Custom, Excise & Service Tax Tribunal
Uti Technology Services Ltd vs Commissioner Of Service Tax, Mumbai on 21 November, 2011
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI
COURT NO. II
APPEAL NO. ST/240/08 Mum
Arising out of Order-in-Original No. 18/STC/BR/08-09 dated 25.08.2008 passed by the Commissioner of Service Tax, Mumbai.
For approval and signature:
Honble Shri Ashok Jindal, Member (Judicial)
and
Shri. P.R. Chandrasekharan, Member (Technical)
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should 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 : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
UTI Technology Services Ltd.
:
Appellant
Versus
Commissioner of Service Tax, Mumbai
Respondent
Appearance Shri R.G. Sheth, Advocate for appellant Shri V.K. Agarwal, Addl. Commissioner (A.R.) For Respondent CORAM:
Shri Ashok Jindal, Member (Judicial) Shri P.R. Chandrasekharan, Member (Technical) Date of Hearing : 21.11.2011 Date of Decision : 21.11.2011 ORDER NO.
Per P.R. Chandrasekharan The appeal and the stay application are directed against order-in-original No. 18/STC/BR/08-09 dated 25.08.2008 passed by the Commissioner of Service Tax, Mumbai.
2. The appellant M/s. UTI Technology Services Ltd. are rendering services to various Government departments namely Income Tax department, Central Board of Trustees Employees Provident Fund, India and also the Department of Company Affairs. As regards the Income Tax department, they are undertaking the services of issue of PAN Card (Permanent Account Number Card). For this purpose, they print, supply and distribute application forms to the applicants against payment of a fee of Rs.5 per application form, receive PAN applications in prescribed form on behalf of the Income Tax department, validate the applications with the checklist provided by the Income Tax department and carry out verification about the identity and address of the applicants. In case any discrepancies are noticed, applications are returned to the applicants pointing out the deficiency and for resubmission with necessary correction/rectification. Thereafter, they digitize the data from PAN application forms and transmit the digitized data to the server at National Computer Center (NCC) of Income Tax department. After receipt of PAN from the National Computer Center of the Income Tax department, the appellant would print PAN cards and issue the same to the applicants. For these services they charge a sum of Rs.60/- from the applicants as authorized by the Income Tax Department. The above activity is sought to be classified under the category of Business Auxiliary Service. A service tax demand for the period July, 2003 to September, 2004 has been demanded on a sum of Rs.45,48,60,957/- received as service charges from various clients and the service tax amount demanded is Rs.3,67,80,546/-. As regards services rendered to Employees Provident Fund Organisation (EPFO), the demand has been made under the category of Management Consultant Services on a sum of Rs.13,92,836/- involving a service tax demand of Rs.1,11,427/-. The 3rd demand is in respect of services rendered to the Department of Company Affairs (DCA) towards E-Governance project relating to modernization and computerization of various operations conducted by the said department. The amount of service tax demanded is Rs.1,27,910/- on a sum of Rs.15,98,879/- received from the department of Company Affairs.
3. The learned Counsel for the appellant submits that the services rendered to the Income Tax department cannot be classified as Business Auxiliary Service inasmuch as the Income Tax department is involved in levy and collection of income tax. It is a sovereign and statutory function and issue of PAN card is in relation to such function. Therefore, it cannot be classified as Business Auxiliary Service. Further, the amount is collected from the applicant who has applied for PAN card and not from the Income Tax department and therefore, the demand is not sustainable.
3.1 As regards the services rendered to the Employees Provident Fund Organisation and the Department of Company Affairs, both services relates to upgradation of information technology systems and operations of these organizations and services rendered by the appellant would be classifiable under the Information Technology Service which came under the tax net effective from 16.05.2008.
3.2 The learned Counsel also relies on the judgement of this Tribunal in the case of Commissioner of CUS. & C.EX., Hyderabad II vs. CMC Ltd. 2007 (7) S.T.R. 702 (Tri. Bang.) wherein it was held that issue of Photo Identity Cards to electors will not come under the category of Business Auxiliary Service or Photography Service. He also relies on the judgement of this Tribunal in the case of C.C., C.E. & S.T., Hyderabad II vs. C.S. Software Enterprises Ltd. 2008 (10) S.T.R. 367 (Tri. Bang.). He further relies on the judgement of this Tribunal in the case of Gandhi & Gandhi, Chartered Accountants vs. C.C.E. Hyderabad 2010 (17) S.T.R. 25 (Tri. Bang.) wherein it was held that Computerized data processing for billing and accounts management service will not come under the category of Business Auxiliary Service for the period prior to 01.05.2006. He further relies on the judgement of this Tribunal in the case of Dataware Computers vs. Commr. of C.EX., CUS. & S.Tax (A) Guntur 2008 (12) S.T.R. 121 (Tri. Bang.) wherein it was held that Generation of MIS reports and development of software for such purpose would be covered under Information Technology Service and not under Business Auxiliary Service.
4. The learned A.R. appearing for the Revenue reiterates the findings of the lower adjudicating authority.
5. We have carefully considered the rival submissions.
6. As regards the demand in respect of services rendered for issue of PAN Cards on behalf of the Income Tax department, we find that the Income Tax department is engaged in the sovereign function of levy and collection of income tax. Issue of PAN Cards on behalf of the Income Tax department is in relation to such sovereign function. It is not in relation to any business. Therefore, issue of PAN Cards cannot come under the category of Business Auxiliary Service as has been held in the impugned order. This Tribunal in the case of C.S. Software Enterprises Ltd. (cited supra) held that the activity of preparing elector photo Identity Cards cannot be considered to fall within the ambit of Photography Service inasmuch as issue of Identity Cards was a sovereign function in terms of Constitution of India and the same cannot be brought in the ambit of photography service. Similarly, levy and collection of income tax is a sovereign function and issue of PAN cards is in relation to such function and, therefore, the said activity cannot be brought under the category of Business Auxiliary Service and we hold accordingly.
6.1 The Central Board of Excise and Customs in Circular No. 89/7/2006-S.T. dated 18.12.2006 had clarified as follows:-
A number of sovereign public authorities (i.e. and agency constituted/set up by government) perform certain functions/duties, which are statutory in nature. These functions are performed in terms of specific responsibility assigned to them under the law in force. For examples, the Regional Reference Standards Laboratories (RRSL) undertake verification, approval and calibration of weighing and measuring instruments; the Regional Transport Officer (RTO) issues fitness certificate to the vehicles; the Directorate of Boilers inspects and issues certificate for boilers; or Explosive Department inspects and issues certificate for petroleum storage tank, LPG/CNG tank in terms of provisions of the relevant laws. Fee as prescribed is charged and the same is ultimately deposited into the Government Treasury. A doubt has arisen whether such activities provided by a sovereign/public authority required to be provided under a statute can be considered as provision of service for the purpose of levy of service tax.
2. The issue has been examined. The Board is of the view that the activities performed by the sovereign/public authorities under the provision of law are in the nature of statutory obligations which are to be fulfilled in accordance with law. The fee collected by them for performing such activities is in the nature of compulsory levy as per the provisions of the relevant statute, and it is deposited into the Government Treasury. Such activity is purely in public interest and it is undertaken as mandatory and statutory function. These are not in the nature of service to any particular individual for any consideration. Therefore, such an activity performed by a sovereign/public authority under the provisions of law does not constitute provision of taxable service to a person and, therefore, no service tax is leviable on such activities.
3. However, if such authority performs a service, which is not in the nature of statutory activity and the same is undertaken for a consideration not in the nature of statutory fee/levy, then in such cases, service tax would be leviable, if the activity undertaken falls within the ambit of a taxable service. 6.2 A perusal of the above Circular makes it abundantly clear that if a service is rendered in relation to a sovereign function, such activity cannot be brought under the category of a taxable service and no service tax is leviable on such activities. Accordingly, we hold that issue of PAN Cards on behalf of the Income Tax department to income tax assessees is not a taxable service falling within the category of Business Auxiliary Service and, accordingly, the demand of service tax on such activity under Business Auxiliary Service is clearly unsustainable in law.
6.3 Similarly, in the case of services rendered to Employees Provident Fund Organisation (EPFO) and the Department of Company Affairs (DCA), it is noticed that the services rendered by the appellant is in respect of modernization and upgrading the Information Technology Systems of these organizations. In the case of DCA, the services rendered by the appellant was to manage and monitor the modernization and computerization of various operations conducted by the DCA so as to improve certainty and speed in delivery of services. In the case of EPFO, the services received relates to acquisition and installation, commissioning and system integration of the IT systems, hosting facilities for the central site, preparation and issue of NSSN cards to the members of EPFO. The taxable service covered under the category of Information Technology Software Service includes - (i) development of IT software; (ii) study, analysis and design of IT software; (iii) adaptation, upgradation, enhancement, implementation and other similar services related to IT software; (iv) providing advice, consultancy and assistance on matters relating to IT software; (v) providing right to use IT software and so on. The activities undertaken by the appellant falls in this category and therefore, would merit classification under Information Technology Software Service which has been brought under the tax net with effect from 16.05.2008 and they do not come under the category of Management Consultancy Service. Therefore, the demand of service tax in respect of these services during the period referred to in the impugned order is clearly unsustainable in law. Accordingly, we allow the appeal with consequential reliefs, if any.
(Pronounced in open Court) (Ashok Jindal) Member (Judicial (P.R. Chandrasekharan) Member (Technical) nsk 8