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Judgment
Rachna Gupta, J
The present appeal has been filed to assail Order-in-Appeal no. 790-17-18 dated 13.05.2018 vide which the Order-in-Original no. 31/2017-18 dated 24.11.2017 has been upheld conforming the demand of service tax amounting to Rs. 8946490 (Eighty nine lakh forty six thousand four hundred ninety) along with the interest and the penalty as mentioned in the order.
The facts, in brief, culminating into the order under challenge are as follows:
The appellant M/s Trivedillc Marketing Pvt Ltd, is the service provider but not registered with the Department of Service Tax. Based on the intelligence about evasion of service tax by the appellant, department found that appellant had provided services to M/s Trivedllic Global Ink, USA as their sole client. The services were delivered online to the client and these services involved continuous online assessment and the outcome of the efforts could be utilized by the appellant’s client on a continuous basis through the interest. Department formed the opinion that the said services fall under the category of ‘Online Information and Data Based Access or Retrivial Services’ (herein after referred as OIADR services). As per Rule 9(b) of the place of provision of services Rule 2012 the place of provision of services in respect of OIDAR services is the location of the service provider. Since the services are provided by M/s TrivediLLC in India, the place of provision is the taxable territory of India.
Department also observe that one of the mandatory condition of Rule 6(A) of Service Tax Rules 1994 for any service to be treated as Export of service is that place of provision of service should be outside India. Hence the service provided by the appellant cannot be called as the “Export of Services” as claimed by the appellant. Resultantly while Show Cause Notice no 19/2017 dated 09-06-2017, which was issued invoking the extended period of limitation, demand of service tax of Rs. 8946490 (Eighty nine lakh forty six thousand four hundred ninety) for the period 2013-14 till may 2016 has been proposed along with the appropriate interest and the propriate Said proposal has been confirmed by the Adjudicating Authority below. Being aggrieved of the order passed by Commissioner (Appeals), the appellant is before this tribunal.
We have heard Shri Awadesh Kumar Pandey, Advocate for the appellant and Ms. Jaya Kumari, Authorized Representative for the department.
Learned Cousnel for the appellant has mentioned that the entire case of department is the result of presumption. Since beginning department has wrongly presumed the activity of appellant as OIDAR services. Learned Counsel further mentioned that the services as e-library where only data is accessed can be called as OIDAR services whereas the appellant is developing website for the USA company, not only this, after the developing the customized products those are delivered under password security. Hence the services provided by the appellant are rendered over the internet from the location in India (appellant’s office is in Bhopal) to their receipient who is located outside India (USA). Thus the activity of appellant is the “Export of Services” on which there arises no tax liability on the service provider located in the taxable territory in India. Due to this reason only, the appellant neither got itself registered nor has paid any service tax. The order under-challenge/ Order-in-Original is therefore prayed to be set aside. The Appeal is prayed to be allowed.
While rebutting the above submissions of the appellant, learned DR has reiterated the findings of the Adjudicating Authority/ Commissioner(Appeals) below and has placed on record the notification no 28/2012-ST dated 20.06.2012 vide which were introduced the place of provision of services Rules 2012, as applicable for the period of question. Rule 9(b) of these rules is impressed upon according to which the place of provision for OIDAR services shall be the location of the service provider. The appellant is the service provider and is located in taxable territory of India, hence is liable to pay service tax while providing OIDAR services. Impressing upon no infirmity in the order under challenged appeal is prayed to be dismissed.
Having heard the parties, persuing the record of the appeal and the order under challenged, we observe and hold as follows;
The appellant has claimed activity to the called as ‘Export of Service’ with the mention that all condition of Rule 6(9) of service tax rule 1994 stands compiled with due to which there is no tax liability for the appellant. On the contrary commissioner(Appeals) has alleged the impugned activity as OIDAR services to which applies Rule 9(2) of place of provision Rules 2012. To Adjudicating this controversy the only point of determination is:
Whether the activity rendered by the appellant amounts to rendering OIDAR services.
For the purpose, foremost we need to look into the section 65(19) of finance act 1994 which defines OIDAR to mean providing data or information retrivial or otherwise to a customer in electronic form through a computer network. The words ‘Data’ ‘Information’ ‘Electronic’ ‘Form’ and ‘Computer’ ‘Network’ in the definition have been assigned the same meaning as in Information Technology Act 2000.
The said definitions in IT Act are as follows:
“Data” means a representation of information, knowledge, facts, concepts or instructions which are being prepared or have been prepared in a formalised manner, and is intended to be processed, is being processed or has been processed in a computer system or computer network, and may be in any form(including computer printouts, magnetic or optical storage media, punched cards, punched tapes) or stored internally in the memory of a computer.
“Information” includes data, text, images, sound voice, codes, computer programmes, software and data bases or micro film or computer generated micro fiche.
“Electronic form” with reference to information means any information generated, sent, received or stored in media, magnetic, optical computer memory, microfilm, computer generated microfiche or similar device.
“Computer network” means the interconnection of one or more computers through- the use of satellite, microwave, terrestrial line or other communication media; and terminals or a complex consisting of two or more interconnected computers whether or nor the interconnection is continuously maintained.
We also observe that, apparently and admittedly, appellant has rendered following services to M/s Trivedi Global INC, USA:
i. Oversee and provide information technology services
ii. Website hosting, security updates and etc.
iii. Support live webcasting events
iv. Online marketing services
v. Website concept, design, development, and maintenance
vi. Search Engine Optimization
vii. Social Media marketing
viii. Online Marketing
ix. Online Reputation management
x. Content writing
These activities when seen through the lens of the above definitions, it stands established beyond all doubts that the activities rendered by the appellant cannot be categorised as OIDAR service.
As per circular no. 11/1/2001-TRO-dated 09.07.2001, annexure IV thereof, it has been clarified that the online data base access/retrival is firstly available through Internet Service Providers (ISP). Secondly it includes data base services, provision of information on websites, provision of online data retrieval services from data bases and other information to all or to limited number of users and provision of online information by content provider. The services as quoted above do not require any of these two elements.
CEC had also published circular dated June 20, 2012. The said circular has also defined OIDAR services which were made taxable with effect from 16-07-2001 in following words:
“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 internet or an electronic network which relies on the internet or similar network for their provision. The other important feature of these services is that they are completely automated, and require minimal human intervation.
Examples of such services are:-
i. Online information generated automatically by software from specific data input by the customer, such as web-based services providing trade statistics, legal and financial data matrimonial services, social networking sites;
ii. Digitized content of books and other electronic publications, subscription of online newspapers and journals, online news, flight information and weather reports;
iii. Web-based services providing access or download of digital content.
The circular also clarifies that 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 and conferencing, and video conferencing.”
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 internet, from a remote location.
v. Internet backbone services and internet access services.”
In the light of definitions above and the circulars clarifications discussed above, we hold that the activity rendered by appellant is not merely of accessing or retrieving online data. It is rather a service of developing softwares/websites or consultancy on internet which require too much of human intervention. Hence we hold that the appellant’s activity is wrongly hold as OIDAR. The confirmation of demand is held to be based on wrong presumption (as elaborated above) is denied to be called as OIDAR. Rule 6(A) of Service Tax Rules is also held to have been wrongly invoked. Resultantly order under challenge is hereby set aside and the appeal is hereby allowed.
(Order Pronounced on 23.10.2024 )