2011 (3) TMI 986 - AT - Service Tax

Service tax liability - Appellant, a subsidiary of M/s. Givaudan Suisse SA, Geneva , Switzerland (hereinafter referred to as Givaudan) - The computer database of Givaudan to which the appellant has access is in respect of flavours, fragrances, product library, manufacture and marketing of flavours and fragrances and the same appears to be covered by the definition of data - The software support has been provided only to enable the access to data warehouse and of the information system of Givaudan - The service received by the appellant, therefore, prima facie appears to be online database access and / or retrieval and the contention of the appellant that the service received was service in relation to information technology does not appear to be acceptable - Since parent company does not have any office or establishment in India, by virtue of the provisions of Section 66A of Finance Act, 1944 read with Rule 2(1) (d) of the Service tax Rules, 1994, the appellant would be liable to pay service tax in respect of taxable service received by them - The appellant, therefore, have not been able to establish prima facie case in their favour and, therefore, this is not a case for total waiver.

Summary

Issues:
1. Whether the services received by the appellant are taxable under the category of 'online information and database access or retrieval service'.
2. Whether the appellant is liable to pay service tax, interest, and penalty as demanded by the department.
3. Whether the appellant's contention that the services received are in relation to 'information technology' is valid.

Analysis:

Issue 1:
The appellant, a subsidiary of a foreign company, had access to various systems and databases of their parent company for remuneration. The department argued that the services received by the appellant fall under 'online information and database access or retrieval service'. The Tribunal found that the services provided by the parent company to the appellant were indeed in the nature of 'online database access and retrieval'. The Tribunal held that the appellant had not established a prima facie case in their favor, and therefore, directed them to deposit a specified amount within a stipulated time.

Issue 2:
The department issued show cause notices demanding service tax, interest, and penalties from the appellant. The orders passed by the Deputy Commissioner and Joint Commissioner confirmed the service tax demands along with interest and penalties. On appeal, the Commissioner of Central Excise upheld the orders. The Tribunal reviewed the orders and directed the appellant to deposit a specific amount within a given period to waive the pre-deposit of the balance amount of service tax, interest, and penalty, staying the recovery until the appeal's disposal.

Issue 3:
The appellant contended that the services received were in relation to 'information technology' and not taxable during the disputed period. The Tribunal analyzed the nature of services provided by the parent company to the appellant, emphasizing data access over software development. It concluded that the services were primarily 'online database access and retrieval', rejecting the appellant's argument regarding 'information technology' services. The Tribunal held that the appellant failed to establish a prima facie case in their favor, leading to the directive for the specified deposit.

This detailed analysis of the judgment highlights the key issues involved, the arguments presented by both parties, and the Tribunal's findings and directives regarding the taxability of the services received by the appellant and the associated liabilities.