2014 (11) TMI 163 - AT - Service Tax

Waiver of Pre deposit - Digital Signature Certificate (DSC) and Secure Socket Layer Certification (SSLC) services - appellant contended that activities of DSC and SSLC would not pertain to IT software and therefore they do not come within the service tax net under IT services - Held that - The essential ingredients of the definition of information technology software are that these are recorded in the machine readable form. Machines normally used for manipulating or providing interactivity to users by means of computer or automatic data processing machine or in other devices of equipment. Software should be written in readable form. The software is meant to operate the machine and it is coded in machine readable language. The data has to be processed by machine using the software. Prima facie, we find that the applicants upload the information in the software to create the required DSC. It is submitted by the applicant in their statements that they were providing IT services to their customers. It appears that recording of data in machine readable form is involved in DSC and SSLC and would cover under IT services. The levy of service tax is not dependent on the fact thereof who retained the source code. But, there is some force in the submission of the learned Advocate in respect of demand of tax on SSLC under BSS and DCS Services. The applicant failed to make out a strong prima facie case for waiver of pre-deposit of entire amount of dues - Partial stay granted.

Summary

Issues:
Demand of service tax on Digital Signature Certificate (DSC) and Secure Socket Layer Certification (SSLC) services.

Analysis:
1. The dispute revolves around the demand of service tax on Digital Signature Certificate (DSC) and Secure Socket Layer Certification (SSLC) services provided by the applicants. The adjudicating authority confirmed the demand of tax along with interest and penalty for the specified periods.

2. The applicants argued that the demands were raised under different headings for various periods, emphasizing that the activities related to DSC and SSLC do not fall under IT services for service tax purposes. They relied on Board's letters to support their contention.

3. The adjudicating authority dropped the demand of tax on DSC under specific categories, following the Board's letter. However, the demand on SSLC was not justified as SSLC is a voluntary activity not requiring government licensing. The demand of tax on SSLC under IT services was considered barred by limitation.

4. The applicants further argued that their activities related to IT software, including agreements with a global player for software usage, do not fit within the definition of IT software services under the relevant section.

5. On the contrary, the Revenue representative argued that the activities undertaken by the applicants, involving automatic data processing machines, fall within the purview of IT services. The definition of IT software and related services under the Finance Act were highlighted to support this argument.

6. The Revenue representative emphasized that the Board's letter is applicable concerning the issuance of DSC certificates, which are defined in the IT Act. SSLC was differentiated as a continuous process for securing web transactions. A Supreme Court decision was cited to support this argument.

7. The Tribunal reproduced the nature of activities related to DSC and SSLC from the adjudication order, highlighting the technical processes involved in issuing DSCs and the security features of SSLC for internet transactions.

8. The definition of "Information Technology services" under the Finance Act was referenced, emphasizing the scope of taxable services related to IT software development, consultancy, and usage rights.

9. Statements from the applicant-company's finance manager were presented to illustrate the nature of services provided, including Public Key Infrastructure solutions and licensing agreements with global certifying authorities.

10. The Tribunal referred to a Supreme Court case to define "software" in the context of computer programs and operating systems, highlighting the importance of machine-readable instructions for software functionality.

11. Considering the facts and legal provisions, the Tribunal directed the applicants to make a pre-deposit, acknowledging the involvement of machine-readable data in DSC and SSLC activities, potentially falling under IT services for tax purposes.

12. The Tribunal's decision required a pre-deposit with a deadline for compliance, with the balance dues waived upon the initial deposit and recovery stayed during the appeal process.