In a major relief to Airbnb Payments, the Chandigarh Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the payment processing services not ‘intermediary services’, the assessee-Airbnb Payments is not liable to pay service tax.
The bench of S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that the appellant provides a single service of processing of payment to Airbnb, Ireland. The appellants have no relation whatsoever with the customers accessing the platforms of Airbnb. There is no tripartite agreement either. The clauses of the agreements do not create a principal-agent relationship. The appellant does not receive a commission and does not facilitate any main service between Airbnb, Ireland and their customers. The appellants are providing Back Office Services which are outsourced which cannot be called Intermediary Services.
The appellants, M/s Airbnb Payments India Pvt. Ltd, are engaged in the provision of services taxable under Section 66B of the Finance Act, 1994. The appellants filed two refund claims, on account of unutilized CENVAT credit, for the period October 2016 to December 2016 for an amount of Rs.53,97,035 and for the period January 2017 to March 2017. The Original Authority allowed the refunds.
The department went in appeal before the Commissioner (Appeals) against the order passed by the Original Authority on the grounds that an amount of Rs.26,25,042 was wrongly refunded and in respect of order dated 15.11.2019, the entire refund was erroneously granted.
Commissioner (Appeals) remanded both the orders back to the Adjudicating Authority with a direction to check whether the appellant was an intermediary between Airbnb, Ireland and their customers. In the remand proceedings, the Original Authority did not pass any order in respect of the refund for the period October 2016 to December 2016 in respect of refund, for the period January 2017 to March 2017, rejected the refund, saying that the appellant is an intermediary. On an appeal filed by the appellant, the Commissioner (Appeals) upheld the order passed by the Original Authority.
The Department has issued another Show Cause Notice seeking the re-payment of refund alleged to have been erroneously sanctioned to the appellants by the Original Authority. The Show Cause Notice also seeks to recover service tax allegedly not paid by the appellants on the output services rendered by them. The proposals in the Show Cause Notice have been confirmed, along with interest and penalties, by the Commissioner.
The appellant contended that PayU and the appellant are one and the same and therefore, the appellant is an intermediary between Airbnb, Ireland and the customers. The Commissioner has given the finding on the basis of the website payubizz.in in which it was claimed that PayU was only an intermediary. The Commissioner also relied on the RBI Circular in which it was stated that payment aggregators and the payment gateways are intermediaries playing an important function in facilitating the payments in online space. The Commissioner also relied on Clause 3.3 of the Agreement with PayU in which it was stated that PayU will act as an intermediary by creating a link between the merchant site and respective acquiring banks.
The appellants submitted that the Commissioner comes to the conclusion for the reasoning that the appellant is arranging and facilitating the main service of Airbnb, Ireland to the Indian customers. There are two supplies. The appellant arranges and facilitates Airbnb, Ireland‘s main service. The test of agency is satisfied because the appellant can accept payments on behalf of Airbnb, Ireland. The Commissioner also relies on the CBEC Circular issued in 2012.
The appellant contended that the appellants provide only one main service which is ‘Payment Collection Service’ to Airbnb, Ireland. There are only two parties; Airbnb, Ireland instead of taking the responsibility of the payments on themselves outsourced the same to the appellant. Outsourcing of provision of service does not make the appellant an intermediary. As per Clause 8.3 of the Contract with Airbnb, the appellant can sub-contract but the responsibility to provide the service is on the appellant and therefore, the appellant is not an intermediary. Clause 20.1 of the Agreement between the appellant and the PayU specifically mentions that the appellant is not an agent.
The department contended that the appellants are covered by the definition of an ‘Intermediary’ as per Rule 9(iii) of POPS Rules, 2012 as the appellants facilitate and arrange provision of a service. From the Master Service Agreement dated 27.05.2015, it is clear that the appellants have provided services during the material period for facilitating the operation of Airbnb Platform which is the main service. Moreover, the appellants are not providing the main service on their own account and have no role in provision of the said services and therefore, the appellants are an intermediary as per the inclusive Clause as well as exclusive Clause of the definition of an ‘Intermediary’.
Section 2(f) of the Place of Provisioning of Services Rules, 2012 (POPS Rules, 2012) defines “Intermediary” . The term “intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service or a supply of goods, between two or more persons, but does not include a person who provides the main service or supplies the goods on his account.
The tribunal while allowing the appeal held that there is no material change in the definition of ‘Intermediary’ in the Service Tax Regime and the GST Regime. The appellants do not satisfy the conditions so as to render their services to be ‘Intermediary’. It is clear from the terms of the Agreement that they are on a principal-to-principal basis. There is no principal-agent relationship and the appellants do not render any service to facilitate the provision of main service by Airbnb, Ireland.
Case Title: M/s Airbnb Payments India Private Limited Versus The Commissioner of Central Excise & Service Tax, Gurugram
Case No.: Service Tax Appeal No. 60117 Of 2022
Date: 04.09.2024
Counsel For Appellant: Krishna Rao
Counsel For Respondent: Aneesh Dewan
