2007 (8) TMI 59 - AT - Service Tax

Tribunal: IT Services Not Taxable as Business Auxiliary Service

The Tribunal held that the services provided by the appellant to M/s. Gulbarga Electricity Supply Co. Ltd. did not amount to 'Business Auxiliary Service' ... Business Auxiliary Service - Information Technology Service - billing - hiring of hardware - re-computation of Service Tax liability - cum-duty benefit - invocation of longer periodBusiness Auxiliary Service - Information Technology Service - billing - Characterisation of the services rendered to GESCOM as taxable Business Auxiliary Service or excluded Information Technology Service. - HELD THAT: - On examination of the agreement and the nature of services rendered, the Tribunal found that the only service falling within the taxable ambit of Business Auxiliary Service is the billing activity. The other activities - provision and hiring of computers, printers and related hardware, generation of MIS reports, data processing and other software-related operations - constitute Information Technology Service as declared in the Explanation and are excluded from the scope of Business Auxiliary Service for the present levy. [Paras 4]Only the billing activity is held to be Business Auxiliary Service; the remaining services are Information Technology Service and not taxable as Business Auxiliary Service for the period under consideration.Re-computation of Service Tax liability - hiring of hardware - cum-duty benefit - invocation of longer period - Remand to the original authority to re-compute Service Tax liability excluding amounts attributable to hiring of hardware and Information Technology Services, and to decide the plea for cum-duty benefit; determination on period of limitation. - HELD THAT: - Having confined taxable activity to billing, the Tribunal remanded the matter to the Original Authority for fresh computation of the Service Tax demand after excluding charges relating to hiring of hardware and charges for services characterised as Information Technology Service. The Original Authority is directed to examine the appellants' request treating gross receipts as including Service Tax (the claimed cum-duty benefit) in accordance with law. The Tribunal further held there is no justification to invoke the extended limitation period and directed that any demand be confined to the normal period. The Original Authority is required to decide the matter within four months from the date of the order. [Paras 4]Matter remanded for re-computation excluding hardware-hiring and Information Technology Service charges; Original Authority to consider the cum-duty benefit claim and to limit any demand to the normal period.Final Conclusion: The Tribunal held that only the billing function falls within Business Auxiliary Service; other services provided (hardware supply/hiring, data processing, MIS/reporting and software-related work) are Information Technology Service and excluded. The matter is remanded to the Original Authority for recomputation of tax liability excluding the excluded services and hardware-hiring charges, for consideration of the appellants' cum-duty benefit claim, and any demand is to be confined to the normal period; decision to be taken within four months. Issues:1. Whether the services provided by the appellant to M/s. Gulbarga Electricity Supply Co. Ltd. amount to 'Business Auxiliary Service' under the Finance Act, 1994.2. Whether the appellants are liable to pay Service Tax for the services rendered.3. Whether the appellants are entitled to cum-duty benefit for not collecting Service Tax from their customer.Analysis:1. The appeal was filed against the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), Mangalore, concerning services provided by the appellant to M/s. Gulbarga Electricity Supply Co. Ltd. The Adjudicating Authority confirmed a demand along with penalties, which was challenged by the appellants before the Commissioner (A) and subsequently before the Tribunal. The appellants contended that their services do not fall under 'Business Auxiliary Service' as defined in Section 65(19) of the Finance Act, 1994. The Tribunal examined the contract and found that the services provided related to 'Computerized Billing and Revenue Management' system for GESCOM, including software and hardware provision. It was held that only the billing activity would come under 'Business Auxiliary Services', while other services such as supplying computers, generating reports, and data processing fall under 'Information Technology Services', which are excluded from 'Business Auxiliary Services'.2. The Tribunal remanded the case to the Original Authority for re-computation of the Service Tax liability, excluding charges for hiring hardware and Information Technology Services. The appellants requested the cum-duty benefit as they had not collected Service Tax from GESCOM. The Tribunal directed the Original Authority to examine this aspect and decide within four months. The demand was to be confined to the normal period, without invoking the longer period. Therefore, the matter was remanded for re-computation of the tax liability, considering the exclusion of certain charges and the cum-duty benefit requested by the appellants.3. The Tribunal's decision focused on the classification of services provided by the appellant and the applicability of Service Tax. The detailed analysis of the contract and services rendered helped in distinguishing between 'Business Auxiliary Services' and 'Information Technology Services'. The remand for re-computation of tax liability with specific directions regarding the exclusion of certain charges and consideration of the cum-duty benefit showcased a fair and thorough approach in resolving the issues raised by the appellants. The judgment provided clarity on the scope of taxable services and the obligations of the appellants in relation to Service Tax compliance.