2017 (10) TMI 291 - HC - Service Tax

Classification of services - Online Information and Database Access or Retrieval or not? - The case of the appellant was that no service tax was liable to be paid by the appellant as the appellant was dealing with copyrights and services of copyrights were not within the purview of service tax - Held that - providing a data or information to the customer through computer network, whether retrievable or not is covered by clause (75) of section 65. The service provided to the customer by a commercial concern i.e. appellant in relation to online information and database access in electronic form through computer network is a taxable service, whether it includes retrieval or not. In paragraph3 of the impugned judgment, the Appellate Tribunal has noted the submissions canvassed on behalf of the appellant. A specific submission canvassed was that the appellant has got copyright over the photographs which are visible on its website and hence, the appellant charges the amount for copyright - The Appellate Tribunal has confirmed the findings of fact recorded by the first appellate authority about the nature of activities carried out and services rendered by the appellant. The said findings are in conformity with the factual statements made by the appellant in paragraph2.3 of the memorandum of appeal - information technology software service is completely different from the service rendered by the appellant in the facts of the case. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Whether the appellant's licensing of images through its website is subject to service tax under the category of "Online Information and Database Access or Retrieval"?
2. Whether the consideration received by the appellant for providing a license to use an image in electronic form constitutes payment for copyright in the image?
3. Whether the licensing of copyright in a particular image amounts to access or retrieval of an online database of images?

Analysis:
1. The appellant contended that no service tax was payable as they dealt with copyrights, not covered by service tax. The Commissioner and Appellate Tribunal held the service taxable under "Online Information and Database Access or Retrieval." The appellant argued that accessing the website was free, and charges were only for downloading images. However, the Tribunal found that downloading images for commercial use required payment, falling under taxable services.

2. The appellant argued that the consideration received was for copyright, not falling under taxable services. The Tribunal found that while viewing images on the website was free, customers had to pay for downloading images for commercial use, making copyright incidental to the main service of providing access and retrieval of data.

3. The Tribunal referenced a previous case involving online teaching services, distinguishing it from the current case. It confirmed the first appellate authority's findings on the nature of activities carried out by the appellant. The Tribunal concluded that the appellant's services fell under "Online Information and Database Access or Retrieval," different from information technology software services.

In conclusion, the High Court found no merit in the appeal, dismissing it as no substantial question of law was involved. The judgment upheld the Tribunal's decision that the appellant's services were taxable under the category of "Online Information and Database Access or Retrieval," based on the nature of activities and services provided.