9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (11) TMI 1446 - AT - Service Tax100% EOU - Management, Maintenance or Repair service - Business Auxiliary Service (BAS) - Information Technology Services (ITS) - nonpayment of service tax - Held that - as regards Management, Maintenance or Repair (MMR) Service, the present issue is a debatable one and differing view-points have been expressed in the decisions of the Tribunal as well as various higher judiciary, we are of the view that the demand under this category should only be confirmed within the normal period of limitation - the matter is remanded to the original adjudicating authority for purpose of quantification of demand. Business Auxiliary Service (BAS) - supply of the software to the foreign customers and transfer of the licence - the assessee pays to the subsidiaries/sub-contractors, the relevant charges - reverse charge mechanism - Held that - If such an arrangement is to be placed within India, it would be a case of levy of service tax under BAS. However, since the service has been carried out on foreign soil, we need to examine the law from the perspective of whether assessee is liable to pay service tax under BAS on reverse charge basis, in terms of Section 66A of the Act, read with Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 - In the instant case, the recipient (assessee) of service (BAS) is in India. The service have been provided by the subsidiaries/sub-contractors, who stand paid by the assessee. The instant case is, therefore covered for demand of service tax under BAS on reverse charge basis under Section 66A of the Act read with the said Rules - However, when we look at the nature of the service rendered abroad, we find that it is in the nature of Information Technology Service (ITS). There was an exclusion for ITS from the definition of BAS which was deleted only with effect from 16-5-2008 when the service of ITSS was introduced in the statute. Consequently, there can be no demand for service tax under BAS up to 15-5-2008. Consequently, demand is upheld under BAS only from 16-5-2008 and the matter is remanded to original authority for requantification of demand.. Whether in the present case, if the assessee pays the service tax demanded, the same will be available to themselves by way of Cenvat credit - revenue neutrality - Held that - Since neither of the services is in the nature of input service, Cenvat credit will not be allowable to the assessee even if the service tax is paid. Consequently, the plea of revenue neutrality merits rejection. Penalty u/s 76, 77 and 78 - Held that - there is no justification for imposition of any penalty on the assessee, keeping in view of the fact that levy of service tax on Information Technology Software Service was newly introduced with effect from 16-5-2008 only. Appeal allowed in part and part matter on remand.
Issues Involved:
1. Demand of service tax on customized software under Information Technology Software Service (ITSS). 2. Demand of service tax under Intellectual Property Service (IPS). 3. Demand of service tax on Management, Maintenance or Repair (MMR) Service. 4. Demand of service tax under Business Auxiliary Service (BAS). 5. Revenue neutrality and eligibility for Cenvat credit. 6. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994. Issue-Wise Detailed Analysis: 1. Demand of Service Tax on Customized Software under ITSS: The Revenue's appeal challenged the dropping of a demand amounting to ?9,30,090/- on the supply of customized software to TATA Consultancy Services (TCS) for use by a customer in Nepal. The Commissioner had dropped the demand by considering that the software was supplied in media and not electronically, thus not falling under ITSS. The Tribunal found that the software was developed and supplied to TCS for the ultimate use of Nepal customers and ruled that service tax is liable on this activity as it is not a mass-produced and packaged software. Consequently, the Revenue's appeal was allowed, and the impugned order was modified. 2. Demand of Service Tax under Intellectual Property Service (IPS): The Revenue also challenged the dropping of a demand amounting to ?56,74,716/- under IPS for the period from 10-9-2004 to 28-2-2008. The Commissioner had dropped the demand, reasoning that the services were taxed under ITSS introduced from 16-5-2008. The Tribunal upheld this view, stating that the licence fee charged for the use of software, which remains the property of the assessee, is covered under ITSS. Thus, there was no justification for the demand of service tax under IPS for the period prior to 16-5-2008. 3. Demand of Service Tax on Management, Maintenance or Repair (MMR) Service: The assessee challenged the demand for service tax on MMR Service for the period from October 2005 to May 2008. The Tribunal noted that the C.B.E. & C. circular of 2003, which excluded maintenance of software from service tax, was withdrawn only in 2007. Given the conflicting views and the fact that ITSS was introduced only from 16-5-2008, the Tribunal directed that the demand should be limited to the normal period of limitation. The matter was remanded to the original adjudicating authority for re-quantification of the demand within the normal time limit. 4. Demand of Service Tax under Business Auxiliary Service (BAS): The assessee also contested the demand for service tax under BAS on amounts paid to subsidiaries and sub-contractors for customization and implementation of software. The Tribunal found that such services fall under BAS when performed on behalf of the assessee. However, since the service was performed abroad, the Tribunal examined the applicability of Section 66A of the Finance Act, 1994, read with the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. The Tribunal concluded that BAS is covered under Category C of the Rules, where the recipient of the service is in India. However, since ITS was excluded from BAS until 15-5-2008, the demand was upheld only from 16-5-2008 onwards. The matter was remanded for re-quantification of the demand. 5. Revenue Neutrality and Eligibility for Cenvat Credit: The assessee argued that the service tax paid would be eligible for Cenvat credit, making the demand revenue-neutral. The Tribunal referred to the Larger Bench decision in Jai Yuhshin Ltd. and concluded that the activities involved (maintenance and customization of software) are output services under the Cenvat Credit Rules, 2004. Since neither service qualifies as an input service, Cenvat credit would not be allowable, and the plea of revenue neutrality was rejected. 6. Imposition of Penalties: Penalties were imposed under Sections 76, 77, and 78 of the Finance Act, 1994, based on the confirmation of demand. The Tribunal, however, noted that service tax on ITSS was newly introduced from 16-5-2008 and upheld only a portion of the demands within the normal period of limitation. Consequently, the Tribunal found no justification for imposing penalties on the assessee. Conclusion: Both appeals were disposed of with modifications as detailed above. The Tribunal allowed the Revenue's appeal in part, upheld the assessee's contentions in part, and remanded the matter for re-quantification of demands within the specified parameters. Penalties imposed were set aside.
|
