2018 (10) TMI 1517 – APPELLATE AUTHORITY FOR ADVANCE RULING MAHARASHTRA – 2018 (18) G. S. T. L. 701 (App. A. A. R. – GST) – Classification of supply – supplies made to overseas clients known as Foreign Ship Owners (FSO) – principal supply is consultancy service – composite supply or not – export of service or not – bundled service or not – appellant was treated as bundled service of Consultancy Service and Support Service, wherein Consultancy Service was the principal service giving essential characteristics to MCS – place of provision of services – applicability of Rule 3 of Place of Provision of Service Rules, 2012 – whether the place of provision of service was the place of FSO, which was outside India.
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Held that:- It is conspicuously evident that the Appellant is acting as an intermediary for the FSO. Though the Appellant is insisting that they are not having formal contracts with any of the potential charterers of the vessels, this is not the requirement or criterion for su
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tering of the vessels by the FSO to their clients i.e. charterers, thereby clearly acting as an intermediary, as the chartering of the vessels is not the main service of the Appellant, but their principal i.e. the FSO. Appellant are performing all these services on behalf of their principal i.e. the FSO, thus acting as an intermediary – The above said intermediary services can be classified under the Service Accounting Code 999799, which is “Other Miscellaneous Services”, as per the Annexure to the Notification 11/2017 -C. T. (Rate) dated 28.06.2017 as the intermediary activities cannot be classified in any other service head/group of the above mentioned Annexure.
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In addition to the intermediary activities, they are obliged to perform the other administrative activities like examination of lay time calculation, voyage account reconciliation for eventual settlement with the charterers, which can be classified under the service head /group ‘accounting services’ bearing the SAC 9982
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r provisions, a reference to the CGST Act would also mean a reference to the same provisions under the MGST Act. The present appeal has been filed under Section 100 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST Act and MGST Act ] by Five Star Shipping (herein after referred to as the Appellant ) against the Advance Ruling No. GST-ARA-18/2017-18/B-26 dated 18.04.2018 = 2018 (7) TMI 1182 – AUTHORITY FOR ADVANCE RULING – MAHARASHTRA. BRIEF FACTS OF THE CASE A. Five Star Shipping (hereinafter referred to as Appellant ) is a partnership firm in terms of (Indian) Partnership Act, 1932. Its office is located in Mumbai (State of Maharashtra). Its partnership deed inter alia records that the partnership business shall be that of consultants. B. The service by the Appellant essentially includes collecting market intelligence information and updates which is directed to the ship owners engaging the Appella
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MCS service of the Appellant is provided to the FSOs who wish to have and therefore seek out potential employment (charterers) for their vessels. Entire engagement between the Appellant and FSO is on principal to principal ( P2P ) basis and has the essential nature of consultancy, that is, provision of market intelligence/ information. F. For the provision of MCS (which is always comprehensively rendered, that is, the Appellant renders Consultancy Service and Support Service bundled together) Appellant has employed resources which inter alia include management professionals, master mariners and chartered accountants. These professionals analyse market data available to them through the internet and other reliable trade resources or by projections. Such data is then converted into meaningful reports which help FSO in business decisions i.e. to maximize revenue and employment of its vessels. G. Fees for provision of MCS become payable to Appellant upon conclusion of agreement between th
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xiliary service ( BAS ) in terms of Chapter V of the Finance Act, 1994 ( the Act ). Hitherto, MCS provided by the Appellant was treated as bundled service comprising of Consultancy Service and Support Service, wherein Consultancy Service was the principal service giving essential characteristics to MCS. These services not covered under a specific rule of the Place of Provision of Service Rules, 2012 ( PPSR ) . Therefore, Rule 3 of the PPSR that is, default rule under the PPSR was applicable. As per Rule 3 of PPSR, the place of provision of service was the place of recipient of service . Therefore, the place of provision of service was the place of FSO, which was outside India. Tax treatment under GST K. The Appellant is providing MCS to both Indian and FSO. There is clarity regarding the GST implication on service provided to Indian ship owner as both provider and recipient of service are located in India however, there is inadequate clarity regarding the GST implication on services pr
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eir consultancy service and for support service: a. Whether consultancy service will qualify as business consultancy service in terms of the scheme of classification of services [Annexure to Notification 11/ 2017 – Central Tax (Rate), dated 28th June, Notification )]? b. Whether the place of supply of such consultancy service will be the location of recipient of service in the terms of Section 13(2)(a) of the IGST Act? c. Whether support service qualifies as intermediary service in terms of Section 2(13) of the IGST Act? And, if ruled that the support service qualifies as intermediary service, the place of supply of support service as intermediary service will be the location of supplier of service in terms of Section 13(8)(b) of the IGST Act? L. Vide its Order dated April 18, 2018 ( Impugned Order ), issued under Section 98 of the CGST Act and Maharashtra Goods and Service tax Act, 2017 ( MGST Act ), the Authority has, basis the findings recorded in the Impugned Order, answered Questi
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ice to foreign parties known as FSOs. The offering of MCS service by the Appellant is in the form of composite supply of services with the principal supply being Consultancy Service. The Support Service provided by the Appellant is in conjunction with the Consultancy Service rendered by it. Therefore, the offering of MCS service by the Appellant can be said to be the offering of two services in conjunction with each other, which are naturally bundled together. 3. It is submitted that in the facts and circumstances of the present case, the impugned findings that the supply of MCS by the Appellant would not constitute a composite supply with the principal supply being the supply of Consultancy Service, is completely erroneous and unsustainable. From 01st July, 2017 (GST regime), all forms of supply of service made for a consideration by a person in the course of furtherance of business qualifies as supply which is liable to GST in terms of Section 7(1)(a) of the CGST Act unless exported
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g MCS to the FSO which is a composite supply of Consultancy Services and Support Services (may include services for or completing employment) which are inherently tied up (bundled) and integrally enjoined, as a commercial offering. Consultancy Service rendered by the Appellant to FSO consists of the following services: i. As Specialists in freight market movement, the consultant will analyse commodity, shipping and freight markets, track movement of ships and cargoes and disseminate such information to the company. ii. Track, collate, analyse and monitor port development and logistics data originating from reliable source and update future trends. iii. Monitor world-wide economic development, bulk commodity trade pattern development. iv. Identify and provide information on port costs, bunker (fuel), trend, cost estimation and analysis v. Preliminary evaluation of cargo volume, trade patterns, trend in commodity movement, port congestion, global and regional economic development and ana
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competitive. This offering is usually at the end of the employment of vessel and involves Appellant merely monitoring voyage execution, examining the lay time calculations and arranging for reconciliation of accounts to crystalize receivables of FSO. Occasionally, support may involve postal or ministerial acts of transmitting messages between FSO and charterer. Yet at all times services are directed at, at insistence of and for benefit of FSO alone. 8. The Appellant can thus be considered as a service provider who supports FSOs in identifying, sourcing and procuring business and thereafter, smoothly concluding it. Therefore, the service provided by the Appellant is on an end to end basis. 9. The Appellants are engaged by the FSOs to provide MCS service by which they gain valuable information which will be beneficial to their business and, will also be helpful in identifying potential charterers. MCS service, consisting of Consultancy Service and Support Service is supplied together to
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ovided by the Appellant amidst the gamut of service is the principal supply or the main/ primary supply. In case of the Appellant, the principal or the primary supply by the Appellant is the Consultancy Service which helps the FSO to initiate business by finding business and the Support Service is ancillary service which is provided at the time of closure of service when the Appellant is called upon to calculate lay time, etc. and help FSO to close its service provided to the Charterer. Both Consultancy Service and Support Service is provided to and for FSO on P2P basis and the Appellant has no wherewithal with the Charterer or paid by the Charterer. 11. Therefore, supply of MCS by the Appellant consisting of Consultancy Service and Support Service will have to be construed as a supply of composite service made by the Appellant as these services (i.e. Consultancy Service and Support Service) are naturally bundled and supplied in conjunction with each other in the ordinary course of bus
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ation which is a percentage of the value of freight received by the FSO. • Majority of similar service provider in the industry provide similar bundle of service. Service provided by Appellant to FSO has an evolving nature. Previously, given the market scenario the requirement was only to find charterers, however, post global financial crisis about a decade ago and emerging commercial dynamics in a shrinking global village, there is an increase in competition and service expectation by the FSO thus, Consultancy Service is being provided with other value-added services. The FSO engages Appellant for Consultancy Services and subsequent Support Service usually provided in tandem. Appellant is now engaged in cross border supply of service using latest technology and methods. More than domestic industry, Appellant must compete on global platform to international standards to meet FSO requirements. • One service is the main service and other services provided in the bundle are inci
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d Support Service. These services are provided by Appellant to and for FSO on need basis. MCS is never provided to or for Charterer and fee for MCS is only paid by the FSO. This is another important indicator of the perception in Service recipient s minds that fee is payable for a consolidated offering. • Elements are normally advertised as a package. Appellant in all cases enters into an agreement with FSO to provide MCS consisting of Consultancy Service and Support Service. Appellant is not a conduit between the FSO and the Charterer. Generally, as discussed above, change in industry dynamics post globalization and increased competition both domestic and overseas, has made it necessary for Appellant to provide the entire gamut of service as a package. • Different elements not available separately. Neither FSO approach Appellant to provide only Consultancy Service or only Support Service, nor is the Appellant able to or actually engaged to provide each of the elements of ser
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nother and so clearly in conjunction. 13. The Education Guide on Service tax which has also been referred in the GST flyer issued by the Central Board of Indirect Tax and Customs ( CBIC ) on Composite Supply and Mixed Supply and has been extensively relied upon by the Authority in the Impugned Order provides the following: Whether services are bundled in the ordinary course of business would depend upon the normal or frequent practices followed in the area of_ business to which services relate 14. The Impugned Order has disregarded the submissions made during the personal hearing wherein the authorized representative has elaborated on how the provision of MCS has matured over the past decades and now, it is a normal as also frequent business practice to supply the Consultancy Service and Support Service together as MCS. Consultancy Service is not sought or applied in isolation by the FSO, which makes it redundant for the Appellant to offer it independently. All FSO s prefer and all sup
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ort Service bundled together as MCS from the same supplier as it increases effectiveness and helps in cost economization. 16. Further, the Agreement annexed shows the general arrangement between parties in transactions of this nature and is the standard form of contract employed by the industry for transactions of this nature. The Authority has acted in an arbitrary manner by resorting to an isolated reading of the Independent Contractor Clause present in the Agreement to determine whether the MCS service supplied by the Appellant would qualify as composite supply or not. The Authority has failed to apply its mind soundly to the issue at hand by not taking into consideration the legal principle that a contract must be looked at as a whole to ascertain the business meaning attributed to it by the. Reliance in this regard can be placed on Mumbai Metropolitan Region Development Authority v. Unity Infraproject Ltd. 2008 (5) Bom CR 196 = 2008 (2) TMI 925 – BOMBAY HIGH COURT. In this case, t
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rate. The law is not divorced from business realities nor can the vision of the Judge who interprets the law be disjointed from the modern necessities to make business sense to business dealings. 17. The supplier of MCS begins by supplying Consultancy Service to the FSO to find a potential charterer and thereafter at end of its bouquet offering provides services like tracking of voyage and assistance in billing of the FSO and charges a unified consideration with respect to the services provided. This practice of charging a unified consideration for the provision of services naturally bundled together is in consonance with the GST flyer titled Composite supply and Mixed Supply , which has been extensively, yet selectively relied upon by the Appellant. The GST flyer provides that one of the indicative illustrators of bundling of service in the ordinary course of business is whether there is a single price, or use the customer pays the same amount, no matter how much of the package they a
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act (MV AM OCEAN PRIDE/ MARUBENI CEMENT CHARTER PARTY CONTRACT DATED 3RD MARCH 2017) and not a general agreement. Therefore, a generalization regarding the perception of an FSO on the basis of the clause on Independent Contractor Status present in the Agreement was uncalled for and is flawed and bad in law for this reason. In this regard, the Appellant is submitting another sample agreement entered between the Appellant and an FSO which too is a template agreement that the Appellant enters into with the FSOs. 19. At any rate, the Authority ought to appreciate that the intention behind the transaction is relevant to ascertain the true nature of an agreement. The words of an agreement must not be construed in such a manner as to defeat the intention of the parties involved in the transaction. Reliance in this regard can be placed on the following decisions: i. N.M. Goel and Co. v. Sales Tax Officer, Rajnandgaon and Ors, 1988 (38) ELT 733 (S.C.) = 1988 (10) TMI 106 – SUPREME COURT OF INDI
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s well as Support Service. The findings of the Authority are based on fundamental misunderstandings of vital facts and fundamental mis-appreciation or misapplication of the relevant law and therefore the Impugned Order is bad in law, arbitrary, legally unsustainable, and deserves to be set aside. In this context, the Hon ble Supreme Court in Micro Hotel P. Ltd. vs. Hotel Torrento Ltd. [(2012) 10 SCC 290] = 2012 (10) TMI 295 – SUPREME COURT, declared the law as follows: Wrong appreciation of facts leads to wrong reasoning and wrong conclusions and justice will be the casualty. Deciding disputes involves, according to Dias on Jurisprudence, knowing the facts, knowing the law applicable to those facts and knowing the just way of applying the law to them. If any of the above mentioned ingredient is not satisfied, one gets a wrong verdict. 21. It is industry practice to supply MCS as a bundle of Consultancy Service and Support Service which practice has emerged and evolved over decades and
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ysts employed by it, with respect to vessel positioning, bunker trends, commodity market, inter alia others, suggests potential charterers that may require the services of the FSO. Thereafter, FSO indulges in negotiation of terms of the contract with the charterer it finds most suitable among the potential charterers suggested by the Appellant. Once FSO enters into a contract with the charterers, Appellant is called upon to provide Support Service in relation to the voyage. 23. Therefore, without Consultancy Service, FSO will not be able to efficiently contract with potential charterers to provide transport services. Further, even though both the services are necessary for the successful completion of the contract between the FSO and charterer, it cannot be denied that provision of Support Service is conditional on the existence of a contract between an FSO and potential charterer for transport of goods by a ship which needs to be adequately supported for its successful completion. The
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jurisdiction and rule on the issue raised by the Appellant before it regarding the classification of MCS provided by the Appellant (which is Consultancy Service and Support Service bundled together) in terms of scheme of classification of services provided in the annexure to the Notification. The Impugned Order merely discusses the entries of the Notification and does not rule on the chapter, section, heading, group or the SAC code under which MCS service provided by the Appellant should be classified. MCS should be classified under Heading 9967 of the Notification 27. In regard to this, the Appellant has identified two categories in the Notification under which MCS can be classified. The Notification provides for the GST rate for service based on the classification of services read with Annexure to the Notification. Heading 9967 at Serial No. Il(ii) of this Notification deals with Support Services in transport, other than GTA . Given that MCS service provided by Appellant to FSO is in
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r transport supporting services directly connected with vessel operations not elsewhere classified and also include services not directly connected with vessel operations such as ice breaking, vessel registration, vessel laying-up and storage services, etc. 29. Thus, in terms of the explanatory notes issued by the Government, services directly or – indirectly connected with water transport should be classified under SAC 996759. Therefore, Heading 9967 under which SAC 996759 at Serial No. 148 of the Annexure to the Notification is the specific entry which provides the appropriate description of activities provided by Appellant. General Agreement of Trade in Services 30. To substantiate its submission, reference is made to classification as per Service sectoral classification list of World Trade Organization ( WTO ) which classifies MCS service provided by Appellant as supporting services for maritime transport (entry 745). The Schedule prescribed under the Served for India Scheme ( SFIS
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al and business services nowhere else classified . Services classified under this head are leviable to GST at the same rate of 18%. It is evident that this is the residuary entry which is generic in nature. Reference in this regard may be made to the basic principle of classification in terms of which a specific entry will prevail over a generic entry which has been upheld by the Hon ble Supreme Court in the case Moorco (India) Limited vs. Collector of Customs, Madras [(1994) 74 ELT 5 (SC)] = 1994 (9) TMI 68 – SUPREME COURT OF INDIA. The same principle was reiterated in the case Coastal Container Transporters Association vs. Union of India [(2018) 65 GST 413 (Gujarat)] = 2018 (1) TMI 501 – GUJARAT HIGH COURT. As this is a generic entry, it is submitted that the specific entry of SAC 996759 would prevail. The Authority has failed to answer a question permissible under Section 97(2) of CGST Act. 33. The Authority has failed to appreciate that determination of classification, which is per
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he supplier of service i.e. the Appellant is located in India, the recipient of service i.e. the FSO is located outside India, payment for supply of MCS service is received from outside India in convertible foreign exchange and supplier of service and recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in Section 8 of the IGST Act. Therefore, it becomes necessary to decide and adjudicate the place of supply in terms of Section 13 of IGST Act, so as to conclude that the supply of MCS service provided by the Appellant would qualify as an export of service. 35. Since, exports are considered to be zero rated supplies according to Section 16(1) of IGST Act, qualification of supply of MCS service as export of service would have direct impact on the taxability of the supply of service. Further, it has been observed by the Hon ble Bombay High Court in the case Repro India Ltd v. Union of India [2009 (235) E.L.T. 614 (Bom.)] = 2007 (12) TMI 2
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the jurisdiction of GST law 37. In arguendo, if the Appellant s services that is, Support Services is characterized as an intermediary service , it must not be lost sight of that – The service provided by the Appellant in this case would be in relation to employment of a vessel (i.e. service provided) by the Appellant located outside India The destination of Appellant s service is outside India To the charterer located outside India, and Contract for plying of vessel between FSO and the charterer is signed outside India and executed outside India. 38. Therefore, as the service of Appellant is provided in relation to a service which is intangible in nature and is initiated, executed and concluded outside India, between parties located outside India in relation to a vessel located outside India, and the service of Appellant is used/ consumed outside India, the transaction be regarded as being outside the territorial jurisdiction of GST law, which extends up to 200 nautical miles from bas
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require extra-territorial operation. Any laws enacted by Parliament with respect to extra-territorial aspects or causes that have no impact on or nexus with India would be ultra vires, as answered in response to question No. 1 above, and would be laws made " for" a foreign territory. 39. In the Impugned transaction, only the Appellant is in India, who is engaged by the FSO to help in finding potential foreign charterers. The tax foisted on the Appellant fails the territorial nexus test laid down by the Hon ble Apex Court in GVK Industries case. 40. Further, it is relevant to note that if GST is levied on the Impugned transaction which is outside the territorial jurisdiction of GST law, it would amount to export of taxes which is not what was intended by the Government as has been observed in the case Repro India Ltd v. Union of India [2009 (235) E.L.T. 614 (Bom.)] = 2007 (12) TMI 209 – BOMBAY HIGH COURT by the Hon ble Bombay High Court and would thus be bad in law. Support S
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n intermediary service in terms of Section 2(13) of the IGST Act, is extracted below: Section 2(13) – intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account. 43. According to the Webster s Encyclopedic Unabridged Dictionary of the English Language, the term arrange means ( to prepare or plan . Further, the Black s Law Dictionary, 9th Edition defines the term facilitation as the act or an instance of aiding or helping . Since, in the facts of the present case, the provision of Support Service can by no means be considered as being provided for the purpose of preparing or planning the transaction between the FSO and the charterer. Support Service provided by the Appellant to the FSO comes into play only in the latter part of the transaction to
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facilitator. Section 2(13) evidences the establishment of a link between all the three parties, which is absent in the facts of the present case. The Appellant is only linked to the FSO for provision of MCS services and there is absolutely no nexus between the Appellant and the charterer. Moreover, the definition of intermediary service requires the provision of two independent services, one by the supplier of goods or services to the recipient of goods or service and second by the intermediary facilitating this supply of goods or services. The Appellant in the present case is involved in providing MCS service which consists of two services, that is, Consultancy Service and Support Service, which services are bundled together and provided by the Appellant. Therefore, the Appellant cannot be said to facilitating service between the provider and recipient of goods and services. Thus, the Support Service provided by the Appellant cannot qualify as an intermediary service within the terms
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market intelligence and on the basis of this intelligence gathered, the Appellant provides the FSO with a list of potential charterers that the FSO can contract with. Further, the service provided by the Appellant is on his own account and reliance in this regard can be placed on para 1 of the Agreement which provides that the Appellant is required to provide independent advice uninfluenced by commercial concerns and that the Appellant is not required to be an advocate for the FSO at any point of time. 47. Clause 5 of the Agreement which deals with Independent Contractor Service provides the following: FSO shall request the Appellant s services on an as-needed basis. There is no guarantee that any or all of the services described in the Agreement will be assigned during the term of this Agreement. Services will be provided on a non-exclusive basis. The FSO may chose to have any of services performed by the other consultants or FSO s own staff. The parties acknowledged that neither part
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re centre and payment processing, on a principal to principal basis to a domain service provider named GoDaddy US . The applicant in this case was not authorized to enter into any contract or arrangement on behalf of GoDaddy US. GoDaddy US directly contracted and rendered services to customers in India. Further, the applicant was provided remuneration by GoDaddy US and received no payment of any kind from the customers of GoDaddy. The Authority for Advance Rulings, New Delhi held that service provided by the applicant would not be considered as an intermediary service under Rule 2(f) of the Place of Provisions of Services Rules, 2012. In Applicant s case, the Applicant is not authorized to enter into any contract or arrangement on behalf of the FSO. The Applicant scouts for potential charterers in the market and provides this information to the FSO who then directly negotiates, enters into contracts, and renders service to the charterers who may be located in India or abroad. Remunerat
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paid or payable by the charterer. 51. Further, it is relevant to note that there exists no contractual obligations between the Appellant and the charterer. Therefore, it can be said that there is no privity of contract between the Appellant and charterer. Section 2(13) of IGST Act requires a person to arrange or facilitate the supply of goods or services or both, or securities, between two or more persons for the service provided to be considered as intermediary service and since the Appellant is contractually bound only to the FSO and does not engage in any interaction with the charterer, the Appellant cannot be said to facilitate any arrangement or supply of goods or services between the FSO and charterer. 52. The Impugned Order is consequently flawed to the extent that it observes that the Appellant is required to interact with the charterer for the provision of Support Services like Monitoring of Voyage Execution and Examination of lay time calculations and therefore supply of Supp
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llant in the course of fulfilling the contractual obligations that exist between the Appellant and FSO. Personal Hearing 54. A personal Hearing in the matter was conducted 03.10.2018, when Shri Ranjeet Mahtani, Advocate, appearing on behalf of the Appellant, reiterated their written submissions made during the time of filing the present appeal. He further deposed that their principal supply is the consultancy service and not the intermediary services as envisaged by the Advance Ruling Authority as they do not represent, or act on behalf of, the Foreign Ship Owners ( herein after referred to FSO )while negotiating the terms and conditions of the contracts/agreements, related to the chartering of the vessels entered between FSO and their clients, thereby, not facilitating or arranging for the said supply of the vessels chartering services by the FSO to their clients in any manner. They are just suggesting the name of the potential charterers of the vessels to the FSO by way of the market
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epartment, countered all the arguments made by the Appellant either orally, or in writing, by sticking to their earlier contentions, made before the Advance Ruling Authority (AAR). DISCUSSION AND FINDINGS 58. Heard both the parties. Ongoing through all the relevant case records, oral & written submissions made by the Appellant and the Respondent, the issues/questions, which are, before us, to decide, are as under:- (1) Whether Marine Consultancy Service ( MCS ) provided to foreign ship owners constitutes composite supply with the principal supply of consultancy service. (2) In the alternate, where service are provided to the foreign ship owners distinctively as supply of consultancy service and support service with separated and demarcated fees for their consultancy service and for support service: (a) Whether consultancy service will qualify as business consultant service in terms of the scheme of classification of services [Annexure to Notification 11/2017 – Central Tax (Rate) da
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ent consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and are supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. 60. Here, the Appellant has submitted that they are providing the consultancy services and the Business Support Services to the FSO, one after the another i.e. first they are first providing the consultancy services by way of the provision of the list of the potential charterers of the vessels owned by the FSO, after doing all the professionals driven research and analysis of the data procured from the various authentic sources. They are classifying these activities as consultancy services. Out of this list of the potential charterers, when the FSO enters into agreement with any of these charterers for chartering of their vessels subject to the terms and conditions of the said agreement, the FSO again call for the services of the Appella
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Charterer Party Contract dated 03.03.2017 submitted before the Appellate Authority, it is seen that the Appellant is eligible for payment from the FSO, their client, only if the FSO has entered into the contract with one of the charterers out of the list provided by the Appellant and all the support services including voyage execution, examining lay time calculations and account reconciliation, etc., as agreed between the Appellant and the FSO have been rendered by the Appellant. Thus, on perusal of the above said agreement and the submissions made by the Appellant, it is adequately evident that the primary activity of the consultant is to introduce the FSO to their potential clients who may be interested in chartering the vessels of FSO. 63. Now, the moot issue is to decide whether the said activity of the introduction of their clients, in this case the FSO, with the potential charterers of their vessels would be considered as intermediary services as pronounced by the Advance Ruling
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e condition the said supply is not made by the intermediary himself on his own account. 64. Applying these above conditions/parameters to the instant case, it is expressly understood that the Appellant is acting as an intermediary in the present arrangement. This can be understood by the following sequence of facts. (i) There has been a supply of services, called Rental services of water vessels including passenger vessels, freight vessels and the like with or without operator as classified under SAC 996602, by FSO to the vessel charterer. (ii) There are involvement of three entities only, first one is Supplier of the chartering services, i.e. The FSO; Second one is the receiver of this chartering service i.e. the charterer and the third one is the Appellant, who have made this supply of service, i.e. chartering of the vessels service, possible by introducing FSO to this charterer by way of the short listing of various potential charterers for the vessels of FSO. Besides this, as a mat
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ever, from the study of market practices or trends in vessels chartering industry available on the website bearing address general cargoship.com/charter-markets.html, it has come to our notice that the ships are normally fixed on charters with the assistance of the shipbrokers, who may be the FSO s brokers or charterers brokers. Here the FSOs brokers are those, who find and arrange employment for their principals ships and charterers brokers are those who find ships to carry out their principals requirements. The chief stages involved in the fixing of the ships/vessels chartering process include the following activities: 1. Circulation by the charterers broker of cargo orders , outlining charterers forthcoming cargo transportation requirements. 2. Circulation by the owners broker of position lists or tonnage lists , detailing expected open dates and positions of available ships. 3. Study of market reports by brokers. 4. Negotiations on main terms between brokers on behalf of their resp
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ved. 67. Thus, on perusal of the market/industry practices as mentioned above, it is prominently noticed that the appellant have made agreement keeping all the clauses related to the necessity or the requirement of the services being offered to the FSO similar to the practices observed in the vessels chartering industry, which include (a) the arrangement for the employment of the principals ships/vessels by way of the study and analysis of the various market reports/trends and intelligence gathered from the other reliable data resulting into the short listing of the potential charterers; (b) facilitating the main supply of services i.e. the Renting of the water vessels with or without operator agreed between the FSO, the provider and their clients i.e. the vessels charterers by undertaking the activity in the form of monitoring of the voyage execution (c) undertaking various other administrative services like examination of lay time calculation and reconciliation of the voyage related
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med by the Appellant as part of the services to be provided to the FSO and the amount , it will be receiving from the FSO for providing these services i.e. 1.25 % of the gross receipt from the charterers and considering the market practice and trends in vessel chartering industries, it is revealed that the Appellant has framed the agreement in such a manner so that their activity as intermediary is not revealed at any stage by projecting themselves as mere consultant to the FSO, with an intent to avoid the levy of GST on the services provided to the FSO. However, the fact is that all the activities, they are doing, is clearly pointing to their role as intermediary not only at the first stage, when they are introducing the FSO to their potential charterers, out of which the final agreements in respect of the chartering of the vessels are being done, but also at the later stages, when they are called upon their principal i.e. the FSO, for rendering the voyage execution, on the behalf of
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al settlement with the charterers, which can be classified under the service head /group accounting services bearing the SAC 998222. 70. In view of the above discussions, it can be deduced that the entire gamut of services or activities performed by the Appellant can be treated as composite supply of the intermediary services and accounting services, of which the intermediary supply is the principal supply , as the appellant, at the first stage, is arranging for the supply of the main service i.e. Rental services of water vessels including passenger vessels, freight vessels and the like with or without operator as classified under SAC 996602, between the service provider i.e. the FSO and the service receiver i.e. the vessels charterer and at the later stage, when the contract for the supply of the main services are finalised between the FSO and the vessel charterers, the Appellant is called upon to facilitate the provision of the main services i.e. monitoring of the voyage execution et
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vices and Business Consultancy Services as per the present claim or submissions made before the Appellate Authority, it is crystal clear that they themselves are not clear about their activities because if they are providing consultancy services and support services as per their own submissions and pleadings made in this regard, they should have taken their service tax registration either under Business Consultancy Services or under Business Support Services. But, that was not the case. Instead, they opted for the Business Auxiliary Service. In this way, they are clearly contradicting their entire submissions and contentions and by doing so, their entire appeal has no grounds worthy of consideration. In view of the above discussions, we pass the following order- Order In view of the above discussion, we hold that the entire gamut of services performed by the Appellant are in fact of the composite supply of the intermediary services, classified under the Service Accounting Code 999799,
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