2024 (1) TMI 183 - AT - Service Tax

Classification of service - Online Database Access and Retrievable (OIDAR) Services or not - place of provision of service - period from July 2012 to November 2016 - time limitation - suppression of facts - HELD THAT - Appellant has not maintained any website or electronic network to provide services which are essentially automated or involving minimal human intervention for public in exchange for any consideration. The Appellant is providing digitized, abstracted and indexed data out of raw data received from third parties using the internet or electronic means of communication just to communicate resultant digitized or converted data, which are input services for their customers who may utilize the data for providing services under the category of OIDAR service (main service) by putting them on the internet for public/clients or for their personal use. The services rendered by appellant are therefore broadly covered under the category of Business support services or telecommunication services using tools of information technology, and shall not be covered under the category of OIDAR services. The instant case is wholly covered by the decision of this Tribunal in the case of State Bank of India Vs. Commissioner of Service Tax, Mumbai-II 2014 (11) TMI 310 - CESTAT MUMBAI wherein SBI had entered into a contract for providing Virtual Private Network (VPN) which enabled SBI and its branches to retrieve data from the data centre maintained by the applicants in different countries abroad and demand was made under OIDAR service - the Appellant is not liable to service tax on the services under the category of OIDAR services. Time Limitation - suppression of facts or not - HELD THAT - The Appellant was under a bona fide belief that its activity was not liable to service tax and further, the Appellant has maintained proper records of its activity and has been making compliances with various laws including Income Tax Act, Companies Act, and had been filing ST-3 returns under service tax, filing refund claims on quarterly basis in respect of service tax paid on input services used in the services exported out of India - the issue in dispute involves interpretation of statute, and as such no mala fide can be attributed to the Appellant. Accordingly, it is held that extended period of limitation cannot be invoked in the facts of the present case. The impugned order cannot be sustained and is accordingly, set aside - Appeal allowed.

Summary

Issues Involved:
1. Liability of the Appellant to pay service tax under 'Online Database Access and Retrieval (OIDAR) Services' for the period from July 2012 to November 2016.
2. Classification of services provided by the Appellant.
3. Applicability of extended period of limitation.

Summary:

1. Liability to Pay Service Tax under OIDAR Services:
The core issue in this appeal was whether the Appellant was liable to pay service tax under 'Online Database Access and Retrieval (OIDAR) Services' for the period from July 2012 to November 2016. The demand of Rs. 50,87,71,481/- was confirmed under section 73(1) of the Finance Act, 1994, along with interest under Section 75 and penalty under Section 78. Additionally, a penalty of Rs. 1,00,000/- was imposed on Shri Rajiv Nandvani, Director and VP (Facilities) of the Appellant company.

2. Classification of Services:
The Appellant, M/s Innodata India Private Limited, provided Content Support Services including data conversion, knowledge process outsourcing (KPO), and IT-enabled services to its holding company, Innodata Inc., USA. The Revenue alleged that these services were OIDAR services, which are taxable in India as per Rule 9(b) of the Place of Provision of Services Rules, 2012. However, the Appellant argued that these services were incorrectly classified as OIDAR services and should be classified under 'Business Support Services' (BSS). The Tribunal referred to various agreements and concluded that the services provided were not OIDAR services but were data conversion, KPO, and IT-enabled services, which involve significant human intervention and are not fully automated.

3. Applicability of Extended Period of Limitation:
The Tribunal found that the Appellant was under a bona fide belief that its activities were not liable to service tax under OIDAR services. The Appellant maintained proper records, complied with various laws, and filed ST-3 returns and refund claims regularly. The Tribunal held that the issue involved interpretation of the statute, and no mala fide intent could be attributed to the Appellant. Therefore, the extended period of limitation could not be invoked.

Conclusion:
The Tribunal concluded that the services provided by the Appellant did not fall under the category of OIDAR services and were correctly classified under Business Support Services. The demand for service tax, interest, and penalties was set aside, and the appeal was allowed with consequential benefits.