2018 (11) TMI 461 - AT - Service Tax

Online Information and Data base Access & Retrieval service - agreement with M/s. Globe Centre, a division of Nestle Australia to share expenses towards establishing and maintaining a SAP software system providing standardized information infrastructure - reverse charge mechanism - Held that - The appellant had agreed to install the Globe Template in a common computer system and the appellant had been granted access to the computer system for its use. The appellant can only access its own data and the data and information on the computer system belongs to the appellant and is neither owned nor provided by Globe Center. In that circumstance, the services in question do not qualify as online Information and data base access and retrieval service - the appellant is not liable to pay service tax under reverse charge mechanism. Manpower Recruitment or supply Agency service - expenses in foreign exchange largely in relation to bonus, medical expenses and school fees, for employees of other Nestle Affiliates - Held that - The appellant is not Manpower Recruitment or supply Agency and the amount paid to the affiliates for the benefit of the appellant s own employees, is not to be treated as consideration towards providing manpower recruitment and supply agency service - Admittedly, appellant is not Manpower Recruitment or supply Agency, therefore, the appellant is not liable to pay service tax under reverse charge mechanism. Technical testing service - testing for sample dispatched of its product and raw materials to laboratories located outside India for analysis and testing making report available to the appellant - demand pertains to the period 1.1.2005 to 17.4.2006 - Held that - Hon ble Bombay High Court in the case of Indian National Ship-owners Association vs. Union of India 2008 (12) TMI 41 - BOMBAY HIGH COURT which has been affirmed by the Hon ble Supreme Court reported in 2010 (17) STR J57 (SC) has observed that prior to 18.4.2006, no service tax is payable by the recipient located in India on the service received from abroad under reverse charge mechanism - As the period pertains prior to 18.4.2006, therefore the demand is not sustainable. Commercial Training or Coaching service - appellant received books from M/s. Competitive Dynamics and SGV Development - amounts were remitted abroad towards training of employees outside India - Held that - Mere supply of reading material cannot be equated to postal coaching. Further training services for employees were rendered outside India and not taxable as import of service. Services, if any, having been performed outside India, cannot be taxed in India in view of the decision of this Tribunal in the case of Cerebral Learning Solutions Pvt.Ltd. 2013 (4) TMI 527 - CESTAT NEW DELHI - appellant is not liable to pay service tax the category of Commercial Training or Coaching service. Online Information and Data base Access & Retrieval service paid for internet charges - appellant has availed leased line services from Equant Network Services Ltd, a global network connectivity provider to communicate with Nestle Environment and outside - Held that - The services provided to the appellant is only for connectivity between two places and therefore, in the absence of provision of data or information, internet charges cannot be liable to tax under the category of Online Information and Data base Access & Retrieval service - demand set aside. Club or association service - period 16.6.2005 to 17.4.2006 - Held that - Prior to 18.4.2006 any service received from outside India is not taxable under the reverse charge mechanism in view of the decision of the Hon ble Bombay High Court in the case of Indian National Ship-owners Association - demand not sustainable. Advertising and advertising agency - period 1.1.2005 to 17.4.2006 - reverse charge mechanism - Held that - The demand has been confirmed for the period 1.1.2005 to 17.4.2006 under the reverse charge mechanism prior to 18.4.2006, therefore, the said demand is not sustainable against the appellant in view of the decision of the Hon ble Bombay High Court in the case of Indian National Ship-owners Association. Software maintenance - period 1.1.2005 to 31.12.2007 - Held that - The appellant has procured software packages for its accounts department, human resource, enterprise resource planning, maintaining consumer complaint and licence of Microsoft Software and incurred expenses for use and their maintenance. As per circular No.70/19/2003 dt.17.12.2003, maintenance of software cannot be taxable to service tax as repair and maintenance as software is not goods. Software is a part of computer system and would therefore be covered by the circular. Therefore, any service rendered outside India is not taxable in India - demand not sustainable. Mnagement consultancy service - period 1.1.2005 to 10.5.2007 - Held that - The appellant has incurred expenses to students of Switzerland who undertake studies on how to improve the productivity of milk and come for training and provide advice to mil farmers. The said activity of providing assistance or advice in respect of technical aspects of production would not be covered under the definition of management consultant. Similarly, these students are not managing the appellant s organizaiton as they have to do nothing with management of organization. In that circumstance, no service tax is payable under management consultancy service - demand not sustainable. Consultancy engineer services - period 1.1.2005 to 31.12.2008 - Held that - The expenses incurred towards licence renewal of job evaluation system to reward technologies Pty Limited and for spares paid to Gambo B.V. which cannot be categorized under consultancy engineer services, no service tax is payable by the appellant - demand set aside. Misc. expenses for the period 1.1.2005 to 31.12.2008 - appellant has incurred miscellaneous expenses in convertible foreign exchange which includes legal charges, courier charges, import of product samples, book, charges for damages goods exported, entertainment expenses abroad, membership fees, etc. - Held that - The show cause notice has not indicated the specific category of taxable services under which the said amount is taxable. In that circumstance, no service tax is payable by the appellant. Moreover, the services provided outside India and for the services rendered outside India no service tax is payable in India - demand not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Online Information and Database Access & Retrieval Service
2. Manpower Recruitment or Supply Agency Service
3. Technical Testing Service
4. Commercial Training or Coaching Service
5. Internet Charges under Online Information and Database Access & Retrieval Service
6. Club or Association Service
7. Advertising and Advertising Agency Service
8. Software Maintenance Service
9. Management Consultancy Service
10. Consultancy Engineer Services
11. Miscellaneous Expenses
12. Market Research Agency Service

Detailed Analysis:

1. Online Information and Database Access & Retrieval Service:
The demand for the period 01.01.2005 to 30.04.2011 was confirmed under this category for expenses towards establishing and maintaining a SAP software system. The appellant argued that the service did not qualify as "online information and database access and retrieval service" as per Section 65 (75) of the Finance Act, 1994. The Tribunal agreed, referencing previous judgments, and held that the appellant is not liable to pay service tax under this category.

2. Manpower Recruitment or Supply Agency Service:
The demand of ?13,81,919/- was confirmed for expenses related to employees of other Nestle Affiliates. The Tribunal found that the appellant is not a Manpower Recruitment or Supply Agency and the expenses were for the appellant's employees. Hence, the demand was not sustainable, referencing the Gujarat High Court's decision in Arvind Mills Ltd.

3. Technical Testing Service:
The demand of ?17,71,200/- for the period 1.1.2005 to 17.4.2006 was for sample testing services. The Tribunal referenced the Bombay High Court's decision in Indian National Ship-owners Association and held that no service tax is payable for services received from abroad prior to 18.4.2006. The demand was set aside.

4. Commercial Training or Coaching Service:
The demand of ?76,820/- was for books and training services rendered outside India. The Tribunal held that mere supply of reading material cannot be equated to postal coaching and services performed outside India are not taxable. The demand was set aside, referencing the Tribunal's decision in Cerebral Learning Solutions Pvt. Ltd.

5. Internet Charges under Online Information and Database Access & Retrieval Service:
The demand of ?7,18,029/- was for leased line services from Equant Network Services Ltd. The Tribunal found that the service was for connectivity and not for providing data or information. Hence, the demand was not sustainable, referencing the Tribunal's decision in State Bank of India.

6. Club or Association Service:
The demand of ?4,798/- for the period 16.6.2005 to 17.4.2006 was set aside as services received from outside India prior to 18.4.2006 are not taxable under the reverse charge mechanism, referencing the Bombay High Court's decision in Indian National Ship-owners Association.

7. Advertising and Advertising Agency Service:
The demand of ?8,97,936/- for the period 1.1.2005 to 17.4.2006 was set aside for the same reason as above, that services received from outside India prior to 18.4.2006 are not taxable under the reverse charge mechanism.

8. Software Maintenance Service:
The demand of ?2,16,768/- for the period 1.1.2005 to 31.12.2007 was for software maintenance. The Tribunal referenced Circular No.70/19/2003 and the decision in Jonson & Johnson Pvt. Ltd., holding that software maintenance is not taxable as repair and maintenance. The demand was set aside.

9. Management Consultancy Service:
The demand of ?6,28,989/- for the period 1.1.2005 to 10.5.2007 was for expenses related to students providing advice to milk farmers. The Tribunal held that this activity does not qualify as management consultancy service. Additionally, services received from outside India prior to 18.4.2006 are not taxable. The demand was set aside.

10. Consultancy Engineer Services:
The demand was for visiting fees and expenses for licence renewal and spares. The Tribunal found that these expenses cannot be categorized under consultancy engineer services, and no service tax is payable.

11. Miscellaneous Expenses:
The demand for miscellaneous expenses in convertible foreign exchange was set aside as the show cause notice did not specify the taxable service category, and services rendered outside India are not taxable.

12. Market Research Agency Service:
The demand was set aside as no payment was made by the appellant, and service tax is payable only on receipt of remuneration.

Conclusion:
The Tribunal held that no demand is sustainable against the appellant under the reverse charge mechanism for services rendered outside India. The impugned orders were set aside, and the appeals were allowed with consequential relief.