Custom, Excise & Service Tax Tribunal
Ruchi Infotech Ltd vs Cce, Indore on 31 July, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi 110 066.
Date of Hearing/Order : 31.7.2014
Appeal No. ST/13/2009-CU(DB)
[Arising out of Order-in-Original No. 18/COMMR/ST/IND/08 dated 30th Sept. 2008 passed by the Commissioner of Customs, Central Excise, Indore]
For Approval & Signature :
Honble Mr. Justice G. Raghuram, President
Honble Mr. R.K. Singh, Member (Technical)
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3.
Whether their Lordships wish to see the fair copy of the order?
4.
Whether order is to be circulated to the Department Authorities?
Ruchi Infotech Ltd. Appellant
Vs.
CCE, Indore Respondent
Appearance:
Shri G.L. Rawal, Sr. Advocate - For the Appellant Shri Rajesh Rawal, Advocate Shri Govind Dixit, D.R. - for the Respondent Coram : Honble Mr. Justice G. Raghuram, President Honble Mr. R.K. Singh, Member (Technical) F. Order No. 53218/2014 Per R.K. Singh :
The appellants have filed this appeal against the Order-in-Original No. 18/Commr./ST/IND/2008 dated 30.9.208 in terms of which the following demands along with interest and penalties including mandatory penalty were confirmed invoking the extended period :
Sr.No. Description Period Amount (Rs.)
1. Maintenance of computer software 9.7.2004 to 31.3.2006 31,56,723/-
2. Lease Line Connectivity 5.9.2002 to 20.3.2007 6,90,674/-
3. Calibration of Machine July 2003 and March 2004 28,800/-
4. Cartridge Refilling 2004-05 to 2006-07 97,898/-
5. Technical Support Charges 2002-03 to 2004-05 10,83,360/-
Total 50,57,455/-
2. Each of the aforesaid five components of the impugned demand is taken up for discussion and finding in the following paragraphs duly taking into account the contentions/submissions of both sides.
3. With regard to the demand relating to maintenance of computer software, it is seen that Management, Maintenance or Repair was defined under Section 65(64) of the Finance Act 1994 as under :-
Management Maintenance or Repair means any service provided by
(i) any person under a contract or an agreement; or
(ii) a manufacturer or any person authorised by him, in relation to,
(a) management of properties, whether immovable or not;
(b) maintenance or repair of properties, whether immovable or not; or
(c) maintenance or repair including reconditioning or restoration, or servicing of any goods, excluding a motor vehicle;
It was only on 11.5.2007 that the following explanation was added under the said definition.
Explanation : For the removal of doubts, it is hereby declared that for the purposes of this sub-clause goods includes computer software.
It is contented by the appellants that they were under a genuine belief that maintenance of computer software did not fall in the category of management, maintenance or repair service. It has to be fairly conceded that the very fact that the Government inserted the said explanation clearly establishes that even the Government acknowledged that there was genuine confusion/ambiguity in this regard and in such a scenario allegation of suppression in the wake of the appellants contention that they genuinely thought that they were not liable to the said service tax cannot be sustained. The judgement of Tribunal in the case of Phoenix It Solutions Ltd. Vs. CCE, Visakhapatnam 2011 (22) STR 400 (Tri.-Bang.) referred to by the appellants in this regard also supports them one hundred percent as the said judgement clearly held that the said amendment was made to clarify doubts and therefore the allegation of suppression is not invokable. In the case of Kasturi & Sons Ltd. Vs. Union of India 2011 (22) STR 129 (Mad.), the Honble Madras High Court has also held that the amendment made to the definition of Management, Maintenance or Repair is not retrospective in effect and held that the Boards Circular dated 7.10.2005 in this regard was contrary to the statutory provisions. Without going into the aspect whether the said explanation expands the trajectory of the existing legislation and hence is inapplicable retrospectively, in the wake of the fact that even the Government acknowledged the existence of confusion/ambiguity with regard to the coverage of management, maintenance and repair of software under the Management, Maintenance or Repair Service to such a degree as to warrant addition of an explanation to clarify the issue and also in view of the aforesaid judicial precedents, it is amply clear that the extended period cannot be invoked making this component of the impugned demand clearly barred by time as it pertains to the period 9.7.2004 to 31.3.2006 while the Show Cause Notice was issued on 15.4.2008.
3. Coming to the Lease Line Connectivity, it has been contended by the appellants that they only provided the Lease Line Connectivity and did not provide access to any data and therefore it cannot come within the scope of Online Information and Database Access and Retrieval Services. The appellants have also contended that they are not providing any data or information retrievable or otherwise to the customer in the electronic form through a computer network and that they had merely taken lease line connection for their clients and paid service tax charged by such authority on such lease line connection. We find that in the Show Cause Notice or in the impugned order it is nowhere elucidated as to how lease line connectivity provided by the appellants fell in the category of Online Information and Database Access and Retrieval services when they did not provide any data or information. As per Section 105(75) of Finance Act 1994 Online Information and Database Access and Retrieval Services means providing data or information, retrievable or otherwise to a customer, in electronic form through a computer network. When no data or information was provided by the appellants nor does the Show Cause Notice contain any allegation to that effect, the question of sustaining this component of impugned service tax demand under Online Information and Database Access and Retrieval Service simply does not arise. Therefore the demand of Rs.6,90,674/- under this category is not sustainable on merit itself.
4. Coming to the next component of demand relating to Calibration of Machine, it is seen that the demand has been confirmed under the Management, Maintenance or Repair service. It is mentioned even in the Show Cause Notice that the appellants had submitted that they have not rendered any service by way of maintenance of any machine and the demand was barred by time. The appellants have contended that they have developed a software which a customer buys and uses for calibration of the machines or equipment. The invoices issued by the appellants in this regard were perused and it was found that the invoices inter alia mention that the amounts are debited towards SCADA (software). The appellants have vehemently stressed that the calibration of machines is done by customers themselves on their own and they only sell their software to the customer which is used by them for that purpose. The Show Cause Notice also does not elaborate as to how it is covered under Management, Maintenance or Repair service. Seen in this light the demand of Rs.28,800/- also does not sustain on merit.
5. Regarding demand of Rs.97,898/- pertaining to cartridge refilling sought to be covered under Management, Maintenance or Repair service, the Show Cause Notice merely states that the appellants have received certain cartridge refilling charges on which service tax is leviable under maintenance or repair service. The Show Cause Notice does not elaborate as to how cartridge refilling would come under the category of Maintenance or Repair service. It is argued by the appellants that refilling of ink in cartridges of customers actually tantamount to sale and therefore cannot be liable to service tax. In the impugned Order-in-Original, the following observation is made on this issue :
As discussed in earlier paras the noticee are doing activity of maintenance of computer/software. The goods consumed i.e. refilling of cartridge and amount collected towards refilling of ink in the process of such maintenance of computer/software are also liable to service tax. Thus even the impugned order admits that this component of the impugned demand relates to charges for refilling of ink which evidently is in the nature of sale as contended by the appellants. Thus this component of the impugned demand also does not sustain on merit
6. The Technical Support Charges recovered by the appellants are sought to be levied to service tax under Scientific or Technical Consultancy Service. Clause (92) of Section 65 of the Finance Act defines Scientific or Technical Consultancy to mean any advice, consultancy or scientific or technical assistance, rendered in any manner, either directly or indirectly, by a scientist or a technocrat, or any science or technology institution or organisation, to a client, in one or more disciplines of science or technology. The appellants argued that the bills raised by them for Technical Support Charges are in relation to designing, developing and maintenance of software etc. which do not come under the scope of Scientific or Technical Consultancy Service. They have stated that the said activity is now covered under the new category of service called Information Technology Software Service introduced with effect from 15.5.2008 and they have been paying service tax under this category from that date. Indeed the CBEC D.O Letter No. 334/1/2008-TRU New Delhi dated 29th Feb. 2008 specifically states that by the Finance Bill 2008 the said service is being specifically included in the list of taxable services. It is seen that the appellants being a company (i.e. body corporate) cannot be called a scientist or a technocrat as a scientist or a technocrat would be an individual. They are evidently also not a science or technology institute. The appellants have argued they also cannot be called science or technology organisation. Even if it is possible for some with seemly soft corner for revenue to adopt some innovative logic and reasoning to show that having regard to the nature of expertise of the appellants, it would not be absurd to call them science or technology organisation, the fact remains that the term science or technology organisation is not defined in the Finance Act, 1994 and arguably in common parlance organisations like the appellants are not generally referred to as science or technology organisations. In such a situation and having regard to the fact that the Show Cause Notice or the impugned order does not elucidate as to on what basis this component of demand was covered under Scientific or Technical Consultancy Service and also the fact that this activity specifically became taxable with effect from 15.5.2008, the appellants contention that they genuinely did not consider themselves to be science or technology organisation is not without considerable force. Consequently the allegation of suppression of facts and invocation of extended period simply cannot be sustained. As a result, as the period involved for this component of impugned demand is 2002-03 to 2004-05 and the Show Cause Notice was issued on 15.4.2008, this component of impugned demand is fatally hit by time-bar.
7. Having discussed and given finding on each component of the impugned demand in the foregoing paras, no further discussion is really necessary but still, it may be pertinent to mention that in the entire Show Cause Notice, only the following (one) para contains the grounds for alleging suppression of facts for invocation of extended period :
The Noticee appear to have suppressed the facts regarding providing of services namely Computer Network Service, Management Maintenance or Repair Service, Business Auxiliary Services, Scientific or Technical Consultancy Services being provided by them by not obtaining registration in form ST I and by not filing ST 3 return wilfully with an intent to evade payment of service tax due on them. Thus extended period of 5 years for issue of Show Cause Notice as contemplated in Section 73 of Finance Act is invokable in the instant case. In the circumstances of this case mere non-registration and non-filing of returns are totally insufficient to sustain the allegation of suppression of facts when the Show Cause Notice nowhere even remotely brings out as to how the appellants bona fides were suspect or what factors indicated the existence of an intention on their part to evade service tax. Indeed the Show Cause Notice para quoted above alleges suppression regarding providing of computer network service (among others) while there was no such taxable service during the relevant period. Thus, the Show Cause Notice itself can hardly be said to contain adequate basis/grounds to sustain the allegation of suppression of facts. But as stated in the beginning of this para, for the purpose of judgement in this case, no strength needs to be drawn from this para.
8. In view of the foregoing the appellants appeal is allowed and the impugned order is set aside.
(Justice G. Raghuram) President (R.K. Singh) Member (Technical) RM 10