2018 (11) TMI 1093 - AT - Service Tax

Classification of service - Online Information and Database Access or Retrieval Services or not - infrastructure services availed from overseas group entity in the Netherlands - Held that - The main take away from the definitions is that services provided should facilitate not only online information but also Database Access or Retrieval. From the facts on record, it appears to reason that the infrastructure services are nothing but a spider web group which connects Philips Netherlands to all its locations worldwide through the Wide Area Network (WAN) of internet protocol - all the infrastructure services are only in the nature of providing intra connectivity between Philips locations worldwide and the payments made are obviously then for sharing of the maintenance cost between the Philips units and not as fees for supply of online information or retrieval of data from the portal. The impugned infrastructure services cannot by any stretch of imagination be brought within the fold of Online Information and Database Access or Retrieval - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Classification of services under the category of "Online Information and Database Access or Retrieval" (OIDAR) for service tax liability.
2. Applicability of service tax demand for the period beyond the normal limitation period.

Analysis:
1. Classification of Services under OIDAR Category:
The case involved the appellants engaged in manufacturing and marketing products who availed infrastructure services from their overseas group entity in the Netherlands. The issue was whether these services fell under the OIDAR category for service tax liability. The appellant argued that the services provided by the overseas entity were more akin to telecommunication services facilitating connectivity between different offices. They contended that the services did not involve the provision of online information or data retrieval for a consideration, as required under the statutory provisions. The appellant relied on a previous judgment of the Tribunal where a similar service tax demand was set aside. The Tribunal analyzed the nature of services provided, including managed backbone infrastructure, email services, and IT infrastructure, and concluded that these services did not qualify as OIDAR. The payments made were for intra-connectivity between locations and not for online information or data retrieval. Therefore, the impugned order demanding service tax liability under OIDAR was set aside.

2. Applicability of Service Tax Demand Period:
Another issue raised was the applicability of the service tax demand for the period beyond the normal limitation period. The demand was for the period from April 2006 to December 2007, while the show cause notice was issued in August 2010, which exceeded the standard limitation period. The appellant argued that the demand was time-barred. However, the Tribunal did not delve deeply into this issue as the primary contention regarding the classification of services under OIDAR was sufficient to set aside the demand. The Tribunal's decision to allow the appeal with consequential benefits, if any, was based on the finding that the infrastructure services provided did not fall under the OIDAR category, thereby invalidating the service tax liability.

In conclusion, the Tribunal's judgment in this case revolved around the classification of services under the OIDAR category for service tax liability and the subsequent setting aside of the demand based on the nature of services provided. The decision provided a detailed analysis of the services rendered by the overseas entity and their compatibility with the statutory provisions governing OIDAR services.