Pr. Commissioner, Central Excise and CGST-Delhi South v. Blackberry India Private Limited

1. The Revenue has filed the present appeal under Section 35G of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 impugning the final order[1] dated 07.12.2022 (hereafter ‘the impugned order’) passed by the Customs, Excise and Service Tax Appellate Tribunal (hereafter ‘the CESTAT’).

2. In terms of the impugned order, the learned CESTAT had Final Oder No.ST/A/51150/2022- in Service Tax Appeal No. 50281/2022 captioned Blackberry India Private Limited v. Commissioner of Central Tax / Excise. allowed the respondent’s appeal against an Order-in-Appeal dated 18.08.2021 passed by the Commissioner (Appeals) rejecting the respondent’s appeal against an Order-in-Original dated 31.08.2020 passed by the Adjudicating Authority.

3. By the said Order-in-Original dated 31.08.2020, the Adjudicating Authority had rejected the respondent’s claim for refund of ₹8,55,34,345/- on account of unutilised CENVAT Credit for three mentioned periods, that is, (i) April to June 2012; (ii) April to June 2013, and (iii) July 2013 to September 2013.

4. The respondent (hereafter ‘BlackBerry India’) was registered with the Department for payment of service tax in respect of Business Auxiliary Services provided by it. BlackBerry India had filed claims for refund of unutilised CENVAT Credit amounting to ₹8,55,34,345/-. The said Credit was accumulated on account of various input services such as security services, manpower services, sponsorship services, legal consultancy services etc., which were utilized by BlackBerry India for providing output services – Business Auxiliary Services. BlackBerry India claimed that its output services were exported to its overseas client. A Tabular statement indicating the claims filed by the respondent is set out below: “

┌────────────────────────────────────────────────────────────────────────────────────────────────────────┐
│                           “                                                                            │
│                                   Sl. No.      Period/Quarter      Refund amount     Date of filing    │
│                                                                                    (Offline) refunds   │
├────────────────────────────────────────────────────────────────────────────────────────────────────────┤
│                                     1         April – June, 2012    3,18,11,287       28.03.2013       │
│ Signature Not Verified                                                                                 │
│ Digitally Signed                                                                                       │
│ By:Dushyant Rawal                                                                                      │
│                                     2      April – June, 2013   2,89,94,208       31.03.2014           │
│                                     3      July – September,    2,47,28,850       30.06.2014           │
│                                                  2013                                                  │
│                                                  Total          8,55,34,345                            │
│                                                                                                   ”    │
└────────────────────────────────────────────────────────────────────────────────────────────────────────┘

2.[2] The concept of ‘intermediary’ was borrowed in GST from the Service Tax Regime. The definition of ‘intermediary’ in the Service Tax law as given in Rule 2(f) of Place of Provision of Service Rules, 2012 issued vide Notification No. 28/2012-S.T., dated 20-06-2012 was as follows: “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 persons, but does not include a person who provides the main service or supplies the goods on his own account.”

3. Primary Requirements for Intermediary services The concept of intermediary services, as defined above, requires some basic prerequisites, which are discussed below: 3.[1] Minimum of Three Parties: By definition, an intermediary is someone who arranges or facilitates the supplies of goods or services or securities between two or more persons. It is thus a natural corollary that the arrangement requires a minimum of three parties, two of them transacting in the supply of goods or services or securities (the main supply) and one arranging or facilitating (the ancillary supply) the said main supply. An activity between only two parties can, therefore, NOT be considered as an intermediary service. An intermediary essentially “arranges or facilitates” another supply (the “main supply”) between two or more other persons and, does not himself provide the main supply. 3.[2] Two distinct supplies: As discussed above, there are two distinct supplies in case of provision of intermediary services: (1) Main supply, between the two principals, which can be a supply of services or securities: (2) Ancillary supply, which is the service of facilitating or arranging the main supply between the two principals. This ancillary supply is supply of intermediary service and is clearly identifiable and distinguished from the main supply. A person involved in supply of main supply on principal to principal basis to another person cannot be considered as supplier of intermediary service. 3.[3] Intermediary service provider to have the character of an agent, broker or any other similar person: The definition of “intermediary” itself provides that intermediary service providers-means a broker, an agent or any other person, by whatever name called… “ This part of the definition is not inclusive but uses the expression “means” and does not expand the definition by any known expression of expansion such as “and includes”. The use of the expression “arranges or facilitates” in the definition of “intermediary” suggests a subsidiary role for the intermediary. It must arrange or facilitate some other supply, which is the main supply, and does not himself provides the main supply. Thus, the role of intermediary is only supportive. 3.[4] Does not include a person who supplies such goods or services or both or securities on his own account: The definition of intermediary services specifically mentions that intermediary “does not include a person who supplies such goods or services or both or securities on his own account”. Use of word “such” in the definition with reference to supply of goods or services refers to the main supply of goods or services or both, or securities, between two or more persons, which are arranged or facilitated by the intermediary. It implies that in cases wherein the person supplies the main supply, either fully or partly, on principal to principal basis, the said supply cannot be covered under the scope of intermediary”. xxx xxx xxx”

24. It is clear from the aforesaid Circular that BlackBerry India cannot be considered as an intermediary in the context of the services rendered by it under the Agreement.

25. This Court had also considered a similar question albeit in the context of refund of input tax credit under the Integrated Goods and Services Tax Act, 2017 in M/s Ernst and Young Limited v. Additional Commissioner, CGST Appeals-II, Delhi and Anr.: W.P.(C) 8600/2022, decided on 23.03.2023 and M/s Ohmi Industries Asia Private Limited v. Assistant Commissioner, CGST: W.P.(C) 6838/2022, decided on 29.03.2023. In our view, the said decisions are squarely covering the controversy sought to be raised by the Revenue in this appeal.

26. The conclusion of the Adjudicating Authority that the services covered under Section 165(105)(zzb) of the Act were excluded from the scope of Export of Taxable Services under Rule 3(1) of the Export of Service Rules, 2005 is, plainly, erroneous. The learned CESTAT has rightly concluded that all services except those specifically mentioned in Rule 3(1) of the Export of Services Rules, 2005 are covered within the scope of Export of Taxable Services. The Adjudicating Authority had clearly misread the said Rule.

27. In view of the above, we find that the present petition does not raise any substantial question of law.

28. The present appeal is, accordingly, dismissed. The pending applications are also disposed of.

VIBHU BAKHRU, J AMIT MAHAJAN, J JULY 12, 2023