2008 (12) TMI 86 - AT - Service Tax

Contract with two infotech companies for providing services of its engineers for software development and maintenance at premises of client of said companies demand under head Manpower Recruitment and Supply Agency - held that manpower kept at disposal of infotech companies could be described as engineering consultancy rendered in the discipline of computer software engineering which is not liable to tax during material period i.e. 16-6-2005 to 31-3-2006 stay granted

Summary

Issues:
Waiver of pre-deposit and stay of recovery of dues adjudged against the appellant.

Analysis:
The case involved an application seeking waiver of pre-deposit and stay of recovery of dues adjudged against a company in an impugned order. The Commissioner had demanded a significant amount towards service tax, education cess, interest, and penalties under the Finance Act, 1994. The company, registered as a 'Manpower Recruitment and Supply Agency', provided highly skilled engineers to IT majors for software development projects. The revenue claimed that the company provided manpower services and was liable to pay service tax under the 'MRSA' category. However, after examining the contracts between the company and the IT majors, it was found that the services provided were in the discipline of computer software engineering, which was not taxable during the material period. The company invoiced the IT majors for programming support and technical assistance in software engineering, which did not change the nature of the service provided. The Tribunal concluded that the company had made out a prima facie case against the demand of tax, interest, and penalties, and ordered the waiver of pre-deposit and stay of recovery of dues pending the appeal decision.

The Tribunal noted that the technical consultancy services provided by the company in computer software engineering were not taxable during the relevant period. It was established that the company's personnel worked under specific task orders from the IT majors, providing software services of a sensitive and confidential nature. The contracts with the IT majors outlined the services to be provided, including software development, modification, and other deliverables. Invoicing was done based on fixed-man-month or man-day rates, and the company charged for programming support and professional services. The Tribunal found that the services rendered were in the discipline of computer software engineering and that the character of the service was not altered by the invoicing method or supervision by the IT majors. The Tribunal concluded that the company had a prima facie case against the tax demand and ordered the waiver of pre-deposit and stay of recovery of dues pending the appeal decision.

Additionally, the company had filed an application for an out-of-turn hearing of their appeal due to the high stakes involved. Considering the circumstances, the Tribunal allowed the application for an expedited hearing of the appeal to address the issues raised in the case.