 of CENVA Credit Rules, 2004, from time
to time in respect of the services provided by them to
10 ST/90037/2014,88704,88925,89582/2018
Globecast, claiming the services provided by them to be
export of services. These refund claims have been rejected
by the jurisdictional Assistant/ Deputy Commissioner. In
case of first two refund claims the appeal filed by the
claimant have been allowed by the Commissioner (Appeal)
and revenue is in appeal against the said order in appeal.
In respect of later two claims the appeals filed by the
appellants before Commissioner (Appeal) have been
rejected by him so the claimant is in appeal before us.
5.4 Claimant has in respect of the cases where the
Commissioner (Appeal) has dismissed the appeals filed
have raised a preliminary ground stating that by treating
the service provided by them as intermediary services
Commissioner (Appeal) has travelled beyond the scope of
show cause notice. Thus the order of Commissioner
(Appeal) is bad in law. For the purpose of verifying the
submissions made it is worth reproducing the para 3 to 7
of Show Cause Notice (all show cause notices being
identically worded) dated 27th October 2014.
"3. The accompanying documents furnished by the
claimant have been scrutinized. It is seen that the
claimant is appointed by M/s. GlobeCast as exclusive
distribution partner for TV Channel 'Russia Today', in
the matters relating to the downlink and distribution of
the said Channel in India on a free-to-air basis via
Channel Distribution Partners in India,
like,DTH,CATV,SMATV,Hotels or other Television
Broadcast System networks. The said Channel
Distribution Partners in India accordingly broadcast the
'Russia Today' TV Channel on their network, M/s
GlobeCast would pay carriage fees to the said Channel
Distribution Partners through the claimant, which is
inclusive of all the taxes. That is, M/s GlobeCast would
remit the amount to the Claimant and the claimant
would pay such fees to the Channel Distribution
Partners. The amounts paid by M/s GlobeCast is in USD.
11 ST/90037/2014,88704,88925,89582/2018
4. It is further seen that the claimant was providing
marketing and administrative support in connection
with developing and maintaining a base of eligible
channel Distribution Partners in India, for which M/s
GlobeCast was paying them Profession Fees at the
agreed rate, which is inclusive of all the taxes. Such
Profession Fees was paid by M/s GlobeCast yearly in
advance. Besides, the claimant was also required to
monitor the signal distributed by each Channel
Distribution Partner, for which the claimant receives
service fee of 400 UJSD per month (inclusive of taxes)
on quarterly basis.
5. From the foregoing, it is seen that the activities
performed by the claimant are downlinking and
distribution of the TV Channel 'Russia Today' in India
though the Channel Distribution Partners, marketing
and administrative support in connection with
developing and maintaining base of eligible Channel
Distribution Partners and to monitor the signal
distributed by each Channel Distribution Partner. The
'Russia Today' TV Channel is downlinked through
INISTA-4A Satellite and then by the Channel
Distribution Partners, viz., Seven Star Dot
Commissioner Pvt. Ltd., Dish TV (India) Ltd., Wire &
Wireless (India Ltd., Indusind Media & Communication
Pvt.Ltd., Sun Direct TV (P) Ltd., Reliance BIG TV Ltd.,
Hathway Cable & Dotcom Pvt. Ltd. Prasar Bharati and
Bharti Telemedia Ltd. Thus, it appears that the
activities performed by the claimant wee performed and
consumed in India. The invoices raised by the claimant
shows that they have been recovering amounts
towards channel placement and promotion of 'Russia
Tuday' on Reliance Big TV Hathway, Dish,TV,
monitoring charges, downlinking and compliance
recording of 'Russia TV' and for reimbursement of fee
payable to Ministry of Information & Broadcasting of
India. These invoices further go to prove that the
12 ST/90037/2014,88704,88925,89582/2018
services are performed in India and the 'Russia Today'
TV channel broadcast/aired by the aforementioned
Channel Distribution Partners are viewed in India.
6. Thus, the claimant is a 'Broadcasting Agent'
providing services in relation to broadcasting of 'Russia
Today' TV Channel in India and is acting as
'intermediary' between M/s GlobeCast and the Channel
Distribution Partners in India. As aforestated the
services are performed and also consumed in India.
Therefore, in terms of the provisions of Rule 9 of the
Point of Provision of Services Rules, 2012, the place of
provision of service is in India and hence, he impugned
services provided by the claimant cannot be treated as
services exported.
7. Further, from the input service invoices issued by
M/s Hathway, M/s Indusind Media & Communications
and M/s Reliance Big TV Ltd., it is seen that these
service providers have raised invoices for Channel
Placement Charges/Carriage fee, which are not input
services to the claimant. In fact these charges are
reimbursed to the said service providers through the
claimant by M/s GlobeCast for airing 'Russia Today' TV
channel. It appears that no nexus exists between the
services provided by the said service providers and the
output services provided by the claimant."
5.5 From the para's reproduced from the show cause
notice, it is established the notice has been issued treating
that the services provided by the claimant have been
provided in India and hence cannot be treated s export of
service. In our opinion show cause notice has sufficiently
disclosed the grounds for disallowance for treating the
services to be provided in India. The only omission being
no mention of the relevant provisions of Place of Provisions
of Service Rules, 2012 in the Show Cause Notice. Since all
the ingredients for making the said charge for treating the
services to be provided in India have been brought out in
the Show Cause Notice, not mentioning of the exact
13 ST/90037/2014,88704,88925,89582/2018
provisions of Place of Provision of Service Rules, 2012 in
the Show Cause Notice cannot be fatal to the Show Cause
Notice specifically when the case is in respect of Refund.
Hon'ble Apex Court has in case of [] clearly laid down that
mere non mention of/ wrong mention of the relevant
provisions of law in the show cause notice cannot be fatal.
We quote the relevant excerpts:
5.6 The clauses of the agreement between the claimant
and Globecast relevant for considering the issue are
reproduced below:
Agreement entered on 26.03.2010
AGREEMENT
BY AND BETWEEN
LAMHAS SATELLITE SERVICES
AND
GLOBECAST ASIA PTE LTD
(ACTING AS A LIMITED AGENT OF GLOBECAST FRANCE)
CONCERNING DOWNLINK AND DISTRIBUTION OF THE
RUSSIA TODAY TV CHANNEL IN INDIA
A. LAMHAS SATELLITE SERVICES LIMITED, a company
incorporated under the Companies Act of 1956 of India
and having its registered office at Tower-1, 6th Floor,
International InfoTech Park, Above Vashi Railway
Station, Vashi Navi Mumbai 400703 India, (together
with its permitted successors and assigns "LAMHAS");
and
B. GLOBECAST ASIA PTE LTD a company incorporated
under the laws of Singapore and having its registered
office at North Bridge Road #12-02/05 Parkview
Square Singapore 188778, (together with its permitted
successors and assigns "GlobeCast")
WITNESSETH
WHEREAS, GlobeCast France (GCF) and the Autonomous
Nonprofit Organization "TV-NOVOSTI" (TV-NOVOSTI)
entered into an agreement dated 1st January 2006, under
which TV-NOVOSTI retained GCF to arrange the
distribution of the satellite-delivered TV Channel "Russia
Today (RT) (the Channel) in India on a free to air basis via
14 ST/90037/2014,88704,88925,89582/2018
Television Broadcast System (as defined therein) subject
to the terms and conditions thereof (the "GCF/TV-
NOVOSTI Agreement"); and
WHEREAS, under applicable Indian Laws and regulations,
the downlink and distribution of the Channel in India via
Television Broadcast System can only be implemented
locally, through a distributor partner arrangement between
the Channel owner (TV-NOVOSTI) and a domestic Indian-
licensed entity (the 'Indian Distributor'); and
WHEREAS, GCF recommended that TV-NOVOSTI appoint
LAMHAS as the Indian Distributor and accordingly
TV_NOVOSTI and LAMHAS entered into a Distribution
Partner Agreement dated 30th October 2008, under which
TV-NOVOSTI appointed LAMHAS as its exclusive
distribution partner for the Channel in India on a free to air
basis subject to the terms and conditions thereof (the "TV-
NOVOSTI/ LAMHAS Agreement"); and
WHEREAS, GCF and its affiliate GlobeCast entered into an
InterBu Agreement dated 21st December 2008 under which
GCF appointed GlobeCast as a de facto agent of GCF to
provide certain services to GCF and the Indian Distributor
to facilitate the performance of their respective obligations
under GCF/TV-NOVOSTI Agreement and TV-NOVOSTI/
LAMHAS Agreement; and
WHEREAS, in furtherance of the foregoing, GCF has
requested the GlobeCast, and GlobeCast and LAMHAS have
agreed to enter into this Agreement.
FOR DUE AND FAIR CONSIDERATION RECEIVED, THE
PARTIES HERETO HEREBY AGREE AS FOLLOWS:
1. CHANNEL DISTRIBUTION AGREEMENTS
A. LAMHAS shall enter into distribution agreement
with each of the Indian distribution partners
(collectively 'Channel Distribution Partners')
listed in Annex 1 attached hereto and covering
the material terms and conditions governing
the distribution of the Channel in India on a
15 ST/90037/2014,88704,88925,89582/2018
free to air basis via the direct to home, CATV,
SMATV, Hotels or other Television Broadcast
System networks specified in the agreement
(each, such agreement deemed a "Channel
Distribution Agreement").
B. Each Channel Distribution Agreement shall
contain such relevant terms as the type/
method of carriage, carriage service fees (and
which for avoidance of doubt shall be inclusive
of all service and other applicable Indian
taxes), terms of payment, term of carriage
service (service commencement and expiry
dates), and other customary portions.
C. The form and substance of each Channel
Distribution Agreement shall be approved by
GlobeCast in writing prior to execution by
LAMHAS and the relevant Channel Distribution
Partner. For avoidance of doubt, the content of
each Channel Distribution Agreement shall
confirm to the relevant provisions of TV-
NOVOSTI/ LAMHAS Agreement governing then
distribution of the Channel in India. LAMHAS
shall provide GlobeCast with a copy of each
fully executed Channel Distribution Agreement
promptly upon its execution.
D. The Channel Distribution Partner may be
expanded to include new Partners from time to
time subject to GlobeCast's prior written
consent. LAMHAS shall enter into a new
Channel Distribution Agreement with each such
additional Channel Distribution Partner.
2. PAYMENT OF CARRIAGE FEES TO CHANNEL
DITRIBUTION PARTNERS
A. GlobeCast shall forward to LAMHAS the
carriage fee payable by LAMHAS to each
Channel Distribution Partner under the Channel
Distribution Agreement (each such payment by
16 ST/90037/2014,88704,88925,89582/2018
GlobeCast to LAMHAS and by LAMHAS to the
relevant Channel Distribution Partner deemed
a "GlobeCast Carriage Fee Payment" and a
"LAMHAS Carriage Fee Payment" respectively
and together as "Carriage Fee Payments")
B. GlobeCast shall pay GlobeCast Carriage Fee
Payments consistent with the payment terms
set forth in Channel Distribution Agreement
and covering carriage provided by the relevant
Channel Distribution Partner(s) during the
commencing 12 month service period against
invoices submitted by LAMHAS to GlobeCast.
LAMHAS shall invoice Globe Cast therefor in
each case at least thirty (30) days prior to the
relevant GlobeCast Carriage Fee Payment due
date.
C. GlobeCast shall ensure that LAMHAS receives
each GlobeCast Carriage Fee Payment at least
two (2) business days prior to the deadline by
which LAMHAS is obliged to pay the associated
LAMHAS Carriage Fee Payment to the Channel
Distribution Partner within 24 Hrs of its receipt
of the GlobeCast Carriage Fee Payment but in
any case no later than the relevant payment
deadline under the relevant Carriage
Distribution Agreement.
D. All Carriage Fee Payments shall be paid
inclusive of all service and other
applicable Indian Taxes.
E. GlobeCast shall pay all GlobeCast Carriage Fee
Payments in United States Dollars (US$), in
each case in an amount calculated consistent
with a mutually-agreed US$/INR exchange rate
determined within 24 hours of the intended
GlobeCast Carriage Payment date (to minimize
exchange rate fluctuations between said date
and the corresponding LAMHAS Carriage Fee
17 ST/90037/2014,88704,88925,89582/2018
Payment date) based on quotations secured
from at least two (2) nationally recognized
financial institutions in India. LAMHAS shall
use reasonable commercial efforts to negotiate
a favorable exchange rate with the selected
financial institution of not more than 5 paisa
below the day's published InterBank rate for
selling US$.
F. Provided that LAMHAS makes the relevant
LAMHAS Carriage Fee Payment in a timely
manner as required under the relevant
Channel Distribution Agreement, then if as a
result of an intervening exchange rate
fluctuation or other bona-fide reason the
converted INR funds received by LAMHAS is
less than the required LAMHAS Carriage Fee
Payment amount payable to the relevant
Channel Distribution Partner, then LAMHAS
shall receive a credit from Globe Cast, to be
reflected in the immediately succeeding
GlobeCast Carriage Fee Payment, for the actual
INR shortfall amount. LAMHAS shall not be
entitled to a credit from GlobeCast (and so
shall bear the shortfall for its own account) if
LAMHAS fails to make the relevant LAMHAS
Carriage Fee Payment in a timely manner and
the exchange rate fluctuation or other
intervening cause occurs after the relevant
LAMHAS Carriage Fee Payment deadline as
stated in the relevant Channel Distribution
Agreement.
G. If and to the extent that the conversion of any
GlobeCast Carriage Fee Payment yields
incrementally more INR under the relevant
designated exchange rate than is required for
the corresponding LAMHAS Carriage Fee
Payment, then GlobeCast shall receive a credit
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from LAHMAS, to be reflected in the
immediately succeeding GlobeCast Carriage
Fee Payment, for the actual INR incremental
amount.
H. Upon GlobeCast's request, LAMHAS shall
provide GlobeCast with evidence of each
Carriage Fee Payment exchange rate
conversion transaction and/or confirmation of
the amount of converted INR amount
transferred to LAMHAS' relevant bank account.
I. Upon GlobeCast's request, LAMHAS shall
provide evidence of each LAMHAS Carriage Fee
Payment actually paid to a Channel Distribution
Partner (including the amount, payment date,
and recipient).
J. Provided that GlobeCast makes each relevant
GlobeCast Carriage Fee Payment in a timely
manner, LAMHAS shall be solely liable to the
Channel Distribution Partner for any failure to
make any LAMHAS Carriage Fee Payment to it
in a timely manner, and agrees to fully
indemnify GCF, GlobeCast, and TV-NOVOSTI
for any losses suffered and expenses (including
but not limited to attorneys' fees) incurred by
any of them based on a claim brought against
any of them by the relevant Channel
Distribution Partner or other third party that is
directly or indirectly based on such payment
failure by LAMHAS.
K. GlobeCast shall fully indemnify LAMHAS for any
losses suffered and expenses (including but
not limited to attorneys' fees) incurred by
LAMHAS based on a claim brought against it by
the relevant Channel Distribution Partner or
other third party that is directly or indirectly
based on GlobeCast's failure to pay any
19 ST/90037/2014,88704,88925,89582/2018
GlobeCast Carriage Fee Payment(s) to LAMHAS
in a timely manner without just cause.
3. PAYMENT OF PROFESSIONAL FEES TO LAMHAS
A. LAMHAS agree to provide marketing and
administrative support in connection with
developing and maintaining a base of eligible
Channel Distribution Partners during the terms
hereof, in consideration for providing such
support, GlobeCast shall, pay LAMHAS
professional fees in the amounts listed in
Annex 1 herein (collectively 'LAMHAS
Professional Fees'). All LAMHAS Professional
Fees shall be inclusive of all service and other
relevant service tax.
B. Globecast shall pay LAMHAS Professional Fees
in United States Dollars (US$) against LAMHAS
submitted invoices quoted in United States
Dollars (all consistent with Annex thereto). For
the avoidance of doubt LAMHAS shall bear any
and all US$/ INR exchange rate risk.
C. LAMHAS Professional Fees shall be paid by
GlobeCast yearly in advance provided the
LAMHAS Carriage Fee payment has been paid
to the relevant Channel Distribution Partner in
full. LAMHAS shall invoice GlobeCast therefor
in each case at least thirty (30) days prior to
the relevant LAMHAS Professional Fees
Payment due date.
D. LAMHAS shall provide GlobeCast together with
each invoice for LAMHAS Professional Fees,
with confirmation notes subsequent to its
physical verification of the Channel signal
carried on the relevant Television Broadcast
System networks under relevant Channel
Distribution Agreement as per format.
4. OPERATION RELATED MATTERS
20 ST/90037/2014,88704,88925,89582/2018
A. LAMHAS shall monitor the Channel signal
distributed by each Channel Distribution
Partner (for the avoidance of doubt, both those
listed in Annex 1 hereto and any additional
Partner(s) that may be added to the said
Annex 1 from time to time, in accordance with
this Agreement) and prepare and maintain
such reports as are reasonably requested by
GlobeCast. The required content and format of
such report s shall be determined by GlobeCast
in consultation with LAMHAS. And submitted by
LAMHAS to GlobeCast on a quarterly basis
along with each invoice for LAMHAS
Professional Fees. LAMHAS shall only be
required to monitor the Channel Distribution
Partner distributed Channel in cases where
LAMHAS is specifically able to view the Channel
from its Vashi Teleport.
B. LAMHAS shall notify each relevant Channel
Distribution Partner in writing of any Channel
carriage outage monitored by LAMHAS and
shall ensure that the said Partner takes all
necessary and appropriate action, consistent
with relevant Channel Distribution Agreement
to restore the carriage service as soon as
possible.
C. Globecast shall pay LAMHAS a service fee of
Four Hundred United States Dollars 9US$ 400)
per month for monitoring the Channel Signal
distributed by each Channel Partner as set
forth in Annex 1hereto against LAMHAS
submitted US$ quoted invoices (collectively
"LAMHAS Service Fees"). For the avoidance of
doubt LAMHAS shall bear any and all US$/ INR
exchange rate risk. LAMHAS Service Fees shall
be paid by GlobeCast quarterly in advance, and
LAMHAS shall invoice GlobeCast therefor in
21 ST/90037/2014,88704,88925,89582/2018
each case at least thirty (30) days prior to the
relevant LAMHAS Service Fees Payment due
date.
D. LAMHAS shall provide GlobeCast with quarterly
reports disclosing the geographic statistics in
which each Channel Distribution Partner is
carrying the Channel in accordance with the
relevant Channel Distribution Agreement,
together with corresponding audited customer
penetration figures and other statistics as
GlobeCast may reasonably request.
5. TERMS AND TERMINATION
.................
6. MISCELLANEOUS A. LAMHAS shall be responsible for securing and maintaining in good standing all necessary and appropriate regulatory licenses, approvals, permits and consents (collectively "Consents") as may be required by the relevant Indian authorities (including but not necessarily limited to those described in Article 2 (Registration of TV-NOVOSTI/ LAMHAS Agreement) for the downlinking and distribution of the Channel in India via Television Broadcast System networks. GlobeCast agrees to reimburse LAMHAS in US$ (at the exchange rate prevailing upon the date of payment as published by a reputed Indian Financial Institution reasonably determined by GlobeCast) for LAMHAS pre-approved direct and reasonable expense incurred in connection with securing such Consents from the Indian authorities rte in each case payable against LASMHAS submission of invoices therefor and associated documented receipts.
B. LAMHAS consistent with the LAMHAS/ TV- NOVOSTI Agreement shall, in relation to 22 ST/90037/2014,88704,88925,89582/2018 GlobeCast, be solely responsible for the content of the Channel transmitted by the Channel Distribution Partners.
C. Nothing in this agreement shall be interpreted as preventing or restricting GlobeCast from freely entering into a similar agreement with another Indian Distributor with respect to any one or more channels (including but not limited to the Channel) to be distributed in India either during the term of this Agreement or after the termination for any reason whatsoever. D. The agreement shall be governed .......... E. .............
F. This agreement does not create any right or benefit enforceable by any third party. G. The parties shall not be entitled to assign or otherwise transfer any of its rights or obligations without the express written consent of the other party (except that GlobeCast may freely assign this Agreement to any affiliate, subsidiary or parent company) H. ..........
I. ........
5.7 From the agreement referred above it is quite evident that the agreements provide in detail the responsibilities of the parties to the agreement. It also provides for payments for various activities and manner of payment to. As per this agreement for certain services, i.e.-
i. Channel Carriage, the claimant enters into agreement with the Channel Distribution Partner on and behalf of GlobeCast. The Channel Distribution Agreement is entered into only after written prior approval of the agreement by Globecast. ii. Channel Carriage Fees paid by the GlobeCast is as per the agreement entered into with the channel distribution agreement and the claimant receives the 23 ST/90037/2014,88704,88925,89582/2018 same from GlobeCast, and is obliged to pay it to the concerned Channel Distribution Partner within 24 hrs of receipt and in any case prior to the appointed date as per the Channel Distribution Agreement. iii. For rendering all such services like maintaining the list of eligible channel distribution partners etc, GlobeCast pays a LAMHAS Professional Fees to the claimant.
iv. For monitoring the Channel Carriage, by the Channel Distribution Partner and reporting any outage to them, for maintaining all the documents in respect of such monitoring of channel carriage and submitting reports to GlobeCast, a service fees called LAMHAS Service Fees @ US$ 400 per month is paid to the claimant.
5.8 Rule 2(f) of Place of Provision of Services Rules, 2012 reads as follows:
"(f) "intermediary" means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the 'main' service) between two or more persons, but does not include a person who provides the main service on his account.;"
In the present case the Channel Carriage for which Channel Carriage Fees is paid by GlobeCast, to Channel Distribution Partner through claimant is the main service which has been provided by the Channel Distribution Partner and not the claimant who has acted only to mediate the provision of service by the Channel Distribution Partner to GlobeCast. This service has in no manner been provided by the claimant to the GlobeCast. In our view the services of mediation of this nature are covered by the term "intermediary" as defined by Rule 2(f) of the Place Of Provision of Services Rules, 2012. Since these services are covered by the term intermediary, in term of Rule 9 ibid, the place of provision of these services will be the location of the service provider that is in India.
24 ST/90037/2014,88704,88925,89582/2018 Hence these services cannot be considered as export of service as per Rule 6A of Service Tax Rules, 1994 which is reproduced below:
"6A. Export of services.-
(1) The provision of any service provided or agreed to be provided shall be treated as export of service when,-
(a) the provider of service is located in the taxable territory,
(b) the recipient of service is located outside India,
(c) the service is not a service specified in the section 66D of the Act,
(d) the place of provision of the service is outside India,
(e) the payment for such service has been received by the provider of service in convertible foreign exchange, and
(f) the provider of service and recipient of service are not merely establishments of a distinct person in accordance with item (b) of Explanation 3 of clause (44) of section 65B of the Act"
5.9 In terms of 6A(1)(d) for a service to qualify as export of service the place of provision service should be outside India. Since in the present case these services have been provided in India as per Place of Provision of Services Rules, 2012 they cannot be termed as export of services.
5.10 Claimant has argued relying on the decisions in case of Gap International and Verizon, that these services should be held to be qualify as export of services. For this reason we consider the said two decisions-
A. Gap International Sourcing (India) Pvt Ltd [2015 (37) STR 757 (T-Del)] Said decision is in respect of the period 19.04.2006 to 31.05.2007. The said decision is in respect of law as it existed much prior to introduction of Place of Provision of 25 ST/90037/2014,88704,88925,89582/2018 Services Rules, 2012 and Rule 6A of Service Tax Rules, 1994. Since this decision has been rendered in respect of the law existing then an without showing that the two provisions are in pari materia the said decision cannot be applied in this case. The concept of intermediary service has not even been the issue in that decision. Thus we find said decision is clearly distinguishable not applicable.
B. Verizon Communication India Pvt. Ltd [2018 (8) GSTL 32 (DEL)] The facts of the case suggest that issue under consideration by Delhi High Court was not identical to the facts of present case. In case of Verizon, the scheme of provision of services has been depicted by High Court as follows:
26 ST/90037/2014,88704,88925,89582/2018 The scheme of provision of the service in the present case is as per the flow chart below:
Distribution TV-NOVOSTI Partner (Channel Owner RT) Agreement LAMHAS (Indian Distributor of RT as per Indian Laws) Partners Agreement with Channel into Channel Distribution Agreement Authorizing to enter Enters into Channel Distribution Agreement and makes payments GlobeCast France (GCF) as per agreement after receiving (Channel Owner RT) from GlobeCast.
Channel Distribution Partners like Tatasky, Airtel DTH, GlobeCast Asia Services Hotels, etc, Agent of GCF to provide services to GCF and Indian Distributor From the schemes as depicted above it is very clear that, the head office of the recipient of service was located outside India and was billed by the entity located in USA. Hence the services were held to be provided in USA. In the present case the except for routing the payment through LAMHAS, who have entered into the Channel Distribution Agreement with Channel Distribution Partners, the services of Channel Carriage were provided by the Channel Distribution Partners to TV-NOVOSTI directly. Hence the services provided by the LAMHAS in this respect qualify as "intermediary services". In the case of Verizon Delhi High Court has not considered the rule 2(f) and Rule 9 of Place of Provision of Services Rules, 2012, hence the said decision do not pronounce/ enunciate law in respect of the said rules. In our view the said decision of Delhi High Court too is distinguishable.
27 ST/90037/2014,88704,88925,89582/2018 C. Paul Merchants [2013 (29) ELT 257 (T-Del)] This decision also is in respect of the law as it existed prior to introduction of Place Of Provision of Service Rules, 2012 and hence not applicable in the present case.
D. Further we do not find much support in favour of the Claimant in the decision of the Advance Ruling Authority in case of GoDaddy Web Services Pvt Ltd [2016 (46) STR 806 (AAR)]. In the said decision issue of intermediary services has been dealt as follows:
"8. Revenue inter alia submits that various services i.e., marketing, event management services and collection of money from customer on behalf of GoDaddy US, proposed to be provided by the applicant to GoDaddy US are not a bundle of services; that there is involvement of the applicant with GoDaddy US as well as customers in India; that the services so provided appear to be covered under "Intermediary Services", which falls under Rule 9 of Place of Provisions of Service Tax Rules, 2012 (hereinafter referred to as POPS). Relevant provisions of law are extracted as under;
Section 66F of the Finance Act, 1994;
Section 66F. Principles of interpretation of specified descriptions of services or bundled services. - (1) Unless otherwise specified, reference to a service (herein referred to as main service) shall not include reference to a service which is used for providing main service.
(2) Where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description.
(3) Subject to the provisions of sub-section (2), the taxability of a bundled service shall be determined in the following manner, namely :-
(a) If various elements of such service are naturally bundled in the ordinary course of business, 28 ST/90037/2014,88704,88925,89582/2018 it shall be treated as provision of the single source which gives such bundle its essential character :
(b) If various elements of such service are not naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which results in highest liability of service tax.
Explanation. - For the purposes of sub-section (3), the expression "bundled service" means a bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of provision of any other service or services.)"
Rule 9 of Place of Provision of Services Rules, 2012;
The place of provision of following services shall be the location of the service provider. -
(a) Services provided by a banking company, or a financial institution, or a non-banking financial company, to account holders
(b) Online information and database access or retrieval services;
(c) Intermediary services;
(d) Service consisting of hiring of all means of transport other than, -
(i) Aircrafts, and
(ii) Vessels except yachts,
Up to a period of one month
9. The contention of Revenue is that the services
proposed to be provided by the applicant are "intermediary services" as mentioned under Rule 9(c) of POPS.
'Intermediary' is defined under Rule 2(f) of POPS as under;
(f) "intermediary" means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the 'main' service) or a supply of goods, between two or more 29 ST/90037/2014,88704,88925,89582/2018 persons, but does not include a person who provides the main service or supplies the goods on his account.
Therefore, as per Section 66F(2) of Finance Act, 1994, more specific descriptions shall be preferred over a more general description. According to Revenue, in view of sub- section (3) ibid, service will not be taxed as bundled service, if the same is to be an "intermediary service".
10. The definition of "intermediary" as envisaged under Rule 2(f) of POPS does not include a person who provides the main service on his own account. In the present case, applicant is providing main service, i.e., "business support services" to WWD US and on his own account. Therefore, applicant is not an "intermediary" and the service provided by him is not intermediary service. Further, during arguments, applicant drew our attention to one of the illustration given under Paragraph 5.9.6 of the Education Guide, 2012 issued by C.B.E. & C. Relevant portion is extracted as under;
Similarly, persons such as call centers, who provide services to their clients by dealing with the customers of the client on the client's behalf, but actually provided these services on their own account', will not be categorized as intermediaries.
Applicant relying on above paragraph submitted that call centers, by dealing with customers of their clients, on client's behalf, are providing service to their client on their own account. Similarly, applicant is providing business support service such as marketing and other allied services like oversight of quality of third party customer care centre operated in India and payment processing services, on behalf of GoDaddy US. Therefore, these services provided by the applicant to GoDaddy US cannot be categorized as intermediary or services, as intermediary service.
11. Applicant proposes to provide support services in relation to marketing, branding, offline marketing, oversight of quality of third party customer care centre and 30 ST/90037/2014,88704,88925,89582/2018 payment processing, on principal to principal basis. These services are proposed to be provided with the sole intention of promoting the brand GoDaddy US in India and thus augmenting its business in India. Therefore, these services proposed to be provided by the applicant, would support the business interests of GoDaddy US in India.
12. It has been submitted by the applicant that services to be provided by the applicant are not peculiar only in applicant's case but are provided by various Indian entities to their overseas customers in India as a single package. Further, supporting the business of GoDaddy US in India is the main service and processing payments and oversight of services of third party Call Centers are ancillary and incidental to the provision of main service, i.e., business support service. Further, applicant would provide said services as a package and the payment for the entire package would be a consolidated lump sum payment. Applicant submits that in view of all these indicators, service provided by them to GoDaddy US is a bundle of services, which is bundled in normal course of business. This point has not been controverted by the Revenue. We agree with the submissions of the applicant that proposed services are a bundle of services, bundled in normal course of business and not intermediary service."
The issue under consideration of the Authority was in respect of bundle of services, and on examination of the services provided that the bundled services provided are the main services provided by the person concerned and hence cannot be treated as intermediary service. The present case is not a case of bundled services, naturally bundled, but is case of providing services which as per the contract itself are not bundled together and hence needs to be examined on its own. In the present case the "Channel Carriage Service" is in no way provided by the claimant on his own account, and hence is an intermediary service.
5.11 Revenue has relied on the decisions as follows:
31 ST/90037/2014,88704,88925,89582/2018 A. In Excelpoint Systems (India) P Ltd [2018 (10) GSTL 9T-Bang)] following has been held:
"7.1 After considering the submissions made by both the parties and the material on record, I find that it is necessary to decide the case to analyse the nature of the agreement between the appellant and its foreign entity/foreign company. Perusal of Buying Services Agreement effective from 1-4-2013 between the appellant and their foreign company in Singapore, the appellants are required to render the following services :-
i. The provision of marketing support services which include of the following :-
a. Data collection and statistical and business analysis in relation to the company's products/customer market and sending across the data/reports to the company.
b. Liaising with the potential customers and receiving orders on behalf of the company;
c. Educating potential customers identified by the company or the suppliers of the company with a view to promote the products of the company;
d. Support the representation of the company on the orders status;
e. Assist the company on the collection of sale proceeds and resolve quality issue on sale; and f. Execute specific advertising strategy formulated by the company to facilitate the sale of products and services in India.
ii. The provision of technical support services which include of the following :-
a. Advisory support provided to customers with regard to project design based on direction from the company;
b. Providing advice, clarification and technical assistance to customers on behalf of the company;
32 ST/90037/2014,88704,88925,89582/2018 c. Provide the company's customers evaluation board and samples for product testing.
7.2 I also find that the learned Commissioner (Appeals) has also analysed the various clauses of the agreement and has come to the conclusion that as per the agreement also appellant is engaged in providing project support services, consulting services, marketing on product, technical support services etc. to the foreign company. The learned Commissioner has also come to the conclusion on the basis of the relevant documents available on record that such services are rendered to the group company located outside India and the payment of such services is received by the appellant in convertible foreign exchange. Further the findings of both the authorities that the services rendered by the appellant fall under the definition of intermediary under Rule 2(f) of the Place of Provisions of Services Rules, 2012 and in terms of Rule 9 of the Place of Provision of Services Rules, 2012 specified vide Notification No. 28/2012, dated 20-6-2012 which is effective from 1-7-2012 in the case of intermediary service, place of provision of services shall be the location of the service provider and therefore the services rendered by the appellant cannot be treated as export of services in terms of Rule 3 of the Export of Services Rules, 2012. More so, as Condition No. (d) laid down in Rule 6(9) of the Service Tax Rules are not satisfied. The learned consultant tried to argue that the appellant does not fall in the definition of intermediary but I do not find force in his argument if I see the various clauses of the agreement between the appellant and the foreign company and after considering the various documents produced by the appellant on record, I am of the considered view that there is no infirmity in the impugned order which is upheld by dismissing the appeals of the appellant."
5.12 Thus in our view the "Channel Carriage Fees" which is towards the Channel Carriage by Channel Distribution Partners cannot be added to the export turnover for 33 ST/90037/2014,88704,88925,89582/2018 determination of the refund of accumulated CENVAT Credit in terms of Rule 5 of the CENVAT Credit Rules, 2004. However the charges recovered as "Lamhas Professional Fee" and "Lamhas Service Fees" which are towards the services provided by Claimant to Globecast on their own account will continue to be part of the Export Turnover of the claimant.
5.13 In view of the our observations as above direct that the Refund Claims filed by the claimant in terms of Rule 5 of CENVAT Credit Rules, 2005 should be disposed off accordingly.
6.1 Thus the appeals filed by the revenue are allowed and matter remanded back to the original authority for re- determination of the amount of refund as per Rule 5 of CENVAT Credit Rules, 2004.
6.2 The appeals filed by the claimant are disposed of as per our observations in para 5.12 and 5.13 supra.
(Order pronounced in the open court on 04.06.2019) (S.K. Mohanty) Member (Judicial) (Sanjiv Srivastava) Member (Technical) tvu