2013 (12) TMI 1613 - AT - Service Tax

Summary

Issues involved:
The issues involved in the judgment are the classification of services provided by the appellant as management, maintenance, or repair services, the applicability of Service Tax liability, and the determination of the nexus between the appellant in India and the customers.

Classification of services:
The appellant, an Indian subsidiary, provides trouble shooting services to customers who purchased equipment from their holding company. The Revenue considered this activity as management, maintenance, and repair of software supplied with the equipment. However, the Tribunal found that the service provided by the appellant to Indian customers is trouble shooting service and not management, maintenance, or repair service. The service is performed in India exclusively for Indian clients, with no part of the taxable service being performed or used outside India. The ultimate responsibility for the service provision lies with the holding company in the US, and there is no direct nexus between the appellant and the Indian customers. The Tribunal concluded that the service provided by the appellant should be treated as provided to the US company and not to the Indian customers.

Applicability of Service Tax liability:
A demand for Service Tax liability amounting to &8377; 6,06,35,955/- for the period from April 2006 to March 2010 was confirmed, along with penalties under Sections 76, 77, and 78 of the Finance Act, 1994. However, the Tribunal considered that the appellant had made out a case on merits for a complete waiver of the requirement of pre-deposit. As a result, the stay against recovery was granted during the pendency of the appeal.

Nexus between appellant and customers:
The Tribunal emphasized that for all documentation and payment purposes, the nexus exists between the US company and the appellant in India. The service provided by the appellant is considered an input service to the US company, resulting in an import of service. The Tribunal concluded that the service received by Indian clients is actually provided by the foreign company with the assistance of the appellant in India, similar to a situation where maintenance work is entrusted to another entity while the responsibility rests with the original supplier. The Tribunal highlighted the absence of a direct service provision between the appellant and Indian customers, leading to the waiver of the pre-deposit requirement.

Separate Judgement:
No separate judgment was delivered by the judges in this case.