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TMI Blog2011 (1) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... Regarding software maintenance - It is the submission of the appellant that maintenance and repair includes development of software and in fact development of software is outside the preview of service tax since the Information Technology service became liable to Service Tax on the development of software only with effect from 16-5-2008 - In the absence of the word 'development' and presence of word 'maintenance' in the agreement, and also in view of the failure of the appellant to submit bifurcation, we have to take a view that the agreement covers maintenance only - suppression of facts could not have been invoked in this case, In view of the above decision, - maintenance of software became taxable only from 1-6-2007. Regarding SSDC - IWhen the meter reading is not done by the implementing agency, as can be seen from the contract with the respective Assistant Accounts Officers or EROs are required to provide meter reading books on the prescribed dates and the appellant is required to enter the data of meter readings, verify the same, incorporate in the computer master and process the bills - Held that: this activity is correctly classifiable under SSBC as claimed by the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intenance (iii) Website Maintenance (iv) Cat Database Maintenance (v) Consumer Indexing (vi) Watch 86 Ward Route Riders 3. After verification of the records recovered and recording the statements and further scrutiny of the records, department took a view that the activity of the appellant in providing services such as Electricity Call Centre, Customer Service Centre, Computerized Collection Centre, Energy Audit, Consumer Indexing, Watch Ward Route Riders etc., fall in the category of Business Auxiliary Service and liable to levy of Service Tax and consequently the proceedings were initiated. After following the principles of natural justice, the impugned order has been passed, whereby the demand for Service Tax of Rs. 74,28,063 has been confirmed with interest as applicable. Further, penalty of Rs. 73,04,414 has been imposed under section 78 of Finance Act, 1994 and further penalty has also been imposed under various other sections of Finance Act, 1994. 4. On behalf of the appellant, a chart of services rendered, taxability/service tax paid was submitted and since it reflects all the services rendered by the appellant and briefly explains the nature of servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a new service category called "Information Technology Service" in section 65(15)( zzze ) levying Service Tax on development of software In any case, maintenance of software cannot be taxed under Management maintenance or repair service prior to 1-6-2007, on which date an Explanation was added considering software as goods to the definition from 1.6.2007. Hence, BMS Maintenance was not liable during the disputed period 2,21,889 4,442 5,808 6. Consumer Indexing This activity is development of GIS software and other IT service and hence is outside the purview of Service Tax as the Finance Act, 2008 has imposed Service Tax on development of software from 16-5-2008 as stated supra . Hence, no liability arises during the disputed period 7. Watch and ward and Route Riders Service. This activity cannot be taxed under Business Auxiliary Service and also the show-cause notice is not clear about classification of said service, hence no Service Tax is payable on this activity. Total 18,22,974 34,440 1,27,688 5. The submissions ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in his statement itself admits that most of the activities of the Customer Service Centre relates to the call centre activity and Customer Service Centre and Computerized Collection Centre component in the total call centre activity is 27 per cent only. This itself shows that the claim of the appellant that the service rendered by them was call centre and the same was exempt prior to 1-3-2006, fails. He submits that this claim is also not acceptable in view of the fact that the service rendered by the appellant cannot be called as call centre service at all. 8. We do not find substance in the claim that show-cause notice has travelled beyond the scope. The show-cause notice only makes a statement of fact that call centre service was exempt till 1-3-2006 and nowhere there is an admission that the appellant was rendering call centre service only. 9. After considering the first submission, we proceed to consider the merits of the classification of different types of services rendered by the appellant. 10. Before we proceed, it would be necessary to reproduce the meaning/definitions of BAS/SSBC as under : BAS : "business auxiliary service" means any service in relation to, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctural support services and other transaction processing. Explanation. For the purposes of this clause, the expression "infrastructural support services" includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security." First item is the service rendered by the appellant in Electricity Call Centre, Customer Service Centre, and Computerized Collection Centre. The claim of the appellant is that this was nothing but call centre service, whereas the department has classified the service as Business Auxiliary Service. The Managing Director of the Company had admitted that the Call centre activity amounted to 73 per cent and Customer Service Centre and Computerized Collection Centre activity amounted to 27 per cent. To this effect, a certificate has been given by General Manager (Costing) of APEPDCL. 11. There are several agreements executed by the appellant with different electricity companies of Andhra Pradesh and electricity departments/companies of Orissa. Since all are similarly worded, it would be worthwhile to examine one of the agreements to unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are required to be referred to concerned persons. The software is required to help in monitoring of complaints till the same are resolved. In this case, it can be seen that the nature of work performed by the so called electricity call centres, can be said to be registration of complaint on behalf of the electricity board and monitoring of the same till the complaints are resolved. The Electricity Call Centre is a place of generation of report indicating the details of the complaints received and resolved. When we look at the nature of services, it is covered by clause (vi) under the definition of Business Auxiliary Service as defined in Finance Act, 1994 and management of the complaints and resolution is covered by item/clause (vii) of the definition. The role of call centre according to the definition is to provide assistance, help or information through telephone on behalf of another person. In this case, the Electricity Call Centre is not providing any assistance excepting registering complains which is basically a service to be provided by electricity company and it is also not required to provide any help or information. We are unable to see any of the three roles - assistan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service receiver and service provider and the customer would not be dealing with the service provider at all. Once the appellants deal with the customer, he is acting on behalf of the electricity company/department and therefore classification of services provided by the appellant is appropriately to be classified under Business Auxiliary Service and not under SSBC. 13. The next service under dispute is software maintenance. The learned Commissioner in impugned order has held that e-Care maintenance, website maintenance and database maintenance are all maintenance contracts for the software used in their website etc. Software are goods and repair of the same are chargeable to Service Tax under the category of management or repair service with effect from 9-7-2004, the date on which earlier Notification was rescinded by Notification No. 7/04-ST, dated 9-7-2004., The learned Advocate submitted that it became taxable only with effect from 1-6-2007 as per the amendment of Finance Act, 1994 and explained in the Circular No. 334/1/2007, dated 28-2-2007. He submitted that this has been totally ignored to demand tax. He relied upon the decision of the Apex Court in the case of Union of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to have a retrospective operation on the premise that it is clarificatory or declaratory in nature. There is no doubt this clarification widen the scope of taxation of service." In any case, the appellants themselves have submitted that the liability can arise after 1-6-2007, Therefore, in view of the ratio of the decision in the case of Martin Lottery Agencies Ltd. (supra), we consider that it would not be appropriate to apply the Explanation retrospectively and levy Service Tax with effect from 9-7-2004. In any case, the very fact that Explanation has been added to clarify doubts, would show that suppression of facts could not have been invoked in this case, In view of the above decision, we hold that maintenance of software became taxable only from 1-6-2007. 16. The next service to be considered is billing and accounting work. The learned Commissioner has taken a view that billing activity and accounting of the same comes under Business Auxiliary Service. In fact, she has not discussed this separately but has taken it as one of the activities related to Electricity Call Centre, Customer Service Centre and Computerized Collection Centre. She has taken a view that just because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s similar provision. In all these cases, the billing and accounting is not done on behalf of electricity companies/departments but is for them. There is no interaction/communication with the customers. The meter readings are required to be provided by the electricity department and these are to be entered into computer and data generated. Further, bills are required to be generated. According to the definition of SSBC, services provided in relation to the business or commerce, including accounting and processing of transaction is covered by SSBC. In this case, billing is a transaction and when the meter reading is provided, the meter reading is entered and the bills are generated. This is nothing but a transaction processing. When the meter reading is not done by the implementing agency, as can be seen from the contract with the respective Assistant Accounts Officers or EROs are required to provide meter reading books on the prescribed dates and the appellant is required to enter the data of meter readings, verify the same, incorporate in the computer master and process the bills. In view of the above discussion, this activity is correctly classifiable under SSBC as claimed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y facilitating consumer indexing and it cannot be said that other activities are incidental or ancillary. For classification purpose, we have to look into the essential character of the service and in this case, development of software only facilitated the consumer indexing and real work is physical in nature as observed by learned Commissioner. In this case, we find that the reliance of the learned Jt. CDR on the decision of the Tribunal in the case of CCE v. Deloitte Tax Services (India) (P.) Ltd. [2008] 16 STT 499 (Bang. - CESTAT). In that case, it was held that back office services and other activities such as tax service, international assignment service etc., were not related to development of software. It was also observed that use of computer in these services was secondary and primary activity was that of business related work. Therefore, it is quite clear that this cannot be classified as IT service. 20. The next question that arises is whether it can be considered as Business Auxiliary Service. Once again we find that appropriate classification for this service is SSBC only. This again can be said to be covered under the category of managing distribution and logistics. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Centre, Spot billing, consumer indexing, e-care maintenance, website maintenance, energy audit, Watch and ward route rider, Computerized Collection Centre, billing and accounting, CAT data base maintenance etc. That being the position, the claim of the appellant that they believed that service provided by them was call centre and therefore had bona fide belief that they were not liable to pay service tax, cannot be accepted. It is a statutory obligation on the part of every service provider to see whether the service rendered by him is liable to Service Tax and make declaration to the department. There is no indication to show whether the appellant had sought clarification from the department or obtained any legal opinion as regards liability to Service Tax. There was a statutory obligation cast on the appellant to obtain registration and pay Service Tax in respect of various services. It has to be noted that even on 3-3-2006, when the application was made, the appellant had not indicated all activities undertaken by them. Therefore, we have to uphold the invocation of extended period. 23. The learned Commissioner has imposed penalty under section 76 but has not quantified the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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