2015 (4) TMI 321 - AT - Service Tax

Waiver of pre deposit - demand pertaining to outstanding balance regarding Debtors/ Creditors for services provided/received - Held that - adjudicating authority has not indicated anywhere as to what are the services on which the service tax has not been paid in respect of the amounts shown as debtors and creditors. Prima facie thus it can hardly be anybody s case that all the outstanding amounts regarding Debtors/ Creditors would be liable to service tax when it is not even indicated as to what are the taxable services they relate to. There is no legal basis for presumption to treat such outstanding balances to be relating to taxable services and therefore the contentions mentioned above, while needing to be examined in detail at the time of final hearing, prima facie, have force. Further the amendment to Section 67 ibid relating to associated enterprises was effective prospectively from 10.5.2008 as has been held by CESTAT in the judgement M/s Gecas Services India Pvt. Ltd. (2014 (7) TMI 410 - CESTAT NEW DELHI). In view of the foregoing and specially the judgment of SAP (India) Private Limited vs. CCE, 2013 (8) TMI 784 - CESTAT BANGALORE and having regard to fact that the appellants started paying service tax on this transaction under reverse charge mechanisms under Information Technology Software Service w.e.f. 16.5.2008, we are of the view that the appellants have been able to make out a case for waiver of pre-deposit of this component of demand. As regards the component of the impugned demand pertaining to commercial coaching or training, it is seen that the appellants are engaged in selling the software and as part of the same they provide advice, consultancy and guidance to its customers/ distributors for operation of the softwares. They are also receiving the said assistance from their overseas affiliated companies. They (i.e. the appellants) are not recovering/paying any amount separately for such assistance provided/received and were apportioning a portion of the sale proceeds under this head merely for accounting purposes. - VAT has been paid on the entire value of the software as seen from the purchase orders. The appellants contend that utilization of infrastructure does not amount to sharing of infrastructure and therefore they would not get hit by sub-clause (Vii) to Section 65(12) of Finance Act 1994. This point certainly needs a detailed examination which can only be taken up at the time of final hearing but it can hardly be denied that the appellants have an arguable case that this is not covered under Banking & Financial Services and therefore it is only fair that they are not required to make the pre-deposit pending appeal. - overall the appellants have made out a case for waiver of pre-deposit and we order accordingly staying recovery of the impugned liabilities during pendency of the appeal. - Stay granted.

Summary

Issues:
1. Stay applications against Order-in-Original for multiple show cause notices.
2. Service tax demand on outstanding balance regarding Debtors/Creditors.
3. Demand related to Franchise Service.
4. Demand concerning Management, Maintenance, or Repair services.
5. Commercial Coaching or Training services demand.
6. Banking and Other Financial Service demand.

Analysis:

1. Stay Applications:
The appellants filed stay applications against Order-in-Original for four show cause notices. The demand confirmed includes service tax, interest, and penalties for various categories of services provided/received during different periods.

2. Outstanding Balance Regarding Debtors/Creditors:
The major demand component pertains to outstanding balance regarding Debtors/Creditors. The appellants argued that service tax is not payable as the nature of transactions was not considered. They highlighted various components in the outstanding balance, including domestic creditors, royalties, provisions, and debtors related to exports and other services. The Tribunal found merit in the appellants' contentions as the adjudicating authority did not specify the taxable services, leading to the waiver of pre-deposit for this demand component.

3. Franchise Service Demand:
Regarding the demand for Franchise Service, the appellants contended that the transaction with Siemens, USA was not classifiable under Franchise Service but under Information Technology Software Service. They had already paid service tax under reverse charge mechanism for this service from a certain period, leading to a waiver of pre-deposit for this demand component.

4. Management, Maintenance, or Repair Services Demand:
The demand related to management, maintenance, or repair services was analyzed. The appellants provided software upgradation/enhancements and argued that these services fall under Information Technology Software Service, not Management, Maintenance, or Repair Service. The Tribunal noted their compliance with service tax payment under the correct category from a specific date, supporting a waiver of pre-deposit for this demand component.

5. Commercial Coaching or Training Services Demand:
The demand for commercial coaching or training services was discussed. The appellants contended that these activities were incidental to software sales, and no separate charges were collected. The Tribunal acknowledged the VAT payment on the entire software value, indicating a waiver of pre-deposit for this demand component.

6. Banking and Other Financial Service Demand:
The demand related to banking and other financial services was examined. The appellants utilized common global infrastructure from overseas entities. They argued that this did not constitute sharing of infrastructure under the relevant section. The Tribunal found the appellants' case arguable, leading to a waiver of pre-deposit pending appeal for this demand component.

In conclusion, the Tribunal granted the appellants' request for a waiver of pre-deposit for various demand components, staying the recovery of the impugned liabilities during the appeal process.