2014 (5) TMI 838 - AT - Service Tax

Waiver of pre deposit - Information Technology Service - whether the service of this type is one of Man-power Supply Service or Information Technology Service has to be examined with reference to each of the contracts - Held that - There are about 20 such contracts involved in this demand. On a preliminary scrutiny, we find both types of contracts. In one type the receiver of service were organisations like banks which hire services of others to develop software or certain modifications software and the agreement specified tasks for development of software and the billing also was in terms of the completed part of the development project. The other type agreements suggest that the service provided is of Man-power Supply service, which is evident from bills raised on man-month basis and also from the fact that the receiver of service was also a software developer which would imply that the applicant could not have been developing the software - Conditional stay granted.

Summary

Issues:
Classification of services provided by the applicant as "Man-power Supply Service" or "Information Technology Service."

Analysis:
The judgment revolves around the classification of services provided by the applicant as either "Man-power Supply Service" or "Information Technology Service." The applicant, registered for service tax under the category of "Information Technology Service," was alleged to have not paid service tax on certain services provided, which the Revenue contended fell under "Man-power Supply Service." The dispute centered on the nature of the services provided by the applicant and the applicable tax liability.

The applicant argued that the services in question should be classified as "Information Technology Service" under Section 65(105) (zzzze), effective from 2008, even though they related to activities before 16-05-08. The applicant emphasized that their contracts with clients clearly outlined tasks that they performed independently, with the right to refuse tasks and discretion in task execution. The applicant presented a specific contract with M/s. GE Capital Corporation to support their argument, highlighting deliverables such as software preparation and delivery, which they contended did not constitute "Man-power Supply Service" subject to service tax before 16.05.2008.

In contrast, the Revenue contended that the invoices raised by the applicant indicated a "Man-power Supply Service" arrangement, where personnel were provided to fulfill obligations under agreements. The Revenue highlighted clauses related to resource availability, personnel selection, and maintenance of personnel standards, suggesting a service provision more aligned with "Man-power Supply Service" rather than "Information Technology Service."

Upon evaluating the submissions from both parties, the Tribunal analyzed around 20 contracts involved in the dispute. The Tribunal observed a mix of contract types, with some indicating software development services and others pointing towards "Man-power Supply Service." Contracts with organizations like banks for software development specified tasks and billing based on project completion, suggesting an IT service nature. However, agreements with software developers and billing on a man-month basis implied a "Man-power Supply Service" arrangement. Consequently, the Tribunal directed the applicant to make a further pre-deposit of Rs.25 lakhs within six weeks, pending the appeal's disposal, to maintain a balance in dues collection as per the impugned order.

In conclusion, the judgment delves into the intricate details of the services provided by the applicant, emphasizing the need for a nuanced examination of individual contracts to determine the correct classification for service tax purposes. The decision underscores the importance of contract specifics and billing practices in discerning between "Man-power Supply Service" and "Information Technology Service" to ascertain the appropriate tax liability.