9911796707
TMI Blog2020 (8) TMI 695X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the appellant themselves at the customers end. Instead, the entire delivery of software service has been out sourced by the appellant to the subsidiary and the subsidiary got paid for these services. The argument of the Department is that the billing is done by the subsidiary in terms of number of manpower or man days of different persons required / utilised for performing the services. It is a common practice in business for consultancy firms to bill the clients in terms of number of man hours of the personnel required at different levels required. Even, advocates may charge their clients for the number of hours spent on their case. Merely because the total amount has been billed using the number of man hours / man days as a measu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds. 3. The appellant herein provides Consulting Engineering Services, Information Technology Services, Map Making Services, Maintenance and Repair Services and Manpower Recruitment and Agency Services and are registered with the service tax department. Show cause notices dated 22.02.2010 and 12.10.2010 were issued to the appellant demanding service tax under reverse charge mechanism on the amounts which they have paid to their subsidiaries located abroad namely M/s IEII, M/s IEEL, M/s IEG and M/s IEJ. Learned Counsel for the appellant would submit that they are engaged in providing software services to their customers abroad. Provision of software services requires some amount of the work to be done at their customers end which include ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from subsidiary companies demand of service tax of ₹ 1,22,75,546/-. They are also contesting the interest on the above amounts and all penalties imposed. 5. Learned Counsel would submit that the demands were made in the show cause notices and confirmed by the impugned order on the amounts which they have paid to their subsidiary companies for the services. The nature of the contracts is identical in all cases. He would take the Bench through the service performance agreement dated 01.07.2006 entered into between the appellant (IEL) and their subsidiary Infotech Enterprises America Inc. (IEAI). The relevant portions of the agreement are as follows: 3.SERVICES TO BE PERFORMED BY IEAI: 3.1 Delivery of Software Services: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Correction: IEAI shall provide Error correction(s) in the form of interim service packs as directed by IEL and shall incorporate such Error correction into the next Release of the Software Services. Obligations of IEL and IEAI 1. IEAI s Obligations: IEAI s obligation is to render / develop Software / Software Services in accordance with the specification provided by IEL. IEAI does not assume any responsibility regarding any defects in the Software / Software Services to any third party. 2. IEAI s Obligations: Understand fully the requirement of the third party client. Prepare steps involved in the project and draw overall delivery plan. Clearly provide specification of work to be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68) of the Finance Act, 1994 with effect from 16.06.2005, as under: Manpower recruitment or supply agency means any commercial concern engaged in providing any service, directly or indirectly, in any manner for recruitment or supply of manpower, temporarily or otherwise, to a client. Section 65(68) of the Finance Act, 1994 as amended by the Finance Act, 2006, with effect from 01.05.2006 reads as below: Manpower recruitment or supply agency means any person engaged in providing any service, directly or indirectly, in any manner for recruitment or supply of manpower, temporarily or otherwise, to a client. From 16.06.2005 in terms of sub-clause (k) of section of Section 65 (105) of the Finance Act, 1994, taxable service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in the agreements to show that the subsidiary is required provide manpower to the appellant in those countries. If that was the case, the services had to be performed by the appellant themselves at the customers end. Instead, the entire delivery of software service has been out sourced by the appellant to the subsidiary and the subsidiary got paid for these services. 9. The argument of the Department is that the billing is done by the subsidiary in terms of number of manpower or man days of different persons required / utilised for performing the services. It is a common practice in business for consultancy firms to bill the clients in terms of number of man hours of the personnel required at different levels required. Even, advocates ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
