2009 (4) TMI 314 - AT - Service Tax

The appellants are providing the following enterprise resource planning (ERP related services) (a) ERP planning and advice. (b) Actual ERP implementation service involving implementation and adaptation of ERP software. - As regards ERP planning and advice the appellants are discharging Service Tax liability under the management consultancy services. - However with regard to the ERP implementation service according to the Department the said service would be liable to a tax under the category of management consultancy service whereas according to the appellants they would be taxable with effect from May 16 2008 under the category of information technology software services - Tribunal s earlier decisions categorically held that such services falling under the category of consulting engineering services however they were exempted by Notification 4/99-S.T. dated 28-2-1999 and excluded from definition itself subsequently In the present case the ER implementation service is definitely for use in furtherance of business and commerce and the service under dispute is for the implementation. So implementation of the ERP services is specifically covered under the information technology service which was effective only from 16-5-2008. Under these circumstances it cannot be liable to Service Tax for a period prior to that

Summary

Issues Involved:
Appeals against Service Tax orders related to ERP implementation services.

Analysis:

1. Classification of ERP Implementation Services:
The main issue revolved around the classification of ERP implementation services for taxation. The Department argued that these services fell under management consultancy services, while the appellants contended that they should be taxed under information technology software services from May 16, 2008. The Tribunal had to determine the correct categorization based on the nature of the services provided.

2. Applicability of Precedents and Legal Provisions:
The appellants cited various cases and legal provisions to support their argument that ERP implementation services should not be considered as management consultancy services. They highlighted that the introduction of a new entry implied non-taxability earlier and presented judicial precedents where software implementation services were not classified as management consultancy services.

3. Exclusion and Tax Liability:
The appellants argued that prior to May 16, 2008, their services were excluded from consulting engineer's services and were not taxable under management consultancy services. They emphasized that the introduction of information technology software services changed the tax liability scenario and that their services were not taxable under the previous categories.

4. Penalty Imposition:
The appellants contended that penalties should not be imposed as there was no intentional tax evasion. They presented evidence of their belief in the non-liability of their services to Service Tax, including previous correspondence with tax authorities and favorable orders in their case.

5. Tribunal's Decision:
After a detailed review of the arguments and legal provisions, the Tribunal concluded that ERP implementation services were covered under information technology services effective from May 16, 2008. As the disputed period was before this date, the services were not liable to Service Tax under management consultancy services. The Tribunal found no merit in the demands made by the Department and ruled in favor of the appellants, setting aside the impugned orders.

In conclusion, the Tribunal's judgment clarified the classification of ERP implementation services for taxation purposes, considering legal precedents, exclusions, and the introduction of new tax categories. The decision provided relief to the appellants by overturning the demands for Service Tax under management consultancy services for the period before May 16, 2008.