2011 (8) TMI 917 - AT - Service Tax

Waiver of demand - Business Auxiliary Services - The activities undertaken by the Subsidiaries appear to be on behalf of the applicant in relation to the agreement entered into between the applicant and the customers but prima facie these activities have been carried out in the foreign countries - The evidences relied upon by the department do not prima facie show that these activities have been carried out in India and therefore notwithstanding payment by the applicant to the Subsidiaries abroad we do not see evidence of import of the services - Decided in favor of the assessee. However pre-deposit ordered in respect of information technology software services provided after 16-5-2008.

Summary

Issues:
1. Waiver of demand of Service Tax totaling around 14.45 crores.
2. Demand under the category of Business Auxiliary Services.
3. Demand under the category of Management, Maintenance, or Repair services.
4. Tax liability for the period from 16-5-2008.

Analysis:

1. The applicant sought a waiver of demand of Service Tax amounting to approximately 14.45 crores, with a significant portion relating to Business Auxiliary Services received from the applicant's Subsidiaries in different countries and Management, Maintenance, or Repair services provided to India-based customers for post-implementation services related to software products. The Chartered Accountant argued that the activities of the Subsidiaries outside India, concerning software development, implementation, and upgrading, fell under Information Technology Software Services, which were not taxable before 16-5-2008. Similarly, services rendered to India-based customers were claimed to be non-taxable pre-16-5-2008, citing a Tribunal decision supporting this stance.

2. The Revenue contended that the services provided by the Subsidiaries directly benefited the applicant, justifying the taxability under Business Auxiliary Services. However, upon review, the Tribunal found that the activities carried out by the Subsidiaries, although on behalf of the applicant, were primarily conducted in foreign countries, as evidenced by the nature of the work involving software fixes, improvements, and implementation assistance. This led to the conclusion that there was no evidence of the services being imported into India, supporting the applicant's claim that the services fell under Information Technology services, which were not taxable before 16-5-2008.

3. The Chartered Accountant acknowledged a tax liability of approximately 1.62 crores for the period post-16-5-2008. After considering all facts and circumstances, the Tribunal directed the applicant to deposit 1.6 crores within eight weeks and report compliance by a specified date. Upon this deposit, the Tribunal waived the pre-deposit of the remaining dues as per the impugned order and stayed the recovery pending the appeal's disposal.

This detailed analysis of the judgment highlights the key arguments presented by both parties, the Tribunal's assessment of the activities in question, and the decision regarding the waiver of the Service Tax demand and tax liability for the relevant periods.