Consultancy Services Rendered To Foreign University/Foreign Group Entity Are Not “Intermediary Services”; Service Tax Not Leviable: CESTAT

The Bench of Binu Tamta (Judicial Member) and (Technical Member) has observed that “it may also be appreciated that the final decision of admitting a student is that of the foreign university. The assessee on the other hand is acting in its independent capacity as a business promoter and does not act as an agent of the university. The fact that the assessee is rendering services on its own account, it cannot be treated as an “intermediary”. On the conclusion that assessee is not an “intermediary”, Rule 9 of POPS Rules will not be applicable and consequently Rule 3 would apply.”

Applying Rule 3 of POPS Rules, the foreign universities, being the service recipient located outside the taxable territory cannot be subjected to service tax on the simple principle as provided in section 66B of the Finance Act, 1994 that for service tax to be levied in terms of Chapter V of the Act, the service has to be provided within the taxable territory, added the Tribunal.

In this case, the assessee/appellant is engaged in providing range of consultancy services including exploring development opportunities in Indian market to international educational organizations.

In some cases, the assessee enters into agreement with its own group entities located outside India, who have existing arrangement or agreements with foreign universities and these foreign group entities have subcontracted its entire exercise to the assessee.

The assessee was classifying its activities as export of services in its ST-3 Returns and was, therefore, not paying any service tax.

A show cause notice was issued on the allegation that assessee is acting in representative capacity for its customers, i.e., the foreign universities, while dealing with the students and was, therefore acting as an agent or broker.

According to the Department, the assessee has been carrying out the activity of arranging /facilitating of enrolment of students in foreign universities and was actually operating as an “intermediary” within the definition of 2(f)of POPS Rules.

Consequently, in terms of Rule 9(c) of the POPS Rules, the place of provision of service is in India and hence the amount received in lieu of the services of arranging/facilitation was chargeable to service tax under the Act.

On adjudication, the demand was confirmed, holding that the assessee is operating as an “intermediary” in terms of Rule 2(f) of POPS Rules and since the location of the assessee is in India, the provision of service is in the taxable territory, which will be taxable in the hands of the assessee. Being aggrieved, the assessee has preferred the appeal before the Tribunal.

The Tribunal observed that “…….the assessee has entered into an agreement with the foreign universities/foreign group entities, whereby it is evident that the services rendered by the assessee is for promotion and marketing of foreign universities among the Indian students. Therefore, the foreign universities or group entities are service recipients which are located outside India. The consideration is received by the assessee from the foreign universities or group entities in convertible foreign exchange……..”

Regarding the Indian Students, the bench opined that the assessee has no agreement with them and no consideration is received from the Indian students and there cannot be any taxable service without any consideration. Thus, the Indian students cannot be termed as service recipients of the services provided by the assessee.

In view of the above, the Tribunal allowed the appeal.

Case Title: M/s Sannam S-4 Management Services India Pvt. Ltd. v. The Commissioner of CGST

Case Number: Service Tax Appeal No.50666 of 2024

Counsel for Appellant/ Assessee: B.L. Narsimhan, Shagun Arora and Kunal Agarwal

Counsel for Respondent/ Department: Aejaz Ahmad

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