2010 (5) TMI 138 - AT - Service Tax

Manpower supply services- The appellants herein are engaged in testing of functionality and performance of software developed by its clients. Appellants were also engaged to supply the required skilled manpower to test the software being developed by their clients. A show-cause notice proposing recovery of service tax on technical testing and analysis services and on manpower supply services was issued. The notice also raised a demand of interest and proposed imposition of penalty. In the light of the decision of Stag Software Pvt. Ltd. Vs Commissioner of Service Tax, Bangalore held that- software testing being an integral part thereof, was not covered under the technical inspection and certification service. And in the light of decision of Cognizant Tech. Solutions (I) Pvt. Ltd. Vs Commissioner, LTU Chennai held that- set aside the order and remand back the matter. The appeal is thus allowed by remand.

Summary

Issues:
1. Liability of service tax on technical testing and analysis services.
2. Liability of service tax on manpower supply services.
3. Applicability of previous tribunal decisions.
4. Consideration of time bar and other pleas raised by the assessees.

Analysis:
1. The appellants were involved in testing software functionality and performance for clients. The excise authorities deemed the testing service liable to service tax from 1.7.2003 onwards. Additionally, supplying skilled manpower for software testing became taxable from 16.6.2005. A show-cause notice demanded service tax for both services totaling Rs.1,05,35,102 along with interest and penalties. The Commissioner upheld the demand and imposed various penalties under different sections of the Finance Act, 1994.

2. The appellants cited the Tribunal's decision in Stag Software Pvt. Ltd. Vs Commissioner of Service Tax, Bangalore [2008 (10) STR 329], which held that software testing was not covered under technical inspection services. They also relied on Cognizant Tech. Solutions (I) Pvt. Ltd. Vs Commissioner, LTU Chennai [2010 (18) STR 326] for the manpower supply service issue. The Tribunal noted that both these decisions were delivered after the impugned order. Therefore, the case was remitted for fresh consideration in light of these judgments, including the plea of time bar and other defenses raised by the appellants.

3. The Tribunal emphasized the need to consider the applicability of the Stag Software and Cognizant Technology decisions, which were delivered after the initial order. The adjudicating authority was directed to reassess the case, taking into account these precedents and allowing the appellants a fair opportunity to present their defense.

4. Ultimately, the appeal was allowed by remand for fresh orders to be passed after considering the relevant judgments and giving the appellants a reasonable chance to be heard. The operative part of the order was pronounced on 6.5.2010 by the Technical Member and Vice-President of the Tribunal.