Custom, Excise & Service Tax Tribunal
Toyota Kirloskar Auto Parts Pvt Ltd vs Bangalore-Ltu on 13 December, 2024
Service Tax Appeal No. ST/1000 of 2010
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 2
Service Tax Appeal No. 1000 of 2010
[Arising out of Order-in-Appeal No. 01/2010 dated 09.02.2010 passed by the
Commissioner (Appeals) LTU, Bangalore]
Toyota Kirloskar Auto Parts Pvt., Ltd
Plot No. 21, Bidadi Industrial Area,
Ramanagara District - 562 109 ...............Appellant
Versus
Commissioner of Central Excise,
Customs and Service Tax .........Respondent
Bangalore LTU 100Ft Ring Road, JSS Towers, Banashankari III Stage, Bangalore - 560 085 Appearance:
Mr. N. Anand, Advocate for the Appellant Mr. Neeraj Kumar, Authorised Representative for the Respondent Coram:
Hon'ble Mr. P.A. Augustian, Member (Judicial) Hon'ble Mr. Pullela Nageswara Rao, Member (Technical) Final Order No. 21535 / 2024 Date of Hearing: 14.06.2024 Date of Decision: 13.12.2024 Per: P.A. Augustian The issue involved in the present appeal is whether the activities carried out by the appellant are classifiable under the category of 'Online Information and Database Access or Retrieval' (OIDAR) services and Page 1 of 8 Service Tax Appeal No. ST/1000 of 2010 whether they are liable for payment of service tax under Reverse Charge Mechanism (RCM) under section 66A read with section 65(105)(zh) from 2004 to 2006, since the liability to pay service tax in respect of services received from outside India is introduced only w.e.f. 18.04.2006 under Section 66A of the Finance Act, 1994.
2. The facts in brief are Toyota Kirloskar Auto Parts Pvt., Ltd., the appellant had entered into 'Basic Agreement on Utilisation of Facility' dated 13.04.2004 with Toyota Motor Asia Pacific Pte Ltd, Singapore for utilizing certain Infrastructure facilities including, hardware like servers and computers, software required, data centre space and rack, providing uninterrupted power (UPS) and power generator, surveillance and access control system, fire detection and suppression systems, maintenance of hardware and software, monitoring, etc., in order to enable the Appellant to store data and access data relating to their own business. Appellant was billed with shared cost of hardware i.e., initial cost of hardware and software and also shared running cost. The Appellant also remitted the consideration i.e. shared initial cost of hardware/software and running cost to the foreign company.
3. Pursuant to audit of the records of the Appellant by the Department, it is observed that the appellant is liable to pay service tax under Section 66A, of the Finance Act, 1994 on the amounts remitted to Toyota Motor Asia Pacific Pte Ltd, Singapore. However, the appellant agreed to pay service tax only in respect of shared running cost of the facility for the period from 18.04.2006 onwards. Accordingly, they remitted service tax of Rs 4,72,201/- with interest of Rs. 54,225/-.
Page 2 of 8
Service Tax Appeal No. ST/1000 of 2010
4. The adjudication authority as per the impugned order dated 24.06.2009 confirmed the demand under the service category 'Online Information and Database Access or Retrieval' (OIDAR) services on the entire amount for the entire period with interest and imposed penalties under the provisions of Finance Act, 1994. Aggrieved by said order, an appeal was filed before the Commissioner(Appeals) and Commissioner (Appeals) as per the impugned order dated 09.02.2012, partially allowed the appeal and set aside the demand prior to 18.04.2006. However, the demand for the period from 18.04.2006 was confirmed with interest and penalty was imposed under Section 76 and 78 of the Finance Act, 1994. Aggrieved by said order, present appeal is filed.
5. When the appeal came up for hearing, the learned counsel for the appellant drew our attention to the definition of "Online Information and Database Access or Retrieval" Services, as per section 65 of the Finance Act, 1994;
65(75), information and database access or retrieval" means providing data or information, retrievable or otherwise, to person, in electronic form through a computer network;
6. The learned counsel further submitted that; they are not doing any such activity falling under the above category; as per the agreement dated 13.04.2004, the foreign company has only provided computer network facility and has raised bill on the appellant towards cost of hardware and software and running the said facility; there is no 'providing of data or information retrievable or otherwise by the foreign company to the appellant; the appellant has utilised the computer network facility to generate, store and access their own data and information pertaining to Page 3 of 8 Service Tax Appeal No. ST/1000 of 2010 their business operations. The learned counsel also drew our attention to the contract entered by the appellant with overseas entity, where it is specifically stated that:- Whereas;
(A) USER desires to be availed the use of certain facilities, which shall include but not be limited to servers and networking facilities ("Facilities") located in Singapore, for the purpose of accessing, utilizing and otherwise receiving the advantage of certain data, software and other applications and/or processes in connection with certain business transactions ("Purpose"), the detailed scope of which will be as separately agreed between the parties hereto; and (B) TMAP is ready and willingly provide the Facilities to USER under the terms and conditions as set forth in this Agreement.
7. Learned counsel for the appellant further submitted that the issue is considered by this Tribunal in the matter of United Telecom Vs. CC reported in 2009 (14) S.T.R. 212 (Tri.-Bang.), wherein it is held that:-
7.2 Secondly, the appellant is responsible for keeping up the uptime. Uptime means the duration when the equipment work without fail. So the responsibility of the appellant is keeping all the elements (ports, connected in the network, they have to function properly) in working condition. The standards are given in Annexure-II. It is also seen that the equipments are connected by leased line. The Andhra Pradesh Government itself has leased the lines from the BSNL. That is not the responsibility of the appellant because the Andhra Pradesh Government has leased the lines from BSNL and the appellants uptime calculations are specific to the Page 4 of 8 Service Tax Appeal No. ST/1000 of 2010 equipment placed by them in the DNCs and SNC. The appellants receive the payment only towards upkeep of the equipments supplied by them and which belong to the appellant. From this, one thing is clear that the entire network does not belong to the appellant. Further, it is also seen that all the user terminals in the network, video conferencing terminals, computer terminals which are all connected to the various ports in the DNCs and SNC are not part of the supply requirement and they have been procured and paid for by the Andhra Pradesh Government separately. We also find that the user data is generated by the Andhra Pradesh Government and is transmitted through the leased, lines by the Andhra Pradesh Government with the help of the equipments owned by the appellant and received by users connected to the ports of APSWAN. As such, it is seen that appellant is not involved in the generation or the usage of data. In these circumstances, when part of the entire network is supplied by the appellant, who maintains the functioning of the network, we cannot simply say that the appellant provided online information and data access and retrieval services".
8. Learned counsel further submitted that the issue is also considered by the Tribunal in the matter of Philips Electronics India Ltd Vs. CC Chennai 2019 (21) G.S.T.L. 415 (Tri.-Chennai), where it is held that:-
"5.2 The department has sought to bring these IT infrastructure services within the fold of OIDAR. We find that the term "Online Information and Database Access or Retrieval" has been defined Page 5 of 8 Service Tax Appeal No. ST/1000 of 2010 under Section 65(75) of the Act to mean providing Data or Information Retrieval or otherwise to any person in electronic form through a computer network. Further under Section 65(105)(zh) of the Act, taxable service means any service provided or to be provided to a client by any person in relation to Online Information and Database Access or Retrieval or both, in electronic form through computer network in any manner.
5.3 The main take away from the definitions is that services provided should facilitate not only online information but also Database Access or Retrieval. From the facts on record, it appears to reason that the infrastructure services are nothing but a spider web group which connects Philips Netherlands to all its locations worldwide through the Wide Area Network (WAN) of internet protocol. For such Philips Global Network Services, payment is made on the basis of invoices raised by Philips Netherlands towards maintenance of server/portal, license fees, server software maintenance cost, infrastructure for global platform, hiring of web space for storing data, management and maintenance of web portal, licence cost for access for wireless WAN environment, Directory services for listing etc. Some of these services which can be availed by Philips locations and employees are of the nature of "Calendaring and Scheduling Directory, Philips e-mail, file back-up etc. In any case, all these infrastructure services are only in the nature of providing intra connectivity between Philips locations worldwide and the payments made are obviously then for sharing of the Page 6 of 8 Service Tax Appeal No. ST/1000 of 2010 maintenance cost between the Philips' units and not as fees for supply of online information or retrieval of data from the portal".
9. Learned Authorised Representative (AR) for the Revenue reiterated the findings in the impugned order and also submitted that as per the agreement made by the appellant with overseas entity, it is clearly mentioned that they have agreed to provide the appellant that certain services including "receiving the advantage of certain data, software and other applications and/or processes in connection with certain business transactions" under the terms and conditions, therein. As regards the decision relied on by the appellant in the matter of M/s. Philips Electronics India Ltd (supra), learned AR submitted that the issue is pending before the Hon'ble Supreme Court.
10. In his rejoinder, the learned counsel also drew our attention to Annexure 'A' services to the contract, which enumerates the service details and submitted that the services availed by them from the Toyota Motor Asia Pacific Pte Ltd, Singapore computer network facility was to generate, store and access their own data and information pertaining to their business operations and not the data belonging to Toyota Motor Asia Pacific Pte Ltd, Singapore. Learned counsel also drew our attention to the judgment of the High Court of Bombay in the matter of Indian National Shipowner's Association Vs. Union of India 2009 (13) S.T.R. 235 (Bom.), where it is held that only after insertion of Section 66A, the services rendered by person outside India were subject to payment of service tax. Fact being so, the appellate authority rightly has partially allowed the demand by dropping the demand for the period prior to 18.04.2006.
Page 7 of 8
Service Tax Appeal No. ST/1000 of 2010
11. Heard both sides and perused the records.
12. We find as held in the matter of United Telecom (supra), ownership of the data is relevant to consider classification of the service. From the contract, it is evident that that Toyota Motor Asia Pacific Pte Ltd, Singapore is not involved in the generation or the usage of data. In these circumstances, when Toyota Motor Asia Pacific Pte Ltd, Singapore maintains the functioning of the network, we cannot say that Toyota Motor Asia Pacific Pte Ltd, Singapore provided 'online information and data access or retrieval' services to the appellant to demand service tax under Reverse Charge Mechanism (RCM). Since the issue is squarely covered by the decisions as stated above, the appeal filed by the appellant is sustainable.
13. Accordingly, the appeal is allowed with consequential relief, if any in accordance with law.
(Order pronounced in Open Court on 13.12.2024) (P.A. Augustian) Member (Judicial) (Pullela Nageswara Rao) Member (Technical) ...iss Page 8 of 8