Order Date – 23 November 2023

Parties: M/s. SNQS International Socks Private Limited (Trading Division) Vs Commissioner of G.S.T. and Central Excise

Facts –

• The Appellant, M/s. SNQS International Socks Private Limited (Trading Division), had received commission for procuring export orders from various buyers in foreign countries for the manufacturers who supplied garments.
• The appellant have raised invoices to their overseas service receiver namely, M/s. Primark, Ireland towards exports sales commission for the support services rendered in relation to procurement of goods for exports and the commission was paid at the rate of 2.5% on the total value.
• A show cause notice was issued alleging that the services rendered by the appellant are rightly classifiable under ‘intermediary’ service as per Rule 2(f) of the Place of Provision of Services Rules, 2012 and it do not qualify as ‘export of service’ since one of the conditions of Rule 6A of the Service Tax Rules, 1994 viz. “the place of provision of service should be outside India” was not fulfilled.

Issue –

• Whether the services provided by the appellant are classifiable as ‘intermediary’ or not?

Order –

• The Tribunal observed that since all these services are rendered by the appellant to its foreign client and as per the direction of the foreign client. Not only procurement of goods, but selection of vendors, monitoring quality of the goods produced, designing of samples, live testing of the samples produced and carrying out various other quality checks on the garments till their final dispatch to the foreign client –the appellant has thus undertaken a bouquet of services which is not mere selling or purchase of goods.
• It is an admitted fact that remuneration for the services rendered to the foreign client is computed on the basis of FOB value of the garments exported and that itself would not make the appellant an intermediary. All these services were rendered to the foreign client on principal-to-principal basis.
• Thus, the appellant is the service provider, and the overseas buyer is the service recipient and there is no oral or written agreement between the appellant and the vendors/exporters of garments. Also, the appellant had not received any consideration for the services provided in relation to export of goods from the vendors in India.
• Hence it was held that the appellant does not satisfy the conditions to be an ‘intermediary’ for his services as such, the impugned order cannot sustain. Thus, the appeal is allowed.