2024 (10) TMI 1260 - AT - Service Tax

Levy of service tax - Whether the activity rendered by the appellant amounts to rendering Online Information and Data Based Access or Retrivial Services (OIDAR) services? - HELD THAT - As per circular no. 11/1/2001-TRO-dated 09.07.2001, annexure IV thereof, it has been clarified that the online data base access/retrival is firstly available through Internet Service Providers (ISP). Secondly it includes data base services, provision of information on websites, provision of online data retrieval services from data bases and other information to all or to limited number of users and provision of online information by content provider. The services as quoted above do not require any of these two elements. The activity rendered by appellant is not merely of accessing or retrieving online data. It is rather a service of developing softwares/websites or consultancy on internet which require too much of human intervention - the appellant s activity is wrongly hold as OIDAR. The confirmation of demand is held to be based on wrong presumption (as elaborated above) is denied to be called as OIDAR. Rule 6(A) of Service Tax Rules is also held to have been wrongly invoked - the appeal is hereby allowed.

Summary

Issues:
- Whether the appellant's services qualify as OIDAR services for taxation purposes.

Analysis:
The appeal challenged an Order-in-Appeal upholding a demand for service tax against the appellant. The appellant, a service provider, was accused of evading service tax by providing services online to a US-based client. The department argued that the services fell under 'Online Information and Data Based Access or Retrieval Services' (OIDAR services), making the appellant liable for service tax. The appellant contended that their services constituted the 'Export of Services' as they were provided from India to a client outside India, thus exempt from tax liability. The key issue was whether the appellant's activities qualified as OIDAR services.

The tribunal analyzed the definition of OIDAR services under the Finance Act 1994, emphasizing the provision of data or information electronically through a computer network. The appellant's services to the US client included various IT services, website hosting, marketing, and content writing, which did not align with the definition of OIDAR services. The tribunal referred to circulars clarifying OIDAR services, highlighting that such services are automated and require minimal human intervention, unlike the appellant's services involving significant human input.

The tribunal cited circulars specifying services that do not fall under OIDAR services, such as sale of goods online, telecommunication services, and consultancy through email. Based on these definitions and clarifications, the tribunal concluded that the appellant's activities did not constitute OIDAR services but rather involved software development and consultancy requiring substantial human involvement. Consequently, the tribunal set aside the order confirming the tax demand, ruling in favor of the appellant and allowing the appeal.

In conclusion, the tribunal's decision hinged on the interpretation of the appellant's services in the context of OIDAR services. By examining the nature of the services provided and comparing them to the definitions and guidelines provided in relevant circulars, the tribunal determined that the appellant's activities did not meet the criteria for OIDAR services, leading to the appeal being allowed and the tax demand being overturned.