CESTAT: Promotion And Marketing Services Is Not A “Intermediary Service”, Grants Australian Company Eligibility For Export Of Services Benefits

CESTAT: Promotion And Marketing Services Is Not A “Intermediary Service”, Grants Australian Company Eligibility For Export Of Services Benefits

The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that the promotion and marketing services provided by an Australian company to foreign educational universities and institutions do not qualify as “intermediary services.” As a result, the assessee is eligible for the benefit of exporting services.

The bench, comprising S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member), examined the definition of “intermediary service” under Rule 2(f) of the Place of Provision of Service Rules, 2012, introduced by Notification No. 28/2012-ST dated June 20, 2012. According to this rule, an “intermediary” is defined as a broker, agent, or any other person who facilitates the provision of services or supply of goods between two or more persons. However, this does not include a person who provides the main service or supplies the goods on their own account.

The case involved an appellant/assessee engaged by Oceanic Consultants Pvt. Ltd., Australia (OCA), to promote and market its services to foreign educational institutions. Under the agreement, the appellant was responsible for providing information about courses, fees, and English proficiency requirements to prospective students in India and assisting them with application submissions to foreign universities and institutions. The appellant was to be reimbursed for marketing and operating expenses, plus a management fee of 10% of these expenses.

The Department contended that because the services rendered by the appellant concluded before the Indian students proceeded to study in Australia, these services were deemed to be provided in India and not as an export of services. Consequently, the department argued that the appellant should pay service tax under the category of “business auxiliary service” for the period up to June 30, 2012, and under Section 66B of the Finance Act, 1994, from July 1, 2012.

A Show Cause Notice for the period 2009-10 to 2013-14 was issued, along with a statement under Section 73 (1A) for the year 2014-15, alleging that the appellant’s services were intermediary services and thus not eligible for export benefits. Both notices led to a common adjudicating order confirming a service tax liability of Rs. 6,69,40,313/- plus interest and penalties.

The appellant argued that their services constituted an export of services, challenging the Commissioner’s observation that services performed in India did not satisfy the criteria for export under Rule 3(2)(a) of the Export of Service Rules, 2005. The department’s stance was that the appellant was directly providing services to third parties outside India as per their subcontracting agreement.

CESTAT considered Circular No. 159/15/2021-GST issued by CBIC, which clarifies that intermediary services involve at least three parties and two distinct supplies. It specified that a person supplying the main service on a principal-to-principal basis cannot be classified as providing intermediary services. Since the appellant and OCA were providing the same main service, helping students gain admission to Australian universities, the tribunal determined that the appellant’s services did not qualify as intermediary services.

The tribunal allowed the appeal, ruling that the services provided by the appellant to OCA from July 1, 2012, to March 31, 2015, did not fall under “intermediary services,” thus entitling the appellant to the benefits of exporting services.