2023 (6) TMI 1160 - AT - Service Tax

Classification of services - Online Information and Data Base Access and / or Retrieval Services or not - setting up the network for transfer of data not provided by them - HELD THAT - In the instant case, the Respondent has been providing System Networking Services . The said service involves linking of two or more computing devices together for the purpose of sharing data. Networks are built with a mixture of computer hardware and software. The work of the Respondent is to undertake inter-linking of computers through installations of required software and hardware. It is the contention of the Respondent that they were nowhere concerned with supply / retrieval of any information or data through any network to any person whomsoever - There was no allegation in the notice also that they have supplied/ retrieved any information or data through any network to any person. It is observed that the Respondent has provided solutions to their customers based on various network models, architectures etc, and thus they have provided service for making available telecommunication network through which data and information can reach from one place to another for the purpose of sharing data - this service will not be classifiable as Online Information and Data Base Access and / or Retrieval Services liable to service tax. From the activity of the Respondent, it is observed that they are neither involved in generation of data or information nor involved in providing the same to their clients. They are involved in setting up the network for transfer of data not provided by them. Thus, the Respondent has not provided the service of Online Information and Data Base Access and / or Retrieval Services to their clients - the impugned order dropping the demands holding that the Respondents have not rendered Online Information and Data Base Access and / or Retrieval Services is sustainable. Appeal of Revenue dismissed.

Summary

Issues:
The issue involves the classification of services provided by the Respondent under the categories of "business Auxiliary Service" and "Internet Café Service" as defined under Sections 65(19) and 65(57) of the Finance Act, 1994, specifically in relation to "Online Information and Data Base Access and / or Retrieval Services" for which Service Tax was not paid.

Summary:
The Appellate Tribunal CESTAT KOLKATA considered a case where M/s Net 4 Communications, the Respondent, was providing services related to System Networking Services involving linking computing devices for data sharing. The department issued a show cause notice for non-payment of Service Tax for the Financial Year 2005-06. The Commissioner dropped the demands raised, leading to the department's appeal.

The Adjudicating Authority dropped the demand based on the observation that the Respondent's services did not fall under the category of "Online Information and Data Base Access and / or Retrieval Services" as they were not involved in generating or providing data to clients but in setting up networks for data transfer.

The Tribunal analyzed the definitions under Section 65 of the Finance Act, 1994, regarding "online information and database access or retrieval service." It was noted that the essential ingredients for classification under this category include providing data or information retrievable in electronic form through a computer network.

The Tribunal found that the Respondent's activities did not involve generating or providing data to clients but focused on setting up networks for data transfer. Therefore, it was held that the Respondent did not provide "Online Information and Data Base Access and / or Retrieval Services" to their clients. Consequently, the impugned order dropping the demands was deemed sustainable, leading to the rejection of the department's appeal.

In conclusion, the Tribunal rejected the department's appeal, emphasizing that the Respondent's services did not fall under the category of services subject to Service Tax.