Custom, Excise & Service Tax Tribunal
Texas Instruments (India) Pvt Ltd vs Bangalore Service Tax- I on 3 July, 2025
ST/26296/2013
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1
Service Tax Appeal No. 26296 of 2013
(Arising out of Order-in-Original No. 006/2013-ST (Commr) dated
17.01.2013 passed by the Commissioner of Central Excise and
Service Tax, Large Taxpayer Unit, Bangalore.)
M/s. Texas Instruments (India)
Pvt. Ltd.,
Bagmane Tech Park, Appellant(s)
66/3 Adjacent LRDE Byrasandra,
C.V. Raman Nagar Post,
Bangalore - 560 093.
VERSUS
Commissioner of Central
Excise and Service Tax,
Large Taxpayers Unit,
JSS Tower, Respondent(s)
100 feet Ring Road, Banashankari III Stage, Bangalore - 560 085.
APPEARANCE:
Mr. Ravi Raghavan with Ms. Purvi Asati, Advocates for the Appellant Mr. M.A. Jithendra, Assistant Commissioner (AR) for the Respondent CORAM: HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL) HON'BLE MRS R BHAGYA DEVI, MEMBER (TECHNICAL) Final Order No. 20952 /2025 DATE OF HEARING: 06.01.2025 DATE OF DECISION: 03.07.2025 PER : DR. D.M. MISRA This is an appeal filed against Order-in-Original No. 006/2013-ST (Commr) dated 17.01.2013 passed by the Commissioner of Central Excise and Service Tax, Large Taxpayer Unit, Bangalore.Page 1 of 19
ST/26296/2013
2. Briefly stated the facts of the case are that the appellant is having an unit under Software Technology Park of India Scheme and providing taxable services under the category of "Business Support Service", "Consulting Engineering Services", "Management, Maintenance or Repair Service" and "Information Technology Software Service"(ITSS). On the basis of intelligence, investigation was initiated against the appellant that even though they had received Online Information Database Access or Retrieval service (OIDAR service) during the period 19.04.2006 to 16.05.2008 from their holding company TIUSA, they have not discharged service tax on the same. On completion of investigation, a show-cause notice was issued to them on 19.10.2011 proposing to recover service tax of Rs.39,88,39,200/- for the period 19.04.2006 to 16.05.2008 along with interest and penalty. On adjudication, the demand was confirmed with interest and penalty. Hence, the present appeal.
3.1. At the outset, the learned advocate for the appellant has submitted that the appellant is a company incorporated under the Companies Act, 1956 and was one of the 25 wholly owned subsidiaries of M/s. Texas Instruments Incorporated, USA (TIUSA, for short). The appellant was primarily engaged in the business of design and development of software for the purpose of new and improved semiconductor related software and products. In the present case, they were undertaking design and development of software for its holding company i.e. TIUSA and for the purpose, the appellant required Electronic Data Automation (EDA) software tools. Due to high cost of said software tools, TIUSA procured the license to use the same from independent vendors such as M/s. Mentor graphics Corporation Limited; M/s. Synopsys USA; M/s. Cadence USA etc. through licensing agreement. Under the Licensing Agreement, TIUSA and its subsidiaries shall have the right to access the licensed Page 2 of 19 ST/26296/2013 software tools provided by the vendors. Due to cost and other factors, TIUSA procured the software tools from vendors and thereafter installed the same in the "servers" of the appellant located in India. A 'Cost Allocation Agreement' has been entered into between the appellant and the TIUSA stipulating the terms and conditions on the usage of EDA software tools by the appellant. Under the said agreement, the appellant was required to pay consideration based on number of seconds it has logged on to EDA packages. The invoice reflecting the charges for the same was raised on quarterly basis and the payments made by the appellant were accounted in the annual reports under the head 'foreign currency transactions' and the column 'charges towards usage of data automation service and information technology services'. During the relevant period, they have not discharged service tax on the access of EDA software tools granted by TIUSA claiming that the said activity do not fall under any of the category of services defined under Section 65(105) of the Finance Act, 1994. He has submitted that once ITSS was specifically introduced as a taxable service w.e.f. 16.05.2008, the appellant has paid service tax for usage of EDA software tools from 16.05.2008 onwards and have been filing ST-3 returns regularly. The appellant was availing cenvat credit on service tax paid by it as recipient of taxable service from outside India and also on various input services procured locally from other service providers. Since, the appellant undertake export of services, periodically refund claim of service tax paid on the input services in terms of Rule 5 of the CENVAT Credit Rules, 2004 had been sanctioned to them.
3.2. Assailing the impugned order which held that software procured by TIUSA and stored in the servers of the appellant falls under the purview of 'data', which can be combined at various levels to form a larger and bigger program i.e. software and accordingly, the act of TIUSA providing access to the EDA Page 3 of 19 ST/26296/2013 software tools to the appellant falls under the OIDAR services as defined under Section 65(75) read with Section 65(105)(zh) of the Finance Act, 1994, he has submitted that the license for the EDA software tools had been procured by TIUSA from a 3 rd party vendor and the same was shared with all the subsidiaries of TIUSA; the appellant received the software tools for using the same for development of software relating to semiconductors. A portion of the expenditure incurred by TIUSA for procurement of EDA software tools was allocated to the appellant based on the time which the appellant logged into EDA software tools was not related to any access of data but for the usage of EDA tools per se by the appellant. He has further submitted that mere access or retrieval of data cannot fall under the scope of OIDAR service.
In support, they have referred to the judgment in the case of Intimate Fashions Pvt. Ltd. Vs. CGST & CE, Chennai [2023-VIL- 729-CESTAT-CHE-ST) and Toyota Kirloskar Auto Parts Pvt. Ltd. Vs. CCE,C&ST, Bangalore LTU [Final Order No.21535/2024 dated 13.12.2024].
3.3. Referring to the judgment of Givaudan (India) Pvt. Ltd. Vs. Commissioner, LTU, Bangalore [2024(12) TMI 600 - CESTAT BANGALORE], he has submitted that in the said judgment, it was held that the agreement between the appellant and the holding company was not for mere usage of software tools / facilities but towards the access of retrieval of manufacturing purposes, supply chain and finance systems etc. which proves that data was made accessible to the appellant through computer network systems; therefore the services were correctly classifiable under OIDAR service. He has submitted that the said decision of the Tribunal is clearly distinguishable on facts as in the present case, the appellant is only getting access to the software tools from TIUSA which is used by the appellant for the development of software for TIUSA only. It is nothing more than access to software tools, which cannot be classified as OIDAR service.
Page 4 of 19ST/26296/2013 3.4. Further, he has submitted that the appellant cannot be considered as a customer to TIUSA. In support, they referred to the Circular F.No.341/43/96-TRU dated 31.10.1996 issued in the context of taxability of co-loaders under 'Courier Agency' services. Therefore, the services provided by TIUSA to the appellant cannot be considered as a service provided to a customer as the appellant is a subsidiary of TIUSA. Further, they have submitted that the activity is classifiable under ITSS which is subjected to tax w.e.f. 16.05.2008 only. Inasmuch as the appellant had used EDA software tools for the development of programmes which were sold to TIUSA and the same is used in the semiconductor; therefore, both the ingredients of the definition of Section 65(105)(zzzze) of the definition of ITSS are satisfied in the present case. Therefore, no tax is leviable for the period prior to 16.05.2008 on such services. The appellant further submitted that the payment of service tax on this activity after 16.05.2008 has been accepted by the Department and no dispute was raised. Further, he has submitted that an activity classifiable under a new category of service cannot be taxed under any other category prior to introduction of the new category. In support, he has referred to the following judgments:-
i. Biocon Limited Vs. CCE&ST, Bangalore [2024(8) TMI 1054
- CESTAT BANGALORE.] ii. Schlumberger Asia Services Ltd. Vs. CST, Dehi [2024(4) TMI 36 - CESTAT NEW DELHI iii. Saumya Mining Pvt. Ltd. Vs. CST, Kolkata and CST, Kolkata Vs. Saumya Mining Pvt. Ltd. [2024(7) TMI 753
- CESTAT KOLKATA] iv. Malviya National Institute of Technology Vs. CST, Jaipur [2019(6) TMI 127 - CESTAT NEW DELHI] 3.5. Further, they have submitted that in any case, no service tax can be levied prior to 18.04.2006 who are receiving taxable service outside India as the recipient becomes liable to pay service tax only after the insertion of Section 66A in the Finance Page 5 of 19 ST/26296/2013 Act, 1994 on 18.04.2006. In support, they have referred to the Circular No.276/8/2009-CX 8A dated 26.09.2011 issued by Board. Further, the learned advocate for the appellant has submitted that extended period of limitation is not invokable in the present case as they have not suppressed nor misdeclared any facts. He has submitted that the Cost Allocation Agreement and Agreement with international vendors, have been furnished to the Deputy Commissioner of Service Tax, Bangalore on being called for necessary details about the EDA software tools procured from the holding company. Also, the appellant has submitted that the Cost Allocation Agreement along with application for the refund claim under Rule 5 of the CENVAT Credit Rules, 2004 for the period July 2008 to September 2008.
It is a settled principle of law that if the Department is well aware of the activities of the appellant, then allegation of suppression of facts with intent to evade payment of service tax cannot be alleged to invoke extended period. In support, they have referred to the following judgments:-
i. Birla Corporation Limited Vs. CCGST7CE [2023-VIL--280- CESTAT-DEL-CE] ii. Nizam Sugar Factory Vs. CCE, AP [2008(9) STR 314 (SC)] 3.6. Further, they have submitted that the present case is a revenue neutral one. It is also submitted that the appellant would not be liable to pay interest and imposition of penalty is also unwarranted.
4. Learned Authorised Representative (AR) for the Revenue has reiterated the findings of the learned Commissioner. He has submitted that the issue involved in the present appeal is squarely covered by the judgment of the Tribunal in the case of Vishay Components India Pvt. Ltd. Vs. CCE, Pune-III [2018(8) GSTL 196 (Tri. Mum.)]. On similar facts and circumstances of the case, the Tribunal observed that the services provided by the associate company are in the nature of OIDAR services. Further, Page 6 of 19 ST/26296/2013 he has submitted that the circular issued by the Board on 09.11.2016 also clarified the scope of OIDAR service wherein in the negative list of OIDAR service, it is very clearly mentioned that accessing or downloading software would be considered as OIDAR service.
5. Heard both sides and perused the records.
6. The issues involved in the present appeal for consideration are whether (i) the activity of providing access to software tools installed in the server by the overseas company M/s. Texas Instruments Incorporated, USA (TIUSA) and access / retrieval to it by the appellant for undertaking software design and development is classifiable under the taxable category of Online Information Database Access or Retrieval service (OIDAR service) and (ii) larger period of limitation be invocable.
7. Before analysing the rival claims on the classification of the services provided by the overseas holding company TIUSA, it is necessary to read the definition of OIDAR service and 'taxable service' as was prevailing during the relevant period of time, which are as under:-
Section 65(75) "on-line information and database access or retrieval" means providing data or information retrievable or otherwise, to a customer, in electronic form through a computer network;
Section 65(105)(zh) "taxable service" means any service provided or to be provided to any person, by any person in relation to on-line information and database access or retrieval or both in electronic form through computer network, in any manner;
8. The said OIDAR service has been inserted in the Finance Act, 1994 in the year 2001. After the introduction of the same, a Circular was issued by TRU explaining the implication of the new service brought into the Service Tax not including the Page 7 of 19 ST/26296/2013 OIDAR service vide Instruction F.No.B.11/1/2001-TRU dated 09.07.2001. The relevant portion is extracted below:-
ANNEXURE IV On-line information and database access and/or retrieval:
1. As per section 65(19), 1994, the term "On-line information and data base access or retrieval" means providing data or information, retrievable or otherwise, to a customer in electronic form through a computer network.
The words "Data", "information", "electronic form" and "computer network" have the same meanings assigned to them in the Information Technology Act, 2000. As per section 65(72)(zh), taxable service means any service provided to a customer, by a commercial concern, in relation to on-line information and database access or retrieval or both in electronic form.
2. The definitions given in the Information Technology Act, 2000 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 inter-connection of one or more computers through-
i. the use of satellite, microwave, terrestrial line or other communication media; and ii. terminals or a complex consisting of two or more inter-connected computers whether or nor the inter-connection is continuously maintained.
3. In the context of this service, it may be relevant to point out the manner in which on-line information and database access/retrieval is generally made available. First, the function of what is commonly known as Internet Service Page 8 of 19 ST/26296/2013 Providers (ISPs). The ISPs provide telecommunication network or gateways necessary to access messages and databases and other information holdings of content providers. The second element is on-line information provision services which includes database services, provision of information on web-sites, provision of on-line data retrieval services from data bases and other information, to all or limited number of users and provision of on-line information by content providers.
4. Internet service providers (ISPs) provide access to the web-sites through the computer network and the web- sites. Web-sites, in turn, provide the database or information. Some of the well-known ISPs operating in India are VSNL, MTNL, Satyam on-line, Bharati, Tata, RPG, HCL, Wipro, BPL, Mantra on-line, Dishnet. They normally charge the customers on the basis of usage of time (hours). They also provide dedicated lease lines on lump- sum payment basis. Clearly ISPs provide service in relation to on-line information and database access or retrieval. They are an integral part of the internet operations and without their service, the data or information can neither be accessed nor retrieved. They are, therefore, liable to pay service tax on the amount charged from the customers whether on usage time basis or on lease line basis.
5. As regards paid websites, a few examples of Indian dot companies are, Indiainformer.com, CIIonline.com, who charge the customer for certain specific information contained in their website either in advance or credit basis. They shall be also liable to pay service tax on the paid services provided by them. It is obvious that where the information is supplied free of charge, no service tax is payable.
6. Point for clarification:
A question has been raised as to whether e-commerce transactions (other than providing on-line information and data) are covered in the ambit of service tax. It is clarified that in e-commerce transactions, no service of on-line information and database access/retrieval is involved.
Therefore, e-commerce transactions will not ordinarily be covered under the service tax net. Normally, the websites do not charge the surfers for information on sale of goods or services offered by them. If at all they do, service tax will be payable on the amount charged for providing the information.
Another point raised relates to applicability of service tax on inter-connectivity services provided by one ISP to another and the charges recovered for such services. It is understood that this is done to inter-connect various networks so as to reach the server where the information is stored. It is informed that inter-connection of one ISP to another is a commercial and technical arrangement under Page 9 of 19 ST/26296/2013 which service providers connect their equipment, networks and services to enable their customers to have access to the data or information. Through this arrangement, it is the customer of an ISP who ultimately receives on-line information and database access and/or retrieval service. Service tax on the amount charged from him is payable. Therefore, inter-connection charges paid by one ISP to another ISP are not liable to service tax.
A question has also been raised whether the cyber cafes will be subject to service tax. It is clarified that the cyber cafes provide only the infrastructure such as computer terminals and internet connection. It is the ISP or websites who provide on-line access or retrieval of information, Therefore, cyber cafes are not liable to pay service tax. Services provided by ISP to cyber cafe are taxable and the ISP will pay the tax on charges realised from the cyber cafe.
9. It is not in dispute that the appellant has received the services from their overseas company TIUSA for which they have entered into an agreement titled as "Group Cost Allocation Agreement" dated 24.03.2006.
1. Expenses incurred by TI Inc TI Inc from time to time incurs the following expenditure for its Group companies including TI India.
• Expenditure for computer software including but not limited to the cost of licensing software used by designers for product design and verification (FDA).
• These computer software essentially consists of off the shelf EDA wals licensed by TI Inc. as per global agreement with the Vendors like Synopsys Cadence, Mathwork, Magma, Rational etc. In recognition of this and in recognition of the benefit derived by TI Indis from usage of the above for its business, it is hereby agreed that Ti India will pay an amount allocated by Ti inc as per the terms of this agreement.
2. Allocation of expenses 2.1. Electronic Design Automation (EDA) expenditures will be allocated to TI India based on the number of seconds TI India personnel are logged onto any of the EDA software packages provided by TI to TI Page 10 of 19 ST/26296/2013 India. Following the end of each yearly accounting period. TI will make a final determination of coss actually incurred and will adjust the amount charged to TI India in the price period by issuing a final invoice or a credit. Any cost incurred by TI not covered by per second of use it any will be allocated to TI India on a mutually agreed basis.
2.2. It is agreed that TI Inc will raise an invoice to TI India on a quarterly basis respect of the amounts allocated to TI India in accordance with the terms this agreement.
2.3. Subject to complying with Indian withholding tax and exchange central regulations, TI India agrees to pay the amounts allocated to it in accordance with the terms of this agreement within a period of 60 days from the date on which it receives the invoice/debit note raised by TI Inc.
10. The aforesaid agreement is the bone of contention between the Revenue and the appellant. It is the allegation of the Revenue that the appellant had received Online Information Database Access or Retrieval service (OIDAR service), whereas it is the claim of the appellant that mere access to the EDA software tools which are used in the design and development of software for their holding company TIUSA cannot be said to be an OIDAR service. We find that the Commissioner analysing the definition of 'data' as provided under the Finance Act read with Information Technology Act, 2000 held as follows:-
30. Now I proceed to examine the provisions of Service Tax in respect of Online Information and Database Access or Retrieval Service:
As per Section 65 (75): "on-line information and data base access or retrieval" means providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network".
As per Section 65 (105)(zh) of the Act, "taxable service" means, any service provided or to he provided to any person, by any person, in relation to on-line information and database access or retrieval or both in electronic form through computer network, in any manner."
Essential ingredients are:Page 11 of 19
ST/26296/2013 • Must relate to providing data or information • The said data or information can be retrievable or otherwise • Must be provided to any person • Must be provided in electronic form • Must be provided through a computer network
31. The Finance Act, 1994 detines the following terms;
"(36) "data" has the meaning assigned to it in clause (o) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000);
(53) "information" has the meaning assigned to it in clause
(v) of sub-section (1) of section 2 of the Information Technology Act. 2000 (21 of 2000) (30) "computer network" has the meaning assigned to it in clause (j) of sub-section (1) of section 2 of the Information Technology Act 2000 121 of 2000):
(39) "electronic form" has the meaning assigned to it in clause (r) of sub-section (1) of section 2 of the Information Technology Act. 2000 (21 of 2000);
32. As per Section 2 of the Information Technology Act, 2000;
"(o) "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 the computer;
(r) "electronic form" with reference to information means any information generated, sent, received or stored in media, magnetic, optical, computer memory, micro film, computer generated micro fiche or similar device;
(v) "information" includes data, text, images, sound, voice, coder, computer programmes, software and databases or micro film or computer generated micro fiche:
(j) "computer network" means the interconnection of one or more computers through-
` (i) the use of satellite, microwave, terrestrial line or other communication media, and Page 12 of 19 ST/26296/2013
(ii) terminals or a complex consisting of two or more interconnected computers whether or not the interconnection is continuously maintained;"
33. On comparison of the requirements of the definition under Section 65(105)(zh) of the Finance Act, 1994 with that of the IT Act, 2000, it is seen that;
33(i). TI Inc procure various software from vendors and store the same in the server of M/s TIPL. As per the requisites of Online Information and Database Access or Retrieval Service, service must relate to providing data or information. The Finance Act defines data & Information as "(36) "data" has the meaning assigned to it in clause (o) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000) & (53) "information" has the meaning assigned to it in clause (v) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000).
As per the 11 Act, 2000 "(o) "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 cords, punched tapes) or stored internally in the memory of the computer, (v) "information" includes data, text images, sound, voice, codes, computer programmes, software and databases or micro film or computer generated micro film:
From the above definition, it is apparent that the software said to have been purchased or procured from different vendors and stored in the servers of M/s. TIPL, is nothing but codes/ instructions or basic codes of programs which can be combined at various levels to form a larger/ bigger programme which are nothing but software. For example, each bit of semiconductor gates/ valves contain in itself instructions of what is the input value what is the output value etc, in different circumstances, if many such gates/ valves are combined in such a way as to get a desired output, it can be called a programme or further compilation of many such programmes can be called software. These hits or codes of instructions is nothing but data only, which can be combined/applied and used in any desired. Further such codes/instructions can also be called basic units of software. Whereas data/ information cannot be called software, codes, instructions, basic units of programs can be called or termed as data when further put to use for compiling larger programs/ software. The aforementioned is included in definition of data of IT Act as well.Page 13 of 19
ST/26296/2013 33(ii). M/s. TIPL contention that they have received only the right to use the software for which the license has been obtained by their holding company from the software vendors; that the service provided in relation to 'software' cannot be equated with data or information only on the ground that information as per IT Act, 2000 includes software, and data includes information which implies that 'software' is included within the definition of 'data' is not acceptable in the light of the above observation and The software and database, the access to which is provided by TI Inc to TI India is nothing but information which is defined under the IT Act, 2000. Therefore, the software provided by TI Inc clearly falls under the ambit of the said service.
Access to these softwares is provided to various group companies including TI India to the said server. As per the requisites of Online Information and Database Access or Retrieval Service, the said data or information can he retrievable or otherwise. Since, the term "access" or retrieval is not defined in the Finance Act, definition of terms under IT Act, 2000, is resorted to. Definition of terms under IT Act, 2000, (a) "access" with its grammatical variations and cognate expressions means gaining entry into, instructing or communicating with the logical, arithmetical, or memory function resources of a computer, computer system or computer network;
33(iii). M/s TIPL have submitted that what TI, US has acquired is software license and not merely permission to access data and only such software is shared with its subsidiaries. That if M/s. TIPL had obtained the same tools from the vendors directly, the transaction would have been considered import of software licence and not as access to data. That the import had happened through the holding company due to commercial reasons does not change the character of service and still amounts to import of software. M/s. TIPL relying upon Circular F.Νο.Β11/1/2001 TRU dated 9.7.2001 submitted that as per the above Circular the levy was intended to cover content access to which is offered directly through web sites or through internet service provider. I observe that as per their own submission that they were provided with permission to access data from TI, US who has acquired the software license and that M/s. TIPL has not purchased the software license but were only allowed to access the said data. Thus I hold that the information/software provided through the network is retrieved by M/s. TIPI. for the development of semiconductor software for M/s 11 Inc. Section 65(105)(zh) is comprehensive and covers both data whether it is retrievable or otherwise.
33(iv). Person includes any company or association or body of individual whether incorporated or not; and as per both to be treated separately. As per the requisite of 'Online Information and Database Access or Retrieval Service must Page 14 of 19 ST/26296/2013 he provided to any person. M/s. TIPL further submitted that they are not customers to IT, US: that they being a subsidiary company of TI, US cannot be construed as a customer and that during the material period taxable service means any service provided or to be provided to a customer, that the expression to a customer was replaced with the expression to a person by the Finance Act, 2008 with effect from 16.5.2008 and that for the entire period covered in the present notice only services provided to a customer was subject to levy. In this regard, I observe that TI, USA and M/s. TIPL are two different legal entities and hence both are to be treated separately. Moreover M/s. TIPL is making payments to TI, USA for the services rendered by them and hence I do not find any merit in the noticee's argument that they cannot be construed as a customer to TI, USA.
In the instant case, I observe that the software provided through the computer network is in electronic form. The Finance Act, 1994, defines 'electronic form' as-
(39) "electronic form" has the meaning assigned to it in clause (r) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000);"
33(v). As per the requisites of Online Information and Database Access or Retrieval Service must be provided in electronic form. "electronic form" with reference to information as defined in the IT Act, 2000, means any information generated, sent, received or stored in media, magnetic, optical, computer memory, micro film, computer generated micro fiche or similar device;
M/s. TIPL relying upon Circular F.No.B11/1/2001 TRU dated 9.7.2001 submitted that as per the above Circular the levy was intended to cover content access to which is offered directly through web sites or through internet service provider. I do not agree with the argument of M/s. TIPL and hold that the data/information provided through the computer network is in electronic form and fully satisfies the requirements of the definition in the Finance Act, 1994.
33(vi). I observe that the access to the software is provided to the group companies through computer network (Wide Area Networking). The Finance Act, 1994 defines 'computer network as - (30) "computer network"
has the meaning assigned to it in clause (j) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000): Definition of terms under IT Act, 2000, j) "computer network" means the interconnection of one or more computers through - (i) the use of satellite, microwave, terrestrial line or other communication media; and(ii) terminals or a complex consisting of two or more interconnected computers whether or not the interconnection is continuously maintained; The access and/or retrieval to the server containing the data/ Page 15 of 19 ST/26296/2013 information is through a computer network and fully satisfies the definition in the Finance Act, 1994 and in the IT Act, 2000. M/s. TIPL has also stated that the software have been stored in the servers in India and accessed only within India, that such access happens in the servers situated within the premises of TIPL and hence the services cannot be treated to have been received from outside India.
34. From the above discussion and legal provision, I observe that the services relate to providing data or information; that the date or information is accessible / retrieval or otherwise; that it is provided to a customer; that it is in electronic form and it is provided through a computer network. The above ingredients satisfy to levy of Service Tax under the taxable category of 'On-line' information and data base access or retrieval services and I hold accordingly.
11. The aforesaid reasoning of the Commissioner has been challenged by the appellant arguing that the appellant are merely using the software tools placed on the server and required to pay for the usage of software tools on cost sharing basis to their holding company TIUSA. There is no downloading or retrieval of data placed on the server; therefore, the use of software tools cannot be considered as an OIDAR service. We do not find substance in the arguments of the appellant. In Givaudan (India) Pvt. Ltd.'s case, this Tribunal referred to the Board's Circular No.202/12/2016-ST dated 09.11.2016, though issued subsequently, indicated broadly what services would fall under the scope of OIDAR service. The relevant portion of the said circular is as below:-
Indicative List of OIDAR services
16. (1) Website supply, web-hosting, distance maintenance of programmes and equipment;
(a) Website hosting and webpage hosting;
(b) Automated, online and distance maintenance of programmes;
(c) Remote systems administration;
(d) online data warehousing where specific date is stored and retrieved electronically;
(e) online supply of on-demand disc space. (2) Supply of software and updating thereof;
(a) Accessing or downloading software (including procurement/accountancy programmes and anti-virus software) plus updates;
(a) software to block banner adverts showing, otherwise known as Page 16 of 19 ST/26296/2013 Banner blockers;
(b) download driver, such as software that interfaces computers with peripheral equipment (such as printers);
(c) online automated installation of filters on websites;
(d) online automated installation of firewalls.
12. From the above, it is clear that the services received by the appellant by way of access of software tools installed in their server discharging the value of service on cost sharing basis definitely falls under the OIDAR service. More or less on similar facts and circumstances, this Tribunal has held in the case of Vishay Components India Pvt. Ltd., as under:-
5. We find that appellant have various IT systems and lease licences which arc centrally managed by IT department of BC Components International BV, Netherland, which is their associated company. The cost relating to the e-mail and internet services, software maintenance and software licence fee, maintenance of IT services, systems support, etc are managed centrally by BC Components International BV, Netherland and cost of the said then allocated to their various companies of the group based on the logical basis like number of users and system usages. The share of such IT cost allocated to the appellant, is paid by them to M/s. BC Components International BV, Netherland. As per this arrangement, we find that M/s. BC Components International BV, Netherland providing service to the appellant for which appellant is making payment. This clearly shows that there is relation of service provider and recipient of the service and the payment made towards such service is a consideration paid by the appellant to service provider, BC Components International BV, Netherland. The contention of the appellant is that payment made to BC Components International BV, Netherland is not consideration but it is cost sharing. Since against the service payment is made, whether it is of cost sharing basis or otherwise the same is considered as gross value of the service and merely by giving term "cost sharing" it does not take the nature of consideration towards service. For the purpose of Finance Act, 1994, BC Components International BV, Netherland and the appellant are two different entity. Accordingly, the relationship is clearly of service provider and service recipient. As regard the classification of service, we find that as per Section 65(75) of the Finance Act, online information and database access for retrieval means providing data or information retrieval or otherwise to the consumer in electric form or through computer network. As per 65(105)(zh) taxable service means any service provided or to be provided to any person by any person in relation to online information and database access or Page 17 of 19 ST/26296/2013 retrieval or both in electronic form through computer work in any manner. In the context of the present case as per the nature of the service it is internet service and online information service that includes database service, provision of information on website, data retrieval, etc. Internet service provider provides access to the website through computer networks and the websites. They also provide dedicated lease licence, they are integral part of the internet operation and without their service data or information can neither access nor retrieved, therefore service of internet service provider is liable to service tax.
In the present case appellant have booked communication and technical fees under the head of expenditure in foreign currency, further this expenses related to payment towards IT cost charged by the BC Components International BV, Netherland. Merely because the total cost charged by the BC Components International BV, Netherland is allocated to the various companies based on the logical basis like number of users, system usages etc. it cannot be said that appellant have not received service and paid consideration thereof. The appellant emphasized that activity is not taxable only because appellant are making payment only for cost sharing does not have any force. Taking into consideration overall facts, it is clear that appellant have received the service and paid consideration to BC Components International BV, Netherland therefore they are liable to pay service tax on reverse charge mechanism. .... .... ....
In view of the above, we agree with the finding of the learned Commissioner that the service received by the appellant is in the nature of OIDAR service.
13. On the issue of larger period of limitation, the learned Commissioner has recorded that the Cost Allocation Agreement dated 24.03.2006 entered into with ITUSA and the agreement between the TIUSA and international vendors which are crucial to determined the taxability of services received by the appellant since not furnished to the Department; therefore, an intention to evade payment of service tax can be inferred from non- submission of these documents. Assailing the said findings of the Commissioner, the learned advocate for the appellant has submitted that the appellant have been claiming refund of input tax credit under Rule 5 of the Cenvat Credit Rules claiming export of such services and the refunds have been sanctioned from time to time. Also, they have submitted that by their letter Page 18 of 19 ST/26296/2013 dated 29.11.2006 in response to query raised by the Department against letter dated 15.11.2006, informed the details of all services received by them from their parent company from 2001 to 2006 (upto September 2006) which includes EDA service along with amount paid to the overseas company for the said periods. Later, on 27.12.2006, they have submitted the sample agreement on electronic data automation software to the Department. Therefore, it is incorrect to allege that the appellant has not informed the Department about such services from the overseas company and the amount has been paid against receipt of such services. Also, they have been filing refund claims under Rule 5 of Cenvat Credit Rules. In these circumstances, it cannot be alleged that the appellant has suppressed the facts about receipt of such service from their overseas company and consequently, extended period of limitation is not invocable against them. Thus, the demand is barred by limitation.
14. In the result, the appeal is allowed on the ground of limitation.
(Order pronounced in Open Court on 03.07.2025) (D.M. MISRA) MEMBER (JUDICIAL) (R BHAGYA DEVI) MEMBER (TECHNICAL) Raja...
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