Cisco India's Support Services To Overseas Affiliates Are Export, Not Intermediary: CESTAT Bengaluru

The Bengaluru Customs, Excise and Service Tax Appellate Tribunal (CESTAT) on 20 July held that marketing support, technical support, manufacturing support, management support and other business support services provided by Cisco Systems (India) Pvt. Ltd. to its overseas group entities qualify as export of services and cannot be treated as intermediary services under the Place of Provision of Services Rules, 2012.

A Bench of Judicial Member P.A. Augustian and Technical Member R. Bhagya Devi allowed the company's appeals against orders confirming service tax demands, interest and penalties on the ground that it had allegedly acted as an intermediary while providing services to its foreign affiliates. It observed:

“an intermediary service necessarily requires the existence of three parties, two distinct supplies, and a person acting in the nature of an agent or broker who merely arranges or facilitates the principal supply.”

The dispute arose after the Department alleged that Cisco India was facilitating the supply of products and services by its overseas group companies to customers in India and was therefore acting as an intermediary. It therefore confirmed service tax demands for the period from July 2012 to June 2017 along with interest and penalties.

Rejecting the Department's stand, the Tribunal held that the agreements showed that Cisco India was providing services on its own account on a principal-to-principal basis. It noted that the company was remunerated on a cost-plus mark-up basis and that its consideration was not linked to the sale of products by the overseas entities.

The Bench further observed that Cisco India did not have the authority to negotiate or conclude contracts on behalf of its foreign affiliates. Merely because the services provided by it supported the business operations of the overseas entities, they could not be classified as intermediary services.

It relied on the CBIC Circular No. 159/15/2021-GST and judicial precedents including Amazon Development Centre India Pvt. Ltd., Salesforce.com India Pvt. Ltd., Informatica Business Solutions Pvt. Ltd., Grant Thornton Advisory Pvt. Ltd., Blackberry India Pvt. Ltd. and Genpact India Pvt. Ltd., to hold that outsourced business support services independently provided to overseas entities qualify as export of services.

Accordingly, the CESTAT set aside the orders confirming service tax demand, interest and penalties on Cisco.

Appearances for the Appellant: For the Appellant: Mr. G. Shivadass, Senior Advocate.

Appearances for the Respondent: Mr. P. R. V. Ramanan, Special Senior Counsel (Authorised Representative).