Services Of Procuring Export Orders From Foreign Buyers For Garment Manufacturers, Not ‘Intermediary’ Service: CESTAT

The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the services of procuring export orders from foreign buyers for manufacturers who supplied garments are not ‘intermediary’ services.The bench of Sulekha Beevi C.S. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) has observed that since all these services are rendered by the appellant to its foreign client 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 that is not mere selling or purchasing of goods.On verification of the accounts of the assessee or department, M/s. SNQS International Socks, by the Audit Officers of Coimbatore, it was noticed that the appellant had received the commission for procuring export orders from various buyers in foreign countries for the manufacturers who supplied garments. The appellant raised invoices to their foreign buyers, for whom the orders were procured, and received the commission in foreign currency towards the services rendered in relation to the procurement of goods for exports. The appellant has raised invoices to their overseas service receiver towards the export sales commission for the support services rendered in relation to the procurement of goods for exports, and the commission was paid at a rate of 2.5% on the total value.The Department opined that these services are rightly classifiable under ‘intermediary’ service as per Rule 2(f) of the Place of Provision of Services Rules, 2012, as amended with effect from October 1, 2014.The assessee submitted that it is engaged in procuring orders for the supply of garments for exports. They directed the seller or manufacturer in India to send the garments to the overseas buyers, and the commission was received in foreign currency through banks. They stopped procuring orders from April 2016 onward.As per Rule 2(f) of the Place of Provision of Services Rules, 2012, as amended by Notification No. 14/2014 dated July 11, 2014, ‘intermediary’ means a broker, an agent, or any other person, by whatever name called, who arranges or facilitates the provision of a service or a supply of goods between two or more persons. It does not include a person who provides the main service or supplies the goods on his account.As per the Department, the term ‘intermediary’ would cover a person who arranges or facilitates the supply of goods, the provision of a service, or both without material alteration or further processing. thus involved with the two supplies at any one time. Firstly, there is a supply between the principal and the third party. Secondly, he supplies his own service to his principal for a fee or commission usually charged.The tribunal held that the appellant does not satisfy the conditions to be an ‘intermediary’ for his services, and as such, the order cannot be sustained and is required to be set aside.Counsel For Appellant: J.V. NiranjanCounsel For Respondent: R. RajaramanCase Title: M/s. SNQS International Socks Private Limited Versus Commissioner of G.S.T. and Central ExciseCase No.: Service Tax Appeal No. 41459 of 2019Click Here To Read The Order

Services Of Procuring Export Orders From Foreign Buyers For Garment Manufacturers, Not ‘Intermediary’ Service: CESTAT

Mariya Paliwala

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