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TMI Blog2024 (6) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... in the nature of providing intra connectivity between Philips locations worldwide and the payments made are obviously then for sharing of the maintenance cost between the Philips units and not as fees for supply of online information or retrieval of data from the portal'. It is well established fact that there is no res-judicata in the taxation matter even if in some cases party have discharged service tax liability by treating these services under the category of OIDAR that cannot be a para for not claim otherwise in subsequent transactions - the claim of revenue that these services should be classified under the category of OIDAR cannot be accepted and the appeal on this ground lacks merit. As it is held that the services provided by the appellant are not classifiable under the category of OIDAR but the same are classifiable under the category of Business Support Service as per Rule 3 of Place of Provision of Services Rules, 2012, benefit of export of services is admissible to the appellant and no service tax could have been demanded from him as per the show cause notice. Appeal filed by the revenue is rejected. - HON BLE MR. P. K. CHOUDHARY , MEMBER ( JUDICIAL ) And HON B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the impugned orders along with the submissions made in appeal and during the course of argument. 4.2 To drop the demand Original Authority has in the Order-in- Original observed as follows:- The party in this regards has submitted that their services are not covered within the definition of online information and database access or retrieval services' and describes the nature of service being provided by them which appears to be covered under Business Support service and insisted that the classification of the service can be changed at later stage. They also referred certain judgments and para 5.9.5 of the Education Guide issued by the Central Board of Excise and Customs ('CBEC) on 20th June 2012, specifically clarifies the scope of 'online information and database access or retrieval services' as under: I find that 5.9.5 of the Education guide of Service tax issued by CBEC on 20.06.2012 clarified that Online information and database access or retrieval services are services in relation to online information and database access or retrieval or both, in electronic form through computer network, in any manner. Thus, these services are essentially delivered over the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ker/ report for submission to Dataflow Dubai. e) The consideration charged by the Noticee on the impugned invoices raised on Dataflow Dubai comprises of the following: d) Management fee, Education Verification Fees USD 20, Health Verification Fees USD 20, Employment Verification Fees USD 10 e) Out of pocket expenses incurred in relation to fulfilling the scope of services including costs of travelling, airfares, accommodation, transport, gifts and entertainment expenses f) Other expenses as may be approved by Dataflow Dubai I observe that plain reading of agreement and sample report, it is evident that the party performs activities outsourced to it by Dataflow Dlibai and renders operational, managerial and verification support to Dataflow Dubai in relation to investigation, detection or verification of specified persons. Subsequently, the party summarizes its findings and prepares reports, including data entry in software for communicating the same to the Dataflow Dubai. I also find that the party have step wise process of business is as follows:- Step 1: Input of request verification, to be verified, into the system Step 2: Verification is done through various modes that include c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting, and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing. Thus, on a plain reading of this service, it can be observed that the phrase 'means services provided in relation to business or commerce' as used in the definition, is very wide in its coverage. In fact, if full and proper meaning of the words as used in the means clause of the definition is given then the meaning will become too general and there will be no requirement of separately classifying any other taxable service. I further find that Ministry of Finance vide D.O.F.No.334/4/2006-TRU dated 28 February 2006 has clarified that Service tax liability in respect of export and import of services which clarifies that BSS seeks to tax all 'outsourced services' of a business. Thus, where any activity which the business is otherwise required to perform as a part of its normal business activity and when it is outsourced to another person, then such outsourc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and manner of services rendered by it to Dataflow Dubai where the nationality of the applicant appearing in the Annexure to the invoices are Indian or Foreign, is completely baseless, It is on records that the party time and again clarified during the course of Audit and between issuance of SCN, that the manner and nature of services rendered by them does not depend upon the nationality of the applicant as mentioned in the annexure to the invoices raised by them. Further, the nature of services provided by them can also be confirmed from samples reports prepared and shared by them with Dataflow Dubai (on the consideration of which no service tax was paid by them) and the Contract between Dataflow Dubai and its client (for understanding the work/ services which have been outsourced by Dataflow Dubai to them). I find force in party's plea that there is no 'res judicata' or 'estoppel' in taxation matters. The assessee as well as the Department is free to change its stand about taxability, and demand can be raised or the refund/ exemption can be claimed within the time limited prescribed by the law. It is a settled legal view that merely following a wrong policy dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 has also not provided any data. The responsibility of the appellant is to see that the network (WAN) functions. This cannot be equated with Online database access/retrieval services The same principle has also been upheld by the Delhi Tribunal in the stay proceedings for Nestle India Ltd. vs. CCE, New Delhi (2011 (22) S.T.R. 165). Further, in the case of State Bank of India vs. Commissioner of Service Tax, Mumbaj -II [2015 (37) STR 340 (Tri-Mumbai)], the Tribunal said that the ownership of data is vital in determining whether the service will qualify as OIDAR or not. Copies of the abovementioned judgements are collectively enclosed as Annexure B. Basis the principle laid down in the abovementioned judgments, in order to render 'OI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment has always been to include only those services under the category of 'OIDAR services, the essential characteristic of which is that the service rendered is mediated automatically by information technology over the internet. The same was made a part of the definition to remove ambiguities in law which were leading to litigation. Moreover, post the amendment in the definition of OIDAR service, Circular No. 202/12/2016- Service Tax dated 09 November 2016 was issued by the government explaining the category of services that are required to be classified as OIDAR services. On perusal of the clarifications issued vide the circular dated 9 November 2016 and basis the facts of the instant case, the services provided by the party appears fallen under Point 7 (serial no. 15) of the table which clearly indicates that services mediated by information technology over internet or an electronic network and which is not automated would not be classified as OIDAR services. I find that the case laws referred by the party in this regards are applicable on the facts of this case. Therefore, I am of the opinion that the party's service are covered under Business support service, now, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the recipient of service is located. In other words, place of provision of services shall be the location of the service receiver. As discussed above, in the instant case, the service recipient is Dataflow Dubai. Accordingly, place of provision of Business Support Services provided by the party shall be the location of Dataflow Dubai, which is Dubai. Thus, condition (d) stands fulfilled. c) Payment for the Business Support Services provided by them is received in convertible foreign exchange and is verifiable from the foreign inward remittance certificates and bank realization certificates issued by the Banker of the Company. Thus, condition (e) stands fulfilled. d) They and Dataflow Dubai are separate legal entities and not the establishments of distinct person in accordance with item (b) of Explanation 3 of clause (44) of Section 65B of the Act. Thus, condition (f) stands fulfilled. e) As all the conditions specified under Rule 6A of the ST Rules, for a service to qualify as export are fulfilled, services provided by the party to Dataflow Dubai qualify as export. Therefore, I am inclined to accept that the party's plea has a lot of force and is tenable, their services a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the verification service undertaken by him in form of verification reports to his client. CBEC vide circular no 202/12/2016-ST dated 09- 11-2016 (para 2, sl. no. 12), with regard to query Do OIDAR services include all services mediated by information technology over internet or electronic network? has clarified that - Using the internet, or some electronic means of communication, just to communicate or facilitate outcome of service does not always mean that a business is providing OIDAR services. In the instant case, the respondent was using electronic communication system (dedicated website/server/internet) only to receive the verification requests from his clients and to deliver the final verification reports to them. From facts and circumstances of the case as discussed above, I find that nature of service provided by respondent to his overseas clients was different from nature of services defined as OIDAR Services. 7. The appellant department, on the other hand, has submitted that during the material period, the respondent classified the services provided by him under the category of OIDAR in his registration certificate, service tax returns and invoices and change of classifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Business Support Services' for which the place of provision would be governed by provisions of general Rule 3 of PoPS Rules 2012, i.e., location of the recipient of service which, in the instant case, was outside the taxable territory and correctly allowed the benefits of export of services to the respondent by dropping the demand. 4.4 It is observed that both the authorities has concluded that the services provided by the appellant are more appropriately fall under the category of Business Support Service and not under OIDAR, as alleged in the show cause notice. In case of Business Support Service as per Rule 3 of Place of Provision of Services Rules, it is the location of the service recipient which is abroad. Accordingly, both the authorities have concluded that the services provided by the appellant are export of services and hence no service tax was due from him. Therefore, by dropping the demand, revenue has without showing any perversity in the order has filed this appeal challenging the above findings and facts. The challenge made by the revenue is on two grounds namely:- I. The Respondent is providing data in electronic format through computer network and is thus cover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f digital content. The following services will not be treated as online information and database access or retrieval services :- i) Sale or purchase of goods, articles etc over the internet; ii) Telecommunication services provided over the internet, including fax, telephony, audio conferencing, and videoconferencing; iii) A service which is rendered over the internet, such as an architectural drawing, or management consultancy through e-mail; iv) Repair of software, or of hardware, through the internet, from a remote location; v) Internet backbone services and internet access services. By Circular No. 202/12/2016 dated 09.11.2016 following was clarified: 12. Do OIDAR services include all services mediated by information technology over internet or electronic network? Using the internet, or some electronic means of communication, just to communicate or facilitate outcome of service does not always mean that a business is providing OIDAR services 13. What services would NOT be considered as OIDAR services? Indicative list of non-OIDAR services i. Supplies of goods, where the order and processing are done electronically ii. Supplies of physical books, newsletters, newspapers or journa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its clients/entities namely Dataflow Dubai by using network of computers. 4.9 In case of Philips Electronics India Ltd. [2019 (21) GSTL 450 (Tri.-Mad)] following has been held: 5.2 The department has sought to bring these IT infrastructure services within the fold of OIDAR. We find that the term Online Information and Database Access or Retrieval has been defined under Section 65(75) of the Act to mean providing Data or Information Retrieval or otherwise to any person in electronic form through a computer network. Further under Section 65(105)(zh) of the Act, taxable service means any service provided or to be provided to a client by any person in relation to Online Information and Database Access or Retrieval or both, in electronic form through computer network in any manner. 5.3 The main take away from the definitions is that services provided should facilitate not only online information but also Database Access or Retrieval. From the facts on record, it appears to reason that the infrastructure services are nothing but a spider web group which connects Philips Netherlands to all its locations worldwide through the Wide Area Network (WAN) of internet protocol. For such Philips ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 2(17) of the IGST Act. On a perusal of said definition, such services have been defined to mean services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention and impossible to ensure in the absence of information technology and includes electronic services such as advertising on the internet; providing cloud services; provision of e-books, movie, music, software and other intangibles through telecommunication networks or internet; providing data or information, retrievable or otherwise, to any person in electronic form through computer network; online supplies of digital content (movies, television shows, music and the like); digital data storage and online gaming. We would wonder as to how such specialized service as being provided by the petitioner under the Agreement as entered between the petitioner and Emirates Defence Industries Co., could at all be said to be of the nature falling under the OIDAR provided under Section 2(6) of the IGST Act. No doubt that in providing such services, the petitioner was required to tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not amount to the petitioner falling within the definition of Section 2(17). 4.11 It is well established fact that there is no res-judicata in the taxassion matter even if in some cases party have discharged service tax liability by treating these services under the category of OIDAR that cannot be a para for not claim otherwise in subsequent transactions, reliance is placed on the following decisions : - Intelligroup Asia Pvt. Ltd. Versus Commissioner OF C. EX., Hyderabad, 2016 (46) S.T.R. 679 (Tri. - Bang.); Dunlop India Ltd. Madras Rubber Factory Ltd. vs. Union of India and Others, 1983 (13) E.L.T. 1566 (S.C.); Collector of Central Excise Customs, Pune vs. Vulcan Level Ltd., 1985 (22) E.L.T. 123 (Tribunal); Crompton Greaves Ltd vs Collector, 2002 (142) ELT A182 (SC). 4.12 Thus, the claim of revenue that these services should be classified under the category of OIDAR cannot be accepted and the appeal on this ground lacks merit. 4.13 As we hold that the services provided by the appellant are not classifiable under the category of OIDAR but the same are classifiable under the category of Business Support Service as per Rule 3 of Place of Provision of Services Rules, 2012, benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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