CESTAT Rules, Consultancy Services To The Foreign University/Foreign Group Entity Are Not “Intermediary Services”
Pranav B Prem
The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that consultancy services provided by Indian entities to foreign universities or their overseas group affiliates do not fall under the scope of “intermediary services” under Rule 2(f) of the Place of Provision of Services Rules, 2012. The Tribunal held such services qualify as “export of services” under Rule 6A of the Service Tax Rules, 1994 and are thus not liable to service tax.
The bench comprising Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member) allowed three appeals filed by M/s Sannam S-4 Management Services India Pvt. Ltd. against an order passed by the Commissioner (Adjudication), Central Tax, Delhi East, which had confirmed the service tax demand by treating the appellant as an “intermediary.”
Background
The appellant, Sannam S-4 Management Services India Pvt. Ltd., entered into agreements with several foreign universities and foreign group entities for promotional and consultancy services in India. Under these contracts, the appellant promoted the universities’ educational programs among Indian students and supported their recruitment activities. In some cases, the group entities outside India, having arrangements with the universities, subcontracted the assignments entirely to the appellant. In both scenarios, the appellant received payment in convertible foreign exchange.
The Department issued a show cause notice covering the period from October 2016 to June 2017, alleging that the appellant acted as an “intermediary” for the foreign universities and group entities by facilitating the enrolment of Indian students in foreign universities. On adjudication, the Commissioner held that the appellant was providing intermediary services under Rule 2(f) of the POPS Rules and, being located in India, was liable to pay service tax. Aggrieved, the appellant challenged the order before the Tribunal.
Appellant’s Contention
The appellant argued that it was rendering independent consultancy and promotional services on a principal-to-principal basis to foreign recipients. It relied on the agreements with universities and group entities which clearly described the relationship as one of independent contractors, not agents. Citing several judgments—including Medway Educational Consultants Pvt. Ltd [2024 (3)TMI 1178], IDP Educational India Pvt. Ltd [2021(10) TMI 1174], Chevron Phillips Chemicals India Pvt. Ltd [2022 (12) TMI 1489 –CESTAT Mumbai], and Arcelor Mittal Projects India Pvt. Ltd [2023 (8) TMI 107 CESTAT Mumbai-LB].—the appellant submitted that it neither facilitated nor arranged any direct supply of service between Indian students and foreign universities. Therefore, it could not be classified as an “intermediary.”
Tribunal’s Analysis and Findings
The Tribunal examined the scope of Rule 2(f) of the POPS Rules, which defines “intermediary” as a broker, agent, or any person who arranges or facilitates the supply of goods or services between two or more persons but does not provide such services on their own account.
It noted that the appellant had no direct dealings with Indian students and did not receive any consideration from them. The sole recipient of services was the foreign university or foreign group entity, and all payments were received in convertible foreign exchange. Citing All India Federation of Tax Practitioners v. Union of India [2007 (7) STR 625 (SC)] and Paul Merchants Ltd. v. CCE [2012(12) TMI 424 –CESTAT-DEL-LB], the Tribunal reiterated that the place of provision of service for such export transactions is the location of the service recipient outside India.
The bench relied on the agreement between the appellant and Victoria University (Australia), which defined their relationship as that of independent contractors. It specifically stated that the appellant would not act as an agent or represent the university without written authorization. The services were confined to marketing, brand promotion, and student outreach—distinct from the university’s core functions of education and admissions. A similar arrangement existed with Sannam S-4 UK, a foreign group entity, which subcontracted its entire responsibility to the Indian appellant.
In light of these facts, the Tribunal concluded: “The appellant is not facilitating any service of the university to the students so as to fall within the definition of ‘intermediary services’. The services are rendered on its own account. Therefore, Rule 9 of POPS Rules will not apply, and Rule 3 would govern the place of provision.”
The Tribunal further dismissed the Department’s reliance on the appointment of designated advisors in India, noting that these advisors were employed by the appellant to fulfil its own contractual obligations—not to facilitate services between third parties.
Decision and Relief
The Tribunal followed its earlier rulings in Medway Educational Consultants, Sunrise Immigration Consultants, Oceanic Consultants Pvt. Ltd., and IDP Educational India Pvt. Ltd., holding that:
The requirement of three parties and two distinct supplies was not met.
The appellant provided the services on a principal-to-principal basis to the foreign entity.
The services qualified as “export of services” under Rule 6A.
No service tax was leviable as the services were rendered to a recipient located outside the taxable territory.
Accordingly, the CESTAT set aside the adjudication order and allowed all three appeals, concluding that no tax liability arose in the hands of the appellant for the services provided to foreign clients.
Appearance
Present for the Appellant: Shri B.L. Narsimhan, Ms. Shagun Arora and Shri Kunal Agarwal, Advocates
Present for the Respondent: Shri Aejaz Ahmad, Authorised Representative
Cause Title: M/S.Sannam S-4 Management Services India Pvt. Ltd. V. The Commissioner of CGST
Case No: Service Tax Appeal No.50666 of 2024
Coram: Hon'ble Ms. Binu Tamta [Member (Judicial)], Hon'ble Mr. P.V. Subba Rao [Member (Technical)]
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