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Showing contexts for: VPN in Alankit Assignments Ltd vs Service Tax - Delhi on 18 July, 2018Matching Fragments
2. Vide the impugned order, the Commissioner has adjudicated the demand raised in six show cause notices issued by various parties. The total service tax demand upheld vide the impugned order is Rs. 4,05,97,745/- alongwith interest and penalties. The following table indicates the demand of service tax made under the different services.
Sl. No. Particulars Amount Rs.
1 Storage & Warehouse Services 5,44,074/-
2 Renting of Immovable Property 1,17,449/-
3 Stock Broker Services - Transaction charges 6,24,304/-
4 Account opening charges, ID charges, 46,01,091/-
reimbursements, SEBI charges, penalty,
interest.
5 Business Support Services 11,77,050/-
6 MMR 9,73,350/-
7 On-line Information and Data Base Access or 62,04,393/-
retrieval - Demand on consideration received
from clients.
8 Demand on reimbursements claimed from 8,18,756/-
NSDL
9 Registrar to an issue , Share Transfer Agents -
Demand on reimbursement of expenses
(A) Demand confirmed under BAS for the 45,03,517/-
period 10.09.2004 to 30.04.2006
(B) Demand confirmed under RTA for the 41,29,303/-
period 01.05.2005 to 31.03.2008.
10 Banking & other Financial Services - 31,21,434/-
Demand on charges collected from the
customers and paid to NSDL.
11 Demand on NSR (National Skill Registry) 21,90,061/-
12 Demand on reimbursement of expenses viz 49,11,209/-
postage, stationery.
13 Denial of CENVAT credit on VPN 38,82,637/-
14 Denial of CENVAT credit on warehouse rent 12,93,501/-
15 Denial of CENVAT credit on digitization 12,05,616/-
charges
Total 4,05,97,745/-
By following the decision of LSE Securities (supra), we set aside the demand for Service Tax on the above two components of demand. 6.1 The appellant, being a stock broker had appointed several sub-brokers. To provide the facilities for interconnection of the sub-brokers with the appellant and inturn access the stock exchanges, the appellant made arrangements for a Virtual Private Network (VPN). A part of the cost incurred for VPN by the appellant was recovered from the sub -brokers. Revenue has confirmed the demand for Service tax on charges recovered under the category of "Business Support Services", by taking the view that the appellant has provided support services for business of the sub-broker. 6.2 The contention of the appellant is that the cost of providing the VPN was shared with the sub-brokers. This was nothing but a cost sharing arrangement and not by way of Support Services of Business or Commerce. The appellant relied the case of Gujarat State Fertilizers and Chemicals - 2016 (12) TMI 103 (SC).
6.3 The ld. AR justified the levy. He argued that the appellant has arranged for VPN which is in the nature of operational assistance and infrastructural support service. He further submitted that the case of GSFC (supra) will not apply to the present case since in the said case the Hon'ble Supreme Court was considering a joint venture arrangement between the two Public Sector Undertakings.
6.4 After hearing both sides, we note that the appellant has set up a VPN, and such network was utilised not only by the appellant but also their sub- brokers to access the various stock exchanges for putting through their transaction in securities. It is to be noted that the arrangement for the VPN was not made by the appellant by way of a support service for the sub- brokers. Evidently there is no service provider - service receiver relationship between the appellant and the sub-brokers. A part of the cost involved in the VPN has been recovered from sub-brokers as their share of the expenditure. It appears to us that this is a cost sharing arrangement and not in the form of a service provider-service receiver relationship. Consequently, we are of the view that there is no justification for levy of Service tax under the category of 'Business Support Services". Further, after going through the relevant definition appearing in Section 65(104c) of the Finance Act, 1994 we find that the activity is not covered by any of the services listed therein. Consequently, we set aside the demand for Service Tax under this category. 7.1 Demands for Service Tax have been raised under the category of 'Management, Maintenance and Repair Service' for the consideration received by the appellant for providing computer software Consultancy Services to their customers. It is the claim of the appellant that such service rendered was for development and maintenance of software for companies. The appellant started discharging Service Tax liability on such consideration, w.e.f. 16.05.2008 under the category of 'Information Technology Services'. The adjudicating authority has taken the view that w.e.f. 01.06.2007, computer software has been declared as "goods" under the definition of 'Management, Maintenance and Repair Service' (MMRS) service and hence service tax is payable under the said category.
11.4 By following the decision in the case of S. V. Engineering Constructions (supra), we set aside the demand for Service Tax on this ground. We also set aside the demand raised under the same heading for reimbursement of expenses such as postage, stationary etc. incurred for sending the information to share holders.
12. As discussed earlier, the appellant set up a VPN for connecting the sub-brokers with itself and also for maintaining the connection with the Stock Exchanges. The Service Tax paid on the VPN rent was availed as cenvat credit on input service. The Department sought to deny such cenvat credit by taking the view that the service is not directly in relation to the output service i.e. Stock Broking Service. We find considerable force in the stand taken by the appellant. The trading of security in the stock exchange is being carried out only through electronic means by establishing on-line connection to the stock exchange. Since VPN has been used for such purpose, the cenvat credit on the Service Tax paid of the service cannot be denied. Hence, the demand is set aside.