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TMI Blog2020 (10) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... routine administration as averred in the SCN - the services availed by the appellants from M/s Hewitt Associates and M/s Communication Services cannot be categorised under Business Support Service before 01.05.2011. Whether the networking (telecommunication related) services received by the Appellant from overseas group entities can be classified as Online Information Database Service (referred as Computer Network Service )? - HELD THAT:- The global entity has created a network of computers and provided connectivity between different group entities so that information and data can be exchanged. We find that the learned AR argues that provision of information is also categorised under OIADR. In such a scenario, information flows both ways from the appellants to other global entities and vice-versa. In such a case, the appellants at times become service providers and at times service receivers. It is not coming forth either in the SCN or in the OIO that the amount paid by the appellants to the overseas entity is for the information they received, even if assuming that data retrieval is not mandatory. In view of the submission of the appellants and on perusal of the invoices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant also claims that they are further using the global telecommunication channel set-up by its overseas group entities for making long distance international calls, toll free calls, toll free intra location, private telephone line, dedicated point to point lines, voice mail service, Emails, messaging, internet etc. In consideration of using the said global telecommunication channel, the Appellant has made payment to overseas group entities. 2.2. During the relevant period, the employees of overseas group companies have come on secondment to the Appellant. The Appellant has entered into separate employment contract with the Seconded Personnel and employer-employee relationship exists between the Appellant and Seconded Personnel. The Seconded Personnel, during the period of secondment, work under the control and supervision of the Appellant. The salary (including other entitlements) of Seconded Personnel, during the period of secondment, is entirely paid by the Appellant. The Seconded Personnel, as required under the Income Tax Act, 1961, files their respective returns under Section 139 of Income Tax Act, 1961 and returns the entire salary paid by the Appellant (including part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... main activity of the Appellant and therefore, the impugned order is beyond the show cause notice and liable to be quashed and set aside on this ground itself; in any event, the said services are not incidental or ancillary to the main activity of the Appellant; the said services are used by the Appellant for the better administration and operation of its business; without prejudice to above and in any event, providing services incidental or ancillary to the main activity of the client is classified under the category Business Auxiliary service and not under Business Support service ; as there is no proposal to demand service tax under the Business Auxiliary service , service tax cannot be demanded from the Appellant under the category Business Support service . 5. On the demand under the category Online Information Database Service (referred as Computer Network Service), learned counsel submits that at the outset, the correct nomenclature of the service referred as Computer Network Service is Online Information and Database Service ; global telecommunication channel set up by the overseas group provides network to the Appellant; using the said network, the Appellant c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, the appellant is under obligation to pay salary (including other entitlements) to the Seconded Personnel during the period of secondment in foreign exchange in his home country; for administrative convenience, the Appellant remits the salary payable to the Seconded Personnel in his home country in Foreign Exchange through the Seconder Company; the Seconded Personnel, as required under the Income Tax Act, 1961, files their respective returns under Section 139 of Income Tax Act, 1961 and shows the entire salary paid by the Appellant (including part of the salary paid in Foreign Exchange) as his/her income as salaries and pays the income tax thereon. 6.1. He submits that the issue involved is no longer res integra; On the same issue, the Hon ble Supreme Court in Commissioner Vs Nissin Brake India Pvt. Ltd. - 2019 (24) G.S.T.L. J171 (S.C.) has dismissed the civil appeal filed by the department against the order of Tribunal [2019 (24) G.S.T.L. 563 (Tri. - Del.)]; similarly, the Hon ble Supreme Court in Commissioner Vs Krohne Marshall Pvt. Ltd. - 2016 (44) S.T.R. J153 (S.C.) has dismissed the civil appeal filed by the department against the order of Tribunal [2016 (44) S.T.R. 310 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Act, 1994, are also liable to be quashed and set aside. 9. Ms D.S. Sangeetha, Joint Commissioner(A.R.), appearing for Revenue, reiterates the findings of OIO and submits that the appellants have conceded the merits of the case and have argued on legal issues; on the issue of Whether the services received by the Appellant from M/s Hewitt Associates and M/s Communication sciences for which payment has been made in foreign currency is liable to be taxed under Business Support Service, she submits that the appellants developed a global human resource database called HR Workways, where in the details of employees like Name, Educational Qualification, Designation, Contact Number and other personal details were stored; this activity of uploading the details of employees to the global database and generating reports has been outsourced to M/s Hewitt Associates, Bangalore; the appellants outsourced the activity of tracking the calls made by the various Goldman Sachs entities/divisions/sub-divisions and generating reports to M/s Communication sciences and a fee was charged by the communication sciences for tracking and generating the said reports; the Appellant argues that they ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbai has allowed the appeal.; difference lies not only in the disputed activity but also the fact that the appellant was not providing any service to the participating group companies but had only acted in the capacity of pure agent ( Para 3.2); thus, the present appeal is not covered by the judgement of Reliance Ada supra. 10. On the issue of whether the activity of networking of computers of the GSSPL (India) with the computers of group companies abroad would be classified under sec 65(75) online database access and retrieval service, Learned AR submits that the findings of the O-I-O of the order no 115/2012 at para no 4.17 brings out the following. I find from the annexure to debit note no GSSPL/08/2006 dated 13/06/2006 (being the reimbursement claimed for IT services for the month of March 2006) that the services rendered include expenses incurred towards desktop internet access charges; internet server software distribution , mainframe activity charges ;multi media charges and providing real time market data services -database access charges amongst others . This clearly establishes the nature of activity which goes beyond infrastructural services as contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further, the words retrievable or otherwise indicates that it is either or and not both; hence the activity of only sharing of information through computer networks is covered under the definition of OIDAR; the word computer networks is defined under Information technology act 2000 as The interconnection of one or more computers through (i) The use of satellite, microwave, terrestrial line or other communication media (ii) Terminals or a complex consisting of two or more interconnected computers whether or not the interconnection is continuously maintained. 10.3. Learned AR submits that hence, it is very clear that interconnecting one or more computers for sharing of information and it will be covered under OIDAR services; since the Goldman Sachs India and the global entity are two separate legal entities registered under respective laws of the land and would clearly be service receiver and provider for the purpose of Finance Act1994. As per Rule 2(l) (d) (v), the Indian entity is liable to pay service tax on reverse charge basis; she relies upon Vishay Components India Pvt LTD Vs CCE Pune-III 2018(8) G.S.T.L 196 (Tri Mumbai). She also relies upon the following de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, 7[operational or administrative assistance in any manner], formulation of customer service and pricing policies, infrastructural support services and other transaction processing. The words 7[operational or administrative assistance in any manner] have been inserted by Finance Act, 2011 w.e.f. 01.05.2011. Therefore, the levy can only be prospective after that date and not before. 12.2. On the contrary, the learned AR submits that the same circular at Para 5.2. clarifies that: The words operational and administrative assistance have wide connotation and can include certain services already taxed under any other head of more specific description. The correct classification will continue to be governed by Section 65A. 12.3. However, we are not inclined to accept this submission in view of the insertion w.e.f. 01.05.2011, of words operational or administrative assistance i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany is using this networking to access the servers of overseas group companies, retrieve data, process and sends it back in electronic form. It is observed in the SCN that these services received by the Company are liable to tax under the category of Computer Network Service. The details of payments made to overseas group companies under this category are listed I Annexure B to the SCN. We wish to submit that the payments referred to in Annexure B relate to payment for telecommunication services provided to the Company by the overseas group companies. The overseas group companies have set-up a global telecommunication channel for use by other group companies for services such as telephone long distance, international calls, toll free calls, toll free intra location, private telephone lines, dedicated point to point lines, voice mail service etc. The taxable category of CNS has been defined in the Act to mean providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network. It is clear from the above that in order to fall under the taxable category of CNS the following conditions should be satisfied: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to hold that the aforesaid activity of the assessee does not fall under within the scope of telecommunication service, as defined under Section 65 (109a) of Finance Act, 1994. The networking is to provide data or information either retrievable or not; it involves information or data provision in electronic form and mandatorily through a network; retrievable of data is not the prime criteria. From the annexure to debit note no. GSSPL/08/2006 dated 13.06.2006 (being reimbursement claimed for IT services for the month of March 2006) that the services rendered include, expenses incurred towards desktop internet access charges; internet server software distribution, mainframe activity charges; multimedia charges; and providing real time market data services database access charges; amongst others. We find from the above that the learned Commissioner was not clear in his findings. He appears to come to the conclusion that the appellants are liable to pay Service Tax under Network Services as the provider of the circuit is not registered under Telegraph Act. This is not a correct proposition. Revenue requires to come to a definitive conclusion on the nature of the service in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts terminals. The whole issue relates to Wide Area Network (WAN). What is the Wide Area Network? A Wide Area Network is a network with communications often over large distances. It is similar to a Local Area Network which is called LAN in computer terminology. In the case of a WAN, however, this organization may be active in commerce or industry and have plant or offices at number of widely dispersed sites. In the present case, the Andhra Pradesh Government uses the Wide Area Network because the different districts and State capital are situated far from each other. They have to be connected for communication. The ultimate aim is proper governance. For this purpose, the Andhra Pradesh State Government wanted to establish Wide Area Network. The appellants are involved with that Wide Area Network. Therefore, APSWAN is a network providing connectivity between all Government offices in State capital and district centres. 7.1 On going through the contract, we can cull-out the responsibility of the appellant. It is seen that the entire network is not provided by the appellant. What the appellant is providing to the Andhra Pradesh Government is given in Annexure - 1 of the Contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.3 We do not agree with the Commissioner that the ownership of data is not relevant. It is a very relevant factor. Whenever, there is information and data retrieval, the ownership definitely becomes very relevant. Just because, the appellant provided a part of the network equipment, we cannot say that the appellant was responsible for the entire services. Again the entire wide area network has been established for better communication between the districts and the State headquarters. The information will be flowing from different centres to the headquarters and vice versa. This cannot be equated with online information and data retrieval. In any case, the appellant is not responsible for the entire network because we find that the communication lines have been leased out from the BSNL by the Andhra Pradesh Government. When they are not functioning, the appellants are not responsible and they do not lose their service charges. They are responsible only for the proper functioning of the equipment supplied by them. Moreover, the data is generated only by the Andhra Pradesh Government and the same is being used by the different wings of the Government, therefore, the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CS E-Serve Ltd. Vs CST, Mumbai, 2014 (33) STR 641 (Tri. Mumbai) and in the case of Philips Electronics India Ltd., 2019 (21) GSTL 450 (Tri. Chennai). We also find that CBEC vide letter F. No. 137/21/2011 dated 19.10.2011 have clarified that: 2. The matter has been re-examined and it is seen that the IPLC is specifically covered by the definition of the telecommunication service given in clause 65(109a)(iv) of the Finance Act, 1994. As per the said section these services are taxable only when provided by a person who has been granted a licence under the first proviso to sub-section (1) of section 4 of the Indian Telegraph Act, 1985. It is only because the foreign telecom service provider cannot constitute a telegraph authority under an Indian law that they remain outside the taxability clause of the telecommunication service. 13.7 . We find that learned AR has relied upon the Tribunal s judgment in the case of Vishay Components (supra). The issue before the Tribunal was the cost of IT facility shared by the individual entity. Therefore, as we find that the facts of the case being different, it cannot be relied upon. In view of the above, we find that the appellants are not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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