2024 (7) TMI 1002 - AT - Service Tax

Classification of services - Online Information and Data base Access or Retrieval services or not - Place of Provision of Services - whether services provided by the Appellant during the period 01.04.2015 to 30.11.2016 were classifiable under category of OIDAR? - HELD THAT - In the present case, it is found that Search Engine Optimization service was provided by the Appellant, which is a process whereby client s website visibility in search engines like, Google, Microsoft Bing etc. is increased. The process optimize search engine results of the client s website. After processing of the website, it is uploaded to client s server. Website visibility is commonly measured by the placement or ranking of the site on search engine results pages. The above process of search engine optimization is not providing any information and database for retrieval but it is a technological change in website of the client to rank it higher for prospective customers of the client who desires to know about the product or service of the client. Job of the Appellant is limited only to process of website of the client. It is not covered under OIDAR service as in the said process no information is provided for database access or retrieval. It is an improvement process of the website of the client to keep it on higher ranking. The Appellant does not have any relationship with any viewer, i.e., the person who retrieves or accesses data. The Appellant simple setting up campaign on the Google site hired by its client who uses them for further purposes. OIDAR services are those services which can be accessed by anyone all over the globe. In the instant case, the Appellant provides service only to specific person who in turn uses the same for viewers of world. The nature of service is more akin to Business Support Service. Hence, services in question are not under OIDAR category. The Appellant is also engaged in development of Mobile apps and web design development activities for its clients. Mobile application development is the process of making software for smart phones, tablets and digital assistants. The software can be preinstalled on the device, downloaded from a mobile app store or accessed through a mobile web browser. It is not an information and database for retrieval but it is software development activities for further operation. Hence the same cannot be classified under OIDAR. Once the classification of said services is not covered under OIDAR services, the place of provision in respect of service being rendered by the Appellant is outside India in respect of which export has been claimed. The place of provision Rule 9(b) of the POPS Rules, 2002 would not be applicable in the present case. The impugned order is set aside - appeal allowed.

Issues Involved
1. Classification of services provided by the Appellant.
2. Applicability of Rule 9(b) of the Place of Provision of Services Rules, 2012 (POPS Rules).
3. Determination of whether the services qualify as export services.
4. Legality of the demand for Service Tax along with interest and penalty.

Issue-wise Detailed Analysis

1. Classification of Services Provided by the Appellant
The primary issue was whether the services provided by the Appellant during the period 01.04.2015 to 30.11.2016 were classifiable under the category of "Online Information and Database Access or Retrieval Services" (OIDAR). The Appellant argued that their services, including "Search Engine Optimization Service," "Google Ads/Pay Per Click Service," and "Applications & Web Development/Designing Service," did not fall under OIDAR as defined under Rule 2(l) of the POPS Rules, 2012. The Tribunal agreed with the Appellant, noting that these services did not involve providing data or information for access or retrieval in electronic form through a computer network, which is a requirement for classification under OIDAR. The Tribunal cited several judicial decisions to support this view, including Dewsoft Overseas Pvt. Ltd., Philips Electronics India Ltd., and United Telecom Ltd.

2. Applicability of Rule 9(b) of the POPS Rules
The Department had argued that the services provided by the Appellant were OIDAR services and, as per Rule 9(b) of the POPS Rules, 2012, the place of provision of service in the case of OIDAR was the location of the service provider, which in this case was India. However, the Tribunal found that the services provided by the Appellant did not meet the criteria for OIDAR services and thus, Rule 9(b) was not applicable. Consequently, the place of provision for these services was outside India.

3. Determination of Whether the Services Qualify as Export Services
Since the services provided by the Appellant were not classified as OIDAR services, the Tribunal determined that these services could be considered as export services. The Appellant had provided these services to overseas clients, and the place of provision was outside India. Therefore, the services qualified as export services, and no service tax was chargeable on them.

4. Legality of the Demand for Service Tax Along with Interest and Penalty
Given the Tribunal's findings that the services provided by the Appellant were not OIDAR services and qualified as export services, the demand for Service Tax, along with interest and penalty, was deemed illegal. The impugned order by the Pr. Commissioner, CGST Noida, was set aside, and the appeal was allowed with consequential relief.

Conclusion
The Tribunal concluded that the services provided by the Appellant did not fall under the category of OIDAR services. Consequently, Rule 9(b) of the POPS Rules was not applicable, and the services were deemed export services. The demand for Service Tax, along with interest and penalty, was set aside, and the appeal was allowed with consequential relief.

(Order pronounced in open court on – 18th July, 2024)

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