2018 (10) TMI 88 - AT - Service Tax

Online Information and Data Retrieval services - Levy of Service Tax - transaction of assignment of the receivables by the respondents to the assignee - recipient of services - Whether the transaction under consideration, i.e. the assignment of debt by the respondents to the assignee is a service liable for tax under the category of taxable services? Held that - Undisputed fact is that RCOM was recipient of certain services from RIL which included the services of sale of handsets to the customers of RCOM. RIL was the provider of services and selling the handsets to customers of RCOM in respect of which the outstanding dues has arisen. These outstanding dues amounting to ₹ 3901 Crores were assigned by M/s RIL to M/s SESPL for a consideration of ₹ 3426 Crores. SESPL paid the entire amount of ₹ 3426 Crores to RIL 26.03.2004. Later on SESPL got merged with M/s RCIL the respondent, and all the assets including the receivables assigned by the RIL became assets in the hand of RCIL. RCIL after writing of the bad debts and other adjustments reduced the net receivables to ₹ 1212.12 Crores and assigned the same to Mahimna and Traitrya for a consideration of ₹ 297 Crores. Thus in fact the transaction between the respondents and assignee is one of the assignment/ sale of receivables for a consideration and not one of providing the taxable service under the category of Online Information and Data Retrieval services. In the entire appeal revenue has challenged the order of Commissioner on the ground that Commissioner has failed to cause the verification of the documents, and have sought the matter to be remanded back to the adjudicating authority for causing the verification of the documents - the said ground of verification is not sustainable as all the documents relating to said transaction ₹ 297 Crores were before the Commissioner and only after consideration of the said documents he has arrived at the findings. Since no service has been provided by the respondents in the present case under the category of Online Information and Data Retrieval services under the transaction under consideration, there is no merit in the appeal filed by the revenue. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Whether the assignment of debts by the respondent to the assignees constitutes a taxable service under the category of "Online Data Information and Retrieval" services.
2. Whether the Commissioner failed to verify relevant documents and clauses of the Assignment Agreement.
3. Whether the amount received from the assignment of debts is attributable to services provided by the respondent or by another entity.
4. Whether the statutory auditor's certificate is valid.
5. Whether the transaction should be remanded back to the adjudicating authority for further verification.

Comprehensive, Issue-Wise Detailed Analysis:

1. Taxability of Assignment of Debts:
The primary issue is whether the assignment of debts by the respondent to the assignees is a taxable service under "Online Data Information and Retrieval" services. The tribunal examined that the transaction involved the assignment of receivables amounting to ?1212.12 Crores for a consideration of ?297 Crores. The tribunal noted that these receivables were related to the sale of goods and services provided by the respondent to its customers. However, the transaction between the respondent and the assignees was distinct and was not in respect of telecom services provided by the respondent to its customers. Therefore, the tribunal concluded that the assignment of receivables does not constitute a taxable service under the said category.

2. Verification of Documents and Clauses:
The revenue argued that the Commissioner did not consider various clauses of the Assignment Agreement, specifically clauses 2.1, 2.2, and 2.6, and did not verify invoices and correspondences. The tribunal found that all relevant documents were before the Commissioner, who had considered them before arriving at the findings. Thus, the tribunal held that the ground of verification was not sustainable.

3. Attribution of Amount Received:
The Commissioner had held that the amount received by the respondent was not attributable to services provided by the respondent to its customers but to services provided by another entity, RCOM. The tribunal agreed with this finding, noting that the receivables had arisen from services provided by RCOM and were assigned to the respondent after various mergers and assignments. Therefore, the demand for service tax on the amount received from the assignment of debts was not sustainable.

4. Validity of Statutory Auditor's Certificate:
The revenue questioned the validity of the statutory auditor's certificate, arguing that it was signed as "Chaturvedi & Shah" without indicating the name of the signing person. The tribunal found that "Chaturvedi & Shah" were the statutory auditors of the respondent company, and any objection regarding the manner of signing the certificate was not sustainable at this stage.

5. Remand for Further Verification:
The revenue sought to remand the matter back to the adjudicating authority for further verification of documents. The tribunal found no merit in this request, as the Commissioner had already considered all relevant documents and arrived at the findings. The tribunal also noted that the decisions of the Hon'ble Apex Court in Tamil Nadu Kalyan Mandapam Association and Bharat Sanchar Nigam Limited did not advance the revenue's case, as those decisions were rendered in respect of services provided to customers, which was not the case here.

Conclusion:
The tribunal dismissed the appeal filed by the revenue, holding that the assignment of debts by the respondent to the assignees did not constitute a taxable service under "Online Data Information and Retrieval" services. The tribunal found no merit in the revenue's arguments regarding verification of documents, attribution of the amount received, validity of the statutory auditor's certificate, and the request for remand. The appeal was pronounced dismissed in court.