2025 (1) TMI 74 - AT - Service Tax

Classification of service - Online Information Data and Access Retrieval (OIDAR) Service or not - refund claims under Rule 5 of the CENVAT Credit Rules, 2004 - export of services or not - HELD THAT - As per the agreement, foreign entity provides raw data to the Appellant in form of manuscripts, articles, photographs and other content required for carrying out the various activities by the Appellant such as copyediting, typesetting, formatting, proofreading, graphic designing, indexing, coding, etc. by using human skill and labour on such data and sends the same in electronic form through internet for access by foreign entity. In this whole process, the ownership of the data vests solely with the foreign entity and is not transferred to the Appellant. The services provided by the appellant do not qualify as OIDAR services as per the above definition. As per the provisions of the said services, appellants are not owing or providing any data through the network of computers to anybody, their services do not fall under the category of OIDAR Services. A basic requirement for classification under the said category that services should have been in respect of the data owned by the person by way of providing access and retrieval of the same to some other person. Nothing has been brought on record to show that appellants have provided any of such services. Just for the reason that appellants have got themselves registered under this category, cannot be a reason for holding that the services provided by the appellants fall under this category. The services provided by the appellants do not fall under the category of OIDAR Services, there are no merits for denial of the refund claims filed by the appellants under Rule 5 of Cenvat Credit Rules read with Notification No.27/2012-ST dated 18.06.2012. Conclusion - The classification of services must be based on the nature of the services provided, not merely on registration categories. Export of services is determined by the location of the service recipient and the nature of the transaction. The services provided by the appellants are not OIDAR services. The appellants are entitled to a refund under Rule 5 of the Cenvat Credit Rules as the services qualify as exports. Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions addressed in this judgment include:

Whether the services provided by the appellants qualify as 'Online Information Data and Access Retrieval' (OIDAR) services under the relevant legal framework.
Whether the services provided by the appellants can be treated as export of services, thereby making them eligible for a refund under Rule 5 of the Cenvat Credit Rules, 2004.
Whether the appellants are entitled to Cenvat credit for services received at unregistered premises.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification as OIDAR Services

Relevant Legal Framework and Precedents: The classification of services as OIDAR is governed by the Service Tax Rules, 1994, and the Place of Provision of Service Rules, 2012. The definition of OIDAR services includes services delivered over the internet or an electronic network, which are automated and involve minimal human intervention.
Court's Interpretation and Reasoning: The court found that the services provided by the appellants did not qualify as OIDAR services because they involved significant human intervention and were not automated.
Key Evidence and Findings: The appellants provided content processing, data management, and technical support services, which required human skill and labor. The ownership of the data remained with the foreign entity, and the services were not automated as required for OIDAR classification.
Application of Law to Facts: The court applied the definition of OIDAR services and concluded that the appellants' services did not meet the criteria for such classification.
Treatment of Competing Arguments: The appellants argued that their services were business support services, not OIDAR. The court agreed, noting the lack of evidence to classify the services as OIDAR.
Conclusions: The court concluded that the services provided by the appellants did not fall under the category of OIDAR services.

Issue 2: Export of Services and Refund Eligibility

Relevant Legal Framework and Precedents: Rule 5 of the Cenvat Credit Rules, 2004, allows for a refund of Cenvat credit in cases of export of services.
Court's Interpretation and Reasoning: The court held that since the services were not OIDAR, they could be treated as export services, making the appellants eligible for a refund.
Key Evidence and Findings: The court noted that the services were provided to a foreign entity, and consideration was received in convertible foreign exchange.
Application of Law to Facts: The court applied Rule 5 and concluded that the appellants were entitled to a refund as the services qualified as exports.
Treatment of Competing Arguments: The respondents argued that the services were provided within India and did not qualify as exports. The court rejected this argument based on the nature of the services.
Conclusions: The court allowed the refund claims under Rule 5 of the Cenvat Credit Rules.

Issue 3: Cenvat Credit for Services at Unregistered Premises

Relevant Legal Framework and Precedents: Cenvat credit is typically available for services used in providing output services, but issues arise when services are received at unregistered premises.
Court's Interpretation and Reasoning: The court found that the appellants failed to establish the use of services received at unregistered premises for providing output services.
Key Evidence and Findings: The appellants did not provide sufficient evidence to demonstrate the use of input services received at unregistered premises.
Application of Law to Facts: The court applied the self-assessment principle, placing the onus on the appellants to prove eligibility for credit, which they failed to do.
Treatment of Competing Arguments: The appellants argued for credit eligibility, but the court upheld the denial due to insufficient evidence.
Conclusions: The court denied Cenvat credit for services received at unregistered premises.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The services provided by the appellants do not fall under the category of OIDAR Services."
Core Principles Established: The classification of services must be based on the nature of the services provided, not merely on registration categories. Export of services is determined by the location of the service recipient and the nature of the transaction.
Final Determinations on Each Issue:

The services provided by the appellants are not OIDAR services.
The appellants are entitled to a refund under Rule 5 of the Cenvat Credit Rules as the services qualify as exports.
Cenvat credit for services received at unregistered premises is not admissible due to lack of evidence.

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