Delhi High Court Dismissed the appeal and upheld the verdict of Customs, Excise and Service Tax Appellate Tribunal (‘the CESTAT’)
Title: PR. COMMISSIONER, CENTRAL EXCISE AND CGST-DELHI SOUTH
versus
BLACKBERRY INDIA PRIVATE LIMITED
Date of Decision: 12.07.2023
+ SERTA 7/2023 and CM Nos. 34149/202 & 34150/2023
CORAM: HON’BLE MR. JUSTICE VIBHU BAKHRU
HON’BLE MR. JUSTICE AMIT MAHAJAN
Introduction
Delhi high Court Dismissed the petition filed under Section 35G of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 and upheld the verdict of the CESTAT in order No.ST/A/51150/2022- in Service Tax Appeal No. 50281/2022 Blackberry India Private Limited v. Commissioner of Central Tax / Excise.
Facts of the case
The respondent (hereinafter referred to as “BlackBerry India”), which provides business auxiliary services, was registered with the Department for the purpose of paying service tax. BlackBerry India had made complaints regarding return of $8,55,34,345 worth of unused CENVAT Credit. The aforementioned Credit was built up as a result of several input services, including security, labour, sponsorship, legal consulting, etc., that BlackBerry India used to provide Business Auxiliary Services as an output service. BlackBerry India stated that its services were outsourced to a client in another country.
The Adjudicating Authority published a Show Cause Notice on January 22, 2020, proposing to reject BlackBerry India’s claim on the grounds that the services BlackBerry India provided looked to be provided in India. BlackBerry India disputed that the services rendered to BlackBerry Singapore were services as an intermediary. The adjudicating authority determined that BlackBerry India’s services were Business Auxiliary Services as defined by Section 65(19) of the Finance Act of 1994 (hereinafter referred to as “the Act”) and that they were taxable services for the time period prior to July 1, 2012. the BlackBerry solution, which includes handheld devices, accessories, software, and other relevant services, had been delivered by BlackBerry India in accordance with the provisions of the aforementioned Agreement. Additionally, BlackBerry India has carried out a number of marketing and promotion tasks as detailed in Schedule A to the Agreement. The adjudicating authority determined that the aforementioned services would come under the 2012 Place of Provision of Services Rules’ definition of intermediate services in Rule 2(f). The Adjudicating Authority said that BlackBerry India served as a middleman while BlackBerry Singapore provided services to its Indian clients.
The Adjudicating Authority determined that Rule 3 of the Export of Service Rules, 2005 applied to the benefit of export services for the time period previous to 1.07.2012, but that this did not apply to services covered under Section 65(105)(zzb) of the Act. BlackBerry India’s claim for CENVAT Credit for the time frame previous to 01.07.2012 was therefore unjustifiable. BlackBerry India filed an appeal with the Appellate Authority after being upset by the Order-in-Original dated 31.08.2020. The Appellate Authority, however, denied the aforementioned appeal since it identified no flaws in the Adjudicating Authority’s original Order-in-Original dated 31.08.2020.
BlackBerry India preferred an appeal before the learned CESTAT. The argument that BlackBerry India was neither an agent nor involved in the planning or facilitation of the delivery of the services in question was recognised by the learned CESTAT. The 2012 Place of Provision of Services Rules’ Rule 2(f) defines an intermediate, and the knowledgeable CESTAT determined that BlackBerry India did not meet this definition. The argument that BlackBerry India was neither an agent nor involved in the planning or facilitation of the delivery of the services in question was recognised by the learned CESTAT. So, according to the 2012 Place of Provision of Services Rules’ Rule 2(f), BlackBerry India was not an intermediate, according to the knowledgeable CESTAT. The learned CESTAT had examined the Agreement and had concluded in favour of the Blackberry India and over-turned the decision of the appellate authority.
Analysis of the court
The hon’ble court held that, an intermediary only arranges or facilitates the provision of services, as is clear from the word. In this instance, the services provided by BlackBerry India to BlackBerry Singapore pursuant to the Agreement were not those that enabled the use of services from another vendor. BlackBerry India was expected to deliver the promotional and marketing services, technical marketing help, and other associated services as an independent service provider. These services were not arranged or made possible by BlackBerry India or any other vendor.
It is also pertinent to make reference to the Central Board of Indirect Taxes and Customs’ circular from the 20.09.2021. Although the aforementioned Circular was issued in relation to the Goods and Services Tax, it notes that the definition of “intermediary” in Section 2(13) of the Integrated Goods and Services Tax Act, 2017, was taken from Rule 2(f) of the Place of Provision of Services Rules, 2012, and provides an explanation of the concept in question.
The Circular makes it clear that BlackBerry India cannot be regarded as an intermediary with regard to the services it provides under the Agreement. The 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 opinion, the aforementioned rulings completely address the dispute that the Revenue is attempting to bring up in this appeal.
The Adjudicating Authority was clearly wrong to conclude that the services covered by Section 165(105)(zzb) of the Act were not included in the definition of export of taxable services under Rule 3(1) of the Export of Service Rules, 2005. The learned CESTAT has correctly decided that all services are under the purview of Export of Taxable Services, with the exception of those explicitly stated in Rule 3(1) of the Export of Services Rules, 2005. Clearly, the adjudicating authority misinterpreted the aforementioned rule.
In light of the foregoing, we determine that the current petition does not raise any significant legal issues. Therefore, the current appeal is denied.
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