2023 (3) TMI 1172 - AT - Service Tax

Levy of Service Tax - reverse charge mechanism - management, maintenance or repair service or not - appellant s Head Office was at U.S.A., from whom they purchase the software, enter into an agreement/contract with Indian customers for maintenance and enhancement of the software sold by them and that the appellant had incurred expenditure in foreign currency towards the purchase - Revenue neutrality - Extended period of limitation. HELD THAT - Admittedly, the provider of service is a foreign entity who would only upload the programme on to the website, provide the internet website address and a password for the same - Section 66A is the charging section under reverse charge mechanism on the services provided or to be provided by a person who is not having a permanent address or usual place of business or residence in a country other than India; and received by a person having business or place of residence, in India - Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, as the name itself indicates, shall apply for services provided from outside India and received in India, when Section 66A ibid is applicable. There is no difficulty for this proposition as the very Rule 3 ibid. starts with subject to Section 66A of the Act . A conjoint reading of the above provisions points only to the fact that they shall apply when services are provided from outside India , and not if the services are provided by a person in India, to any other person in India. This follows, therefore, that both the statutory provisions would apply only when the location of the service provider is outside India and the recipient is located in India. Further, the Adjudicating Authority has negated the claim of the appellant that it is the second proviso to Rule 3(ii) of the Taxation of Services Rules ibid. that would apply, by holding that the software which was supplied by the foreign company was very much available in India upon its receipt by the appellant, which was only thereafter forwarded within India to the customers - It is in the second proviso that we see the reference, inter alia, to the service provided in relation to any goods. There is no dispute here that the software is treated as goods and the alleged service albeit provided through internet, but performed in India. Therefore, to say that the software was available in India, with the appellant and hence the provision of service was from India only, as observed by the Adjudicating Authority, runs counter to the demand of Service Tax under reverse charge mechanism within the meaning of Section 66A ibid. read with Rule 3 (ii) of the Taxation of Services Rules ibid. The appellant could not have been fastened with the Service Tax liability under management, maintenance or repair service for the reason that there is no document placed on record to negate the appellant s claim that they have not rendered any service in India and the Revenue has also not been able to place anything on record in their support to establish that the appellant had rendered nothing but management, maintenance or repair service. The issue insofar as it relates to invoking of extended period of limitation, not decided as the same is academic. Appeal allowed - decided in favour of appellant.

Summary

Issues Involved:
1. Liability to Service Tax under the category of 'management, maintenance or repair' service.
2. Revenue neutrality.
3. Invocation of the extended period of limitation.

Summary:

1. Liability to Service Tax under 'Management, Maintenance or Repair' Service:
The Revenue contended that the appellant's activities constituted management, maintenance, or repair service, making them liable for Service Tax under the reverse charge mechanism per Section 66A of the Finance Act, 1994, and Rule 2(i)(d)(iv) of the Service Tax Rules, 1994. The appellant argued that they only forwarded passwords and website addresses to customers, who then downloaded and used the software, and thus did not provide any maintenance or repair services themselves. The Tribunal found that the Revenue failed to prove that the appellant rendered management, maintenance, or repair services in India and noted that the software was supplied by a foreign entity and downloaded by customers in India. Therefore, the Tribunal concluded that the appellant was not liable for Service Tax under the said category.

2. Revenue Neutrality:
The Tribunal did not decide on the issue of revenue neutrality, noting that it depends on the facts of each case, referencing the Larger Bench decision in M/s. Jay Yuhshin Ltd. v. Commissioner of Central Excise, New Delhi and the Supreme Court decision in M/s. Star Industries v. Commissioner of Customs (Imports), Raigad.

3. Invocation of Extended Period of Limitation:
The Tribunal did not address the issue of the extended period of limitation, considering it academic in light of their decision on the merits.

Conclusion:
The appeals were allowed on merits, with consequential benefits as per law, as the Tribunal found no evidence that the appellant rendered management, maintenance, or repair services in India. The order was pronounced in open court on 24.03.2023.