Interface Development Services by BlackRock India

The CESTAT Chandigarh Bench ruled that the services provided by BlackRock India, relating to the development of an interface for an operating system for investment managers, are not an intermediary service.

The bench of Ajay Sharma (judicial member) and PV Subba Rao (technical member) held that the “business support services” rendered by BlackRock to its US-based customers would be considered a service export within the meaning of Rule 6A of the Services Tax Rules, 1994, and therefore BlackRock was eligible for a refund of unused CENVAT credit on input services used to provide such business support services.

The caller- M/s. BlackRock Services India, sought repayment of unused CENVAT credit on input service used to provide “business support services” outside India, under Rule 5 of the CENVAT Credit Rules, 2004 , read with notification n° 27/2012 CE (NT) dated 18/06/2012. The adjudicating authority dismissed the claims for reimbursement on the grounds that the service provided by the appellant was an intermediary service and therefore the place of service provision was in India. Thus, the Contracting Authority held that the appellant was not entitled to any credit under the CENVAT Credit Rules, 2004. The appellant challenged the order of the Contracting Authority before the Commissioner CGST (Appeal), which confirmed the order of the Contracting Authority. Against this, the Appellant appealed to the CESTAT.

The appellant BlackRock India argued before the CESTAT that it is engaged in providing services to M/s. HLX, its US-based client, regarding the development of an interface for Aladdin – an operating system for investment managers to undertake portfolio management. The Appellant submitted that he managed, troubleshoots and provided support for the creation of M/s client accounts. HLX on said platform.

The appellant added that these services were provided by him to M/s. HLX on a principal to principal basis, and that the appellant was an independent contractor and not an agent or employee of M/s. HLX. Therefore, he argued that the services provided by him were purely between the appellant and M/s. HLX and that it did not involve any 3rd party or a consumer.

The Appellant thus maintained that the lower authorities had wrongly rejected his request for reimbursement by considering that the Appellant was an agent and therefore an “intermediary”, having his place of supply of services in India and not outside India. India.

CESTAT observed that in view of the definition of the term “intermediary”, as provided for in Rule 2(f) of the Place of Supply Rules, 2012, an “intermediary” is a person who arranges or facilitates the supply of goods or services or securities between two or more persons and therefore the arrangement would require a minimum of three parties.

Considering that an activity between only two parties cannot be considered as an intermediary service, CESTAT has ruled that an intermediary does not include the person who provides such goods or services or both on his own account, and that an intermediary merely arranges or facilitates the supply between two or more persons.

Thus, the Tribunal ruled that where the person provides the principal supply, in whole or in part, on a principal-to-principal basis, that supply cannot fall within the definition of “intermediary”.

Observing that the Appellant was required to provide maintenance and support services and perform troubleshooting functions as requested by M/s. HLX, in order to ensure transparent access to the services available on that platform, the CESTAT held that no interaction was required between the applicant and M/s’ customers. HLX and, therefore, the appellant could not be characterized as an intermediary.

“There is nothing in the record to show that the appellant liaises or acts as an intermediary between the HLX and its clients. Accordingly, the finding of the lower authorities that the appellant is an ‘intermediary’ is misplaced. We are surprised to find that, although for earlier periods, the contracting authority at the time allowed the appellant’s request for reimbursement, but without reviewing these orders and without giving any reason not to follow the orders. previous years, this time the authorities concerned judged the opposite by refusing the credit.”

Noting that the Arbitration Authority had rejected the applicant’s claims for reimbursement and had considered that the service rendered by it was not a “Business assistance service” but an intermediation service, the CESTAT ruled that the burden of proving that the classification claimed by the applicant was incorrect, lied to the revenue service. The Tribunal added that the conclusions reached by the Ministry of Revenue must be supported by supporting evidence and not simply on the basis of assumptions and presumptions.

“We also observe that the learned commissioner in the impugned order also relied on the website without confronting the appellant with said material, which is completely in breach of the principle of natural justice and also beyond notice. of substantiation as substantiation. the opinion was not based on any such website.”, CESTAT added.

The Tribunal accepted the appellant’s assertion that, having regard to Rule 3 of the Place of Supply of Services Rules, 2012, the place of supply of the service is generally the location of the recipient of the service. Observing that the location of the recipient of the service was outside India, i.e. in the United States, CESTAT held that since the place of provision of the service was outside India, the service provided by the appellant would be considered an export of service within the meaning of Rule 6A of the Services Tax Rules, 1994.

Accepting the appellant’s appeal, the CESTAT canceled the order issued by the Arbitral Authority. The Tribunal sent the case back to the contracting authority to calculate the amount of the reimbursement on the basis of the documents submitted by the appellant and ordered it to rule on the appellant’s request for reimbursement within a specified period. .

Case title: M/s. BlackRock Services India Private Limited v CGST Commissioner

Date: 08.08.2022 (CESTAT Chandigarh)

Appellant’s representative: Kamal Sahwney, Krishna Rao and Anishka Gupta, lawyer

Respondent’s representative: Amandeep Kumar, authorized representative of the respondent

Click here to read/download the order