Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise vs Eclouds on 20 May, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNALSOUTH ZONAL BENCH
CHENNAI
Appeal No.ST/256/2011 with ST/CO/14/2011
[Arising out of Order-in-Original No.1/2011-ST-Commr. dt. 27.1.2011passed by the Commissioner of Central Excise, Customs & Service Tax, Coimbatore]
Commissioner of Central Excise,
Coimbatore Appellant
Versus
eClouds Respondent
Appeal No.ST/258/2011 [Arising out of Order-in-Original No.1/2011-ST-Commr. dt. 27.1.2011 passed by the Commissioner of Central Excise, Customs & Service Tax, Coimbatore] eClouds Appellant Versus Commissioner of Central Excise, Coimbatore Respondent Appearance:
Shri R.Chandrasekaran, AC (AR) For the Appellant-Assessee Shri S.Durairaj, Advocate For the Revenue CORAM :
Honble Shri D.N. Panda, Judicial Member Honble Shri V. Padmanabhan, Technical Member Date of hearing :19.5.2016 Date of Pronouncement : 20.05.2016 FINAL ORDER No.40840-40841/2016 Per V. Padmanabhan The present appeals by the Revenue and M/s.eClouds (hereinafter referred to as appellant-assessee) are directed against different portions of the Order-in-Original passed by the Commissioner dated 27.1.2011. Revenue has challenged the adjustment of Service Tax payable on import out of that paid on the output service, The appellant-assessee has challenged the classification of the import service and sought its classification under Management, Maintenance and Repair service.
2. The facts, in brief, are summarized below.
The appellant-assessee is a service provider who imported, on several occasions, Digital Control Software (DCS) from M/s.Minerals and Metals, FIE, Jabel Ali, Dubai. The appellant-assessee carried out repairs to imported software to make the software usable for their customers in India and supplied the same to their local customers. The view taken by the Commissioner in the impugned order was that the software imported by the appellant-assessee was in the category of "Information Technology Software Services" for the purpose of use in business or commerce. Since the supplier of this software was located abroad and did not have any place of business in India, the appellant-assessee was considered liable to pay service tax on the imported software services under the reverse charge mechanism as per Section 66A of the Finance Act, 1994. It was found during investigation that they had not paid any service tax such import. It was also found that the assessee, after repairs and customization, supplied the software to their customers in India and on this activity, they have discharged service tax under the category of "Management, Maintenance or Repair Service" in terms of Section 65 (64) of the Finance Act, 1994. In the impugned order, the Commissioner held that appellant-assessee was liable to pay service tax for the import of software services under the category of Information Technology Software Service under the reverse charge mechanism. However, he observed that the aggregate import value is Rs.37,78,71,679/- whereas the gross value of service provided to domestic client is Rs.45,95,02,093/-. The appellant-assessee have paid service tax amounting to Rs.4,92,23,529/- on the service provided locally. They would have been liable to pay only an amount of Rs.4,35,13,012/- for the liability on the import of software service. Accordingly, he came to the conclusion that there is no short levy of service tax as alleged in the SCN. Further, he also held that appellant-assessee is to be considered as a proprietary concern of Shri R. Shanthakumar and that the service tax paid in the accounts of (1) M/s.Android Automation as well as (2) M/s.eClouds [both proprietary concerns of Shri R. Shanthakumar]is to be considered as paid by Shri R. Shanthakumar. Since proprietary concerns need to pay the service tax only on or before the 5th of the month immediately following the quarter in which the payments are received towards the value of taxable service, he concluded that there is no interest liability on the appellant-assessee under Section 75 since the service tax has been paid under 'Management, Maintenance and Repair Service' well within the time within which the appellant-assessee is liable to pay the service tax on the import of software services.
3. Revenue being aggrieved with this order has challenged the same in appeal before us mainly on the ground that the Commissioner erred in holding that service tax has been considered to have been duly paid and appropriated on the import of software services when the appellant-assessee paid the service tax on the output service.
4. Heard Ld.D.R appearing on behalf of Revenue and Ld.Advocate for the appellant-assessee.
5. Ld. D.R argued that the Commissioner has arrived at the various conclusions in the impugned order by simply relying on the relevant claim without giving any definite findings and without carrying out any independent verification with relevant records. In respect of the aggregate value of import of software, the Commissioners observation is not factually correct as he has included the import done by M/s.Sara Enterprises and M/s.Technicon Automation which happened after 10.4.2009 i.e. after the period of dispute. He also pointed out that in respect of imports under invoice No.45631, dt. 10.6.2008 and 45634 dt. 12.6.2008, payments have been discharged only on 5th October 2008 whereas the due date for payment of service tax for the aforesaid imports would be 5th July 2008. For the delay of 90 days in payment of service tax, interest liability would arise which has not been considered by the learned Commissioner in the impugned order.
6. The learned advocate for the appellant-assessee submitted that the appeal filed by them was directed against the classification of the service imported by them. Their claim is that it is classifiable under Management, Maintenance or Repair Service specified under Section 65 (105) (zzg) of the Finance Act,1994. The Commissioner in the impugned order held that the services imported will fall under Information Technology Services whereas taxable service provided by them would fall under Management, Maintenance or Repair service. They brought to notice that in Mysore Commissionerate in respect of Vishakarma Software Services, a similar dispute arose which was before the Honble CESTAT, Bangalore Bench. In Final Order no.26548/2013, the Tribunal remanded the matter to Commissioner, Mysore where software service similar to that provided by the appellant-assessee was classified under Management, Maintenance and Repair Service.
7. To the point raised by the Ld.DR, he admitted that the two invoices in the names of M/s.Sara Enterprises as well as by M/s.Technicon Automation which stand included in the computation of total value of imported software services in the impugned order, were not for import but for service domestically procured by them.
8. We have perused the records of this case and given due to consideration to the points urged before us by both sides.
The dispute in this case may be crystallized into the following four points :-
(i) whether service tax liability on reverse charge basis under Section 66A arises on the software service which has been imported; if so under which category
(ii) whether the liability has been discharged;
(iii) whether interest liability under Section 75 arises and
(iv) is there any liability for levy of penalty.
The ld. Commissioner in his detailed findings has already held that the imported software serviceis liable for service tax under reverse charge mechanism in terms of Section 66A. This finding has not been challenged by either party before us. However, the appellant-assessee has contended that it is classifiable under Management, Maintenance or Repair Service" as against the classification of Information Technology Services in the impugned order. There is no dispute that the service tax to the tune of Rs.4,92,23,529/- has been paid by the appellant-assessee on the Management, Maintenance or Repair service on account of supply of services to domestic clients. The objection by Revenue is that Commissioner ought not to have adjusted the service tax payable on the import with that paid on the output service. It is quite obvious that the service provided by the appellant-assessee to their domestic client is based principally on the software which has been imported and on which further repair and customization has been carried out in India by them. Consequently, there is no doubt in our minds that any service tax paid on such import under reverse charge mechanism would be rightly available to the appellant-assessee by way of cenvat credit on input services subject to satisfying the conditions prescribed in the Cenvat Credit Rules, 2004. They may utilize such credit for discharge of the service tax on the output service. However, we hasten to add that the liability for payment of service tax under reverse charge mechanism is required to be discharged by the appellant-assessee within the time available to them under the rules. Thereafter on satisfying the procedural requirement under the Cenvat Rules the same may be availed as cenvat credit on such input service and utilized to discharge service tax on output service. They should also maintain appropriate prescribed documentation to satisfy the Revenue authorities. Such documentation would also serve as an easy reference to verify the discharge of service tax liabilities as well as to compute payment of interest, if necessary in future.
9. We find no serious infirmity in the view taken by the Commissioner that adjustment of service tax payable in the import of services as well as paid on the output service can be permitted as long as the liability is adjusted within the same service payment cycle. However, in view of the points brought to our notice by the Revenue in its appeal, we feel that the computation needs to be factually checked to arrive at the correct value of import of software services and the total service tax liability on such import. The liability of payment of interest under Section 75 also needs to be re-checked in the light of the Revenues appeal. For this purpose, we consider it necessary to remand the matter to the adjudicating authority who is directed to pass orders expeditiously, in any case within a period of 3 months. The issue of classification of the imported software can also be considered in the light of decision of CESTAT Bangalore brought to our notice by the appellant-assessee. Both the appeals are disposed of in the above terms by way of remand.
10. Cross objection is disposed accordingly.
(Order pronounced in open court on 20.05.2016)
(D.N. PANDA) (V.PADMANABHAN)
JUDICIAL MEMBER TECHNICAL MEMBER
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