2017 (12) TMI 1205 - AT - Service Tax

Management, Maintenance and Repair Service - software - levy of tax - Held that - the services repair, maintenance and management of software by the entity situated outside India was carried out through internet. Such services were brought into tax net by insertion of proviso to Rule 3 (ii) of the Taxation of Services (Provided From Outside India and Received in India), Rules, 2006 vide N/N. 6/2008 - ST dt. 01.03.2008 - the services become taxable by insertion of above w.e.f. 01.03.2008, whereas in the present case the demand pertains to the period 13.06.2005 to 17.11.2006, hence the service tax is not leviable - demand not sustainable. Business Support Service - Held that - the services were rendered in respect of providing international roaming services to the customers of the Appellant and the same falls under the category of Telecommunication services and the same is not taxable - demand set aside. Development & Supply of content for Telecommunication, Advertising and Online Information Services - demand paid before issuance of SCN - penalty - Held that - except services under the category of Development & Supply of content for Telecommunication, Advertising and Online Information Services no service tax is payable and the demands are set aside. In case of demand under the Category of D & STA Services taking into consideration the fact of deposit of Service tax with interest before issuance of show cause notice and the revenue neutrality, we find it fit not to impose any penalty - penalty not sustainable. Appeal allowed in part.

Summary

Issues:
1. Liability for service tax on services received from entities outside India.
2. Applicability of reverse charge mechanism for service tax.
3. Taxability of services under different categories.
4. Payment of service tax before the issuance of show cause notice.
5. Consideration of revenue neutrality in imposing penalties.

Analysis:
1. The appeal addressed the issue of liability for service tax on services received from entities outside India. The appellant was held liable for payment of service tax under the reverse charge mechanism for services like Maintenance of Billing and Customer Care Software, International Connectivity Services to roaming subscribers, and services towards download of content provided by entities outside India. The demands were confirmed by the adjudicating authority and upheld by the Commissioner (Appeals), leading to the appeal.

2. The appellant argued that certain services were not taxable before a specific period and that the demand under the category of Business Support Service was not sustainable as it fell under Telecommunication services, which were not taxable. The appellant also highlighted that the demand under the category of "Development & Supply of content for Telecommunication, Advertising and Online Information Services" had been paid before the issuance of the show cause notice, and the service tax paid was available as credit, making the situation revenue neutral.

3. The Tribunal examined the provisions related to the taxation of services provided from outside India and received in India. It was noted that the services of repair, maintenance, and management of software by entities outside India through the internet were brought into the tax net by an insertion in the rules effective from a specific date. As the demand in the present case pertained to a period before the taxable services became applicable, the service tax was deemed not leviable, rendering the demand unsustainable.

4. Regarding the demand under the category of Business Support Service, the Tribunal found that the services provided were related to international roaming services, falling under Telecommunication services, which were held to be non-taxable based on a previous case ruling. Additionally, the demand under the category of "Development & Supply of content for Telecommunication, Advertising and Online Information Services" had been paid along with interest before the show cause notice was issued, leading to the conclusion that no service tax was payable in this regard.

5. Considering the facts presented, the Tribunal ruled that except for the services under the category of "Development & Supply of content for Telecommunication, Advertising and Online Information Services," no service tax was payable, and the demands were set aside. Furthermore, no penalty was imposed due to the deposit of service tax with interest before the issuance of the show cause notice, and the situation being revenue neutral. Consequently, the penalty against the appellant was deemed unsustainable, and the appeal was partly allowed with consequential reliefs granted to the appellant.