Custom, Excise & Service Tax Tribunal
Seed Infotech Ltd vs Commissioner Of Central Excise, Pune ... on 28 May, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal No. ST/573/11 (Arising out of Order-in-Original No. 05/AT/COMMR/2011-12 dated 28.07.2011 passed by Commissioner of Central Excise, Pune III.) For approval and signature: Honble Mr.S.S. Kang, Vice President Honble Mr. P.S. Pruthi, 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 :Yes 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?
========================================================== Seed Infotech Ltd Appellant (Represented by: Mr. M.H. Patil, Advocate) Vs Commissioner of Central Excise, Pune III Respondent (Represented by: Mr. V.K. Agarwal, Additional Commissioner (AR)) CORAM:
Honble Mr.S.S. Kang, Vice President Honble Mr. P.S. Pruthi, Member (Technical) Date of Hearing : 28.05.2014 Date of Decision: 28.05.2014 ORDER NO..
Per: S.S. Kang
1. Heard both sides.
2. Appellant filed this appeal against the adjudication order whereby a demand of Rs. 4,99,07,210/- is confirmed with interest and penalty is also imposed under Section 78 of the Finance Act, 1994. The adjudicating authority confirmed the following demands after taking into consideration the activities undertaken by the appellant:
(a) Computer Training Rs. 4,56,86,059/- (b) Manpower Recruitment Rs. 36,83,790/- (c) Intellectual Property Services Rs 2,45,400/- (d) Business Support Service Rs. 2,91,959/-
3. The contention of the appellant in respect of the demand which is confirmed on the ground that the appellant during the period 1.11.2004 to 30.9.2007 provided computer training service and had not paid the appropriate tax is that the demand is barred by limitation. The contention is that under Notification No. 9/2003-ST dated 20.6.2003 the computer training institutes were exempted from payment of service tax and thereafter another Notification No. 24/2004-ST dated 10.9.2004 was issued whereby the exemption from payment of service tax is granted to the vocational training institutes, computer training institute or recreational training institutes. The appellant were under the bona fide belief that the computer training is also entitled for benefit of Notification No. 24/2004-ST. This Notification was further amended by Notification No. 19/2005-ST dated 7.6.2005 whereby the Commercial Training or Coaching by computer training institutes are specifically excluded from the Notification. During this period there are following decisions of the Tribunal,whereby the benefit of exemption was extended upto 7.6.2005:
(a) Gargi Consultants Pvt Ltd 2013 (32) STYR 654;
(b) Doon Institute of Information Tech Pvt Ltd 2008 (12) STR 459;
(c) Ultra (Training Software & Allied Services) 2009 (14) STR 218;
(d) Stag Software Pvt Ltd 2008 (10) STR 329;
(e) Stag Software Pvt Ltd 2009 (16) STR J-78 (SC)
4. In the case of Sunwin Technosolution Pvt Ltd reported in - 2007 (7) STR 700 whereby the Tribunal held that vocational training institute include computer training institutes which are exempted from service tax in terms of Notification No. 24/2004-ST upto the date of Notification No. 19/2005 i.e. upto 7.6.2005. This decision of the Tribunal is set aside by the Honble Supreme Court reported in CC vs Sunwin Technosolution Pvt Ltd reported in - 2011 (21) STR 97 (SC). The Honble Supreme Court held that the exclusion introduced by Notification No. 19/2005-ST is from the date of Notification No. 24/2004-ST i.e. from 10.9.2004.
5. Appellant also submitted that during the period in dispute the appellant under the Extra Ordinary Taxpayers Friendly Scheme filed a declaration and paid appropriate service tax in respect of computer training given to the corporate staff and that declaration was accepted by the Revenue. The appellant had also written a letter dated 31.12.2004 to the Revenue where the appellant specifically mentioned that the appellants are paying service tax in respect of computer training to professionals and corporate clients and are not paying service tax in respect of computer training to students and appellant sought clarification in this regard. This letter was duly received by the Revenue. However, no reply was received by the appellant in this regard. In these circumstances, the contention is that the allegation of suppression with intent to evade payment of tax is not sustainable and the demand beyond the normal period of limitation is not sustainable. The appellant relied upon the decision of the Tribunal in the case of Gargi Consultant Pvt Ltd reported in 2013 (32) STR 654 where the Tribunal in a similar situation held that the demand is time barred after taking into consideration the decision of the Honble Supreme Court in the case of Sunwin Technosolution (supra).
6. In respect of demand of Rs 36,83,790/- which was confirmed under the Manpower Recruitment & Supply Agency Service, the contention is that prior to 16.6.2005 as per the provisions of Section 65 (68) of the Finance Act, 1994 that taxable service is only in respect of Manpower Recruitment Agency and it is only with effect from 16.6.2005 that supply of manpower, temporarily or otherwise, to a client is covered under the scope of Service Tax as Manpower Recruitment and Supply Agency. The appellants contention is that prior to 16.6.2005 the appellants are not covered under the definition of Manpower Recruitment Agency Service. The appellants are only providing manpower to various software companies for development of software as required. Therefore it is only the activity of supply of manpower, temporarily or otherwise, hence the appellants are not liable to pay service tax prior to 16.6.2005 in this regard. Appellants rely upon the decision of the Tribunal in CST, Ahmedabad vs Azur Cyber Pvt Ltd - reported in 2009 (13) STR 294 and Mehta Security & Detective Services vs CCE, Jaipur reported in 2007 (7) STR 287.
7. In respect of the other two demands which are confirmed on the ground that the appellant provided Intellectual Property Service and Business Support Service, the contention is that the appellant had not provided such service.
8. In respect of Intellectual Property Service the contention of the appellant is that it is only a franchisee service. In respect of the demand of Business Support Service, the contention is that the appellant had not provided any Business Support Service. Rather appellants are providing infrastructure to various clients who conduct examination for recruitment or conducting certain conferences etc.
9. Revenue relies upon the findings of the adjudicating authority.
10. The contention of Revenue in respect of computer training institute is that the computer training service was specifically excluded from the scope of Notification No. 24/2004-ST by Notification No. 19/2005-ST dated 7.6.2005; in spite of specific exclusion, the appellant had not paid service tax even after 16.6.2005. The contention is that after 16.6.2005 there is no case for the appellant for not paying the service tax in respect of computer training.
11. In respect of other demands, the Revenue submitted that as the appellants are providing manpower to various clients hence the demand is rightly made.
12. In respect of Intellectual Property service, the Revenue rebutted the argument of the appellant that it is a franchisee service. The learned A.R. submitted that the appellant allowed their clients to use their software and the appellant had right over that software. The Revenue relied upon the definition of Intellectual Property as provided under Section 65 (55a) of the Finance Act, 1994 to submit that Intellectual Property means any right to intangible property, namely, trade marks, designs, patents or any other similar intangible property. In the present case the appellants are allowing their clients to use their software on which the appellants has a property right. Hence the demand is rightly made.
13. Similar argument is made on Business Support Service. The contention is that the appellant provided space for consideration to various clients to conduct examination or other business purpose which is clearly covered under the Business Support Service. Hence the demand is rightly made.
14. In respect of computer training we find that the demand is for the period from 1.11.2004 to 30.9.2007 and the Show Cause Notice is issued on 25.6.2008 and the demand is made by invoking the extended period on the ground of suppression of facts with intent to evade payment of tax.
15. We find that Notification No. 9/2003-ST dated 20.6.2003 provides exemption from payment of service tax to a computer training institute. This Notification was upto 30.6.2004. Thereafter another Notification No. 24/2004-ST dated 10.09.2004 was issued whereby the exemption payment of service tax is only in respect of recreational institute. Thereafter another Notification No. 19/2005-ST dated 7.6.2005 was issued whereby commercial training or coaching by computer training institutes are specifically excluded from the scope of Notification No. 24/2004-ST. The dispute regarding the benefit of Notification No. 24/2004-ST in respect of computer training institute came before the Tribunal and the Tribunal in the case of Sunwin Technosolutions (supra) held that vocational training institute including computer training institutes are exempted from service tax in terms of Notification No. 24/2004-ST till computer training institutes were excluded from exemption under Notification No. 24/2004-ST with effect from 16.6.2005 by Notification No. 19/2005-ST dated 7.6.2005. Revenue filed appeal against the decision before the Honble Supreme Court and the Honble Supreme Court set aside the decision of the Tribunal and held that Notification No. 19/2005-ST is from the date of Notification No. 24/2004-ST i.e. from 10.9.2004. During this period the appellant filed a declaration under the Extra Ordinarily Taxpayers Friendly Scheme in respect of the computer training given to the corporate clients on 24.11.2004 and that declaration was accepted by the Revenue. Simultaneously appellant, vide letter dated 31.12.2004, addressed to the jurisdictional Assistant Commissioner sought advice regarding the activity undertaken by the appellant in respect of computer training. The appellant specifically mentioned in the letter that appellants are paying service tax in respect of I.T Training to corporate clients and sought advice for their activity undertaken in respect of computer training to students. The appellant had not received any reply.
16. The Tribunal in the case of Gargi Consultants Pvt Ltd (supra) held that the allegation of suppression with intent to evade payment of tax is not sustainable where the assessee not paying service tax in respect of computer training by availing the benefit of Notification No. 24/2004-ST. The Tribunal held as under:
7. However, we find that the demand in the present case stand raised for the period July 2004 to March 2005 by way of issuance of show cause notice on 22-09-2010. During the relevant period all the decisions of the Tribunal were in favour of the assessee, laying down that a "computer training institute" is covered by the expression "vocational training institute" and as such, was exempted from service tax. As such when the Tribunal, an expert appellant body, has interpreted the law in favour of the assessee, no fault can be found on the part of the assessee to interpret the law in the same manner and not to pay service tax on the "computer training services". It is only subsequently that the law declared by the Tribunal was reversed by the Hon'ble Supreme Court in the case of Sunwin Techno Solutions Pvt. Ltd. As such we are of the view that there was a bonafide belief on the part of the assessee not to pay service tax on the "computer training services" provided by them. There is no evidence indicating any malafide suppression or mis-statement with an intent to evade duty on the part the appellant. In as much as the demand stands raised against the appellant by invoking the longer period of limitation, we are of the view that the same is not justifiable. As such we set aside the impugned order and allow the appeal on the point of time bar, with consequential relief to the appellant.
17. In these circumstances the decision of the Tribunal in the case Sunwin Technosolutions (supra) was in favour of the assessee and it was subsequently set aside by the Honble Supreme Court and in view of the fact that the appellant wrote a letter regarding their activity and sought advice, we find merit in the contention that the allegation of suppression with intent to evade payment of duty is not sustainable in respect of demand which is confirmed in respect of computer training. The demand beyond the normal period of limitation is set aside. As we are setting aside the demand beyond the normal period of limitation, therefore penalty is also set aside in this regard.
18. In respect of demand which is confirmed on Manpower Recruitment we find that the appellants are only providing manpower to the software company when required. Prior to 16.6.2005 the definition of manpower recruitment agency as provided under Section 65 (105) of the Finance Act, 1994 covers service provided to client by Manpower Recruitment Agency in relation to recruitment of manpower. The appellants are not providing any such activity in respect of recruitment of manpower. We find that only from 16.6.2005 the definition of manpower recruitment agency is amended and as per the provision of Section 65 (108) of the Finance Act, 1994 manpower recruitment or supply agency means any person engaged in providing any service, directly or indirectly, in any manner for recruitment or supply of manpower, temporarily or otherwise to any other person. The appellants are providing their employees to various companies temporarily. Therefore, appellants are liable to pay service tax with effect from 16.6.2005 under the category of Manpower Recruitment or Supply Agency Service. The demand prior to 16.6.2005 is set aside which was confirmed on the ground that the appellant provided manpower recruitment agency service. Consequently the penalty under Section 78 of the Finance Act, 1994 is also to be reduced to that extent only.
19. In respect of the demand on Intellectual Property Service we find that the appellant had been allowing their clients to use their software which is the property of the appellant and as per the definition of Intellectual Property Service, taxable service (as per Section 65 (105)(zzr) taxable service means any service provided or to be provided to any person, by the holder of intellectual property right, in relation to intellectual property service. In the present case, admittedly the fact is that the appellants have the property right over a software which they allowed to be used by their clients. Hence we find no infirmity in the impugned order whereby the demand within limitation is confirmed and penalties were imposed in this regard.
20. In respect of the demand on Business Support Service, we find that the appellants are providing their space for conducting examination by various clients for recruitment purposes as well as for holding conferences etc which clearly comes under the scope of Business Support Service. Hence we find no infirmity in the impugned order whereby the demand with interest and penalties were imposed is confirmed on this ground.
21. The appeal is disposed of as indicated above.
(Dictated in Court.) (P.S. Pruthi) Member (Technical) (S.S. Kang) Vice President rk 10