Custom, Excise & Service Tax Appellate Tribunal (CESTAT), Delhi: In an appeal filed against order wherein demand raised by two show cause notices against the appellant Amazon Internet Services Private Limited was upheld the two-member Bench of Hemambika R. Priya (Technical Member) and Binu Tamta (Judicial Member)* partly allowed the appeal and held that the appellant is not an “intermediary” within the meaning of Section 2(f) of the Place of Provision of Service Rules, 2012 and set aside service tax demands in respect of data hosting services and remanded the matter to the Adjudicating Authority to examine the amounts paid before the issuance of show cause notice.
Background:
The Appellant provided data hosting services and marketing services to Amazon Web Services, Inc. USA (AWSI). On investigation against the appellant for the services rendered, the Department was of the view that the appellant acted as a link between AWSI and its customers located in India by temporarily holding and routing the data through the edge servers installed in India. The appellant thereby acted as an intermediary between AWSI and the customers of AWSI located in India by facilitating/providing the necessary infrastructure to provide the customers access to the data/content with low latency. In respect of marketing services, the allegation was that the appellant was marketing the cloud services in India and getting the orders for the same from Indian customers and thereby providing marketing services to AWSI as an intermediary. The appellant paid service tax of Rs.9,36,41,506 on marketing service along with applicable interest of Rs.1,50,993 for the period from April 2014 to January 2016, and informed the Department by a letter dated February 25, 2016 and requested for closure of the proceedings in terms of Section 73(3) of the Finance Act, 1994.
Show Cause Notice for period of October 2013 to March 2016, proposing demand for service tax of Rs.34,31,38,111 and for the period April 2016 to June 2017 for Rs.47,08,04,315 were issued. On adjudication, demand was confirmed as proposed in the notices and it was held that the activity undertaken by the appellant was similar to an agent and, therefore, the appellant qualified as an “intermediary” under Rule 2 (f) of Place of Provision of Service Rules, 2012 (‘POPS Rules, 2012’) and thus, liable to pay service tax.
Present appeal was filed on the findings that the appellant was covered under the definition of ‘intermediary’ as defined under Rule 2(f) of POPS Rules, 2012 and is, therefore, liable to pay service tax in terms of Rule 9. In respect of demand of service tax on marketing support services, the appellant restricted the challenge to levy of penalty thereon.
Analysis, Law and Decision:
To Ascertain whether the appellant falls in the category of ‘intermediary’ under Rule 2(f) of The POPS Rules, 2012 the Tribunal noted the definition of definition of ‘intermediary’ as provided under Section 2(13) of the IGST Act, 2017 and the circulars issued in that regard. The requirements and conditions to be intermediary either under the POPS Rules, 2012 or under the IGST Act, 2017 were the same. The Tribunal observed that there was no difference even in the meaning of the term ‘intermediary’ as defined in the two provisions.
The Tribunal held that the definition of intermediary in the GST regime which has been picked up from the service tax laws squarely covers the issue at hand and consequently, the appellant could not be held to be an intermediary as the services provided were export of services.
The Tribunal referred to the various decision of High Courts and Tribunal and observed that the law is settled that an intermediary merely arranges or facilitates supply of goods or services or both between two or more persons and a person, who supplies the goods or services is not an intermediary.
The Tribunal further noted that to consider the appellant as intermediary in terms of definition under Rule 2(f) of the POPS Rules, 2012 the first condition to be satisfied was that service provider must be appointed as a broker of agent of the service recipient or principal. However, DSA titled as “Relationship Between Parties” provided that any services performed by a party pursuant to this agreement are performed by such party as an independent contractor on a non-exclusive basis and nothing in the agreement created a partnership, joint venture, franchise or agency relationship between the parties. The next condition to be satisfied was whether the appellant was arranging or facilitating any service between two or more persons. As per the agreement, the appellant was rendering only one service, i.e., data hosting services to AWSI. The cloud computing services provided by AWSI to its customers is by virtue of a separate agreement between them, to which appellant is not a party. The Tribunal observed that the allegation made by the revenue that Indian customers access cloud computing services from AWSI via the appellant’s data server facility and, therefore, the appellant facilitates the provision of cloud services for its customers from AWSI was not the scope of services. The data hosting service was one of the inputs for the provision of cloud computing services by AWSI.
The Tribunal while examining the condition of the definition of ‘intermediary’ that it does not include a person, who provided the main service or supplies on his own account, observed that the appellant was providing the data hosting service on his own account. The entire responsibility for rendering the main service of data hosting services under the agreement was on the appellant on his own account and was not connected in any manner for rendering the cloud computing services which was in the exclusive domain of AWSI. Therefore, the appellant was outside the purview of intermediary services.
The Tribunal held that from the terms of the agreement, it was evident that the appellant was a provider of input services on principal-to-principal basis. The principle that intermediary should not be a sub—contractor for the main supply excluded the appellant from providing intermediary services. The Tribunal further observed that Rule 9 of POPS Rules, 2012 provided that ‘Place of Provision of Specified Services’ should be the location of the service provider and Rule 9(c) incorporates ‘intermediary services’. Since, the service recipient ASWI was located outside India and therefore, the services provided by the appellant would be taxable outside the taxable territory and as a result there was no scope for levy of service tax.
The Tribunal further held that the appellant is not an ‘intermediary’ as per the definition given in Rule 2(f) of POPS Rules and, therefore, the place of supply of service being the location of the service recipient outside India, no service tax is leviable. The Tribunal observed that the appellant bonafide believed that the services rendered by them were covered under export of services as per Rule 6A of the Service Tax Rules, 1994 and thus, not liable to pay service tax. In view thereof, the appellant could not be said to have suppressed or mis declared to justify the extended period of limitation. With respect to the levy of penalty in respect of the service tax amount paid before the issuance of Show Cause Notice, the Tribunal remanded the matter to the Adjudicating Authority to examine, and if so, no penalty would be leviable. The appeal was partly allowed and remanded to the Adjudicating Authority.
[Amazon Internet Services (P) Ltd. v. Commr. of Customs, 2026 SCC OnLine CESTAT 155, decided on 19-1-2026]
Advocates who appeared in this case:
For the Appellant (s): B.L. Narasimhan and Shri Ashutosh Choudhary, Advocates
For Respondent(s): Mihir Ranjan, Special Counsel