Tribunal grants waiver of pre-deposit for online service tax application

The Tribunal granted the application for waiver of pre-deposit of service tax on online information and database access services. The applicants argued that the services provided by M/s Equant Pte Ltd. were limited to Virtual Private Network (VPN) services and not actual data retrieval. The Tribunal agreed, finding that the service was not provided in electronic form through a computer network as required by the definition under Sec. 65(75) of the Finance Act. Therefore, the pre-deposit of dues was waived, and recovery stayed pending appeal proceedings.

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Issues:
Application for waiver of pre-deposit of service tax on online information and database access or retrieval service through a computer network.

Analysis:
The applicants sought waiver of pre-deposit of service tax amounting to Rs.2,61,06,556/-, interest, and penalties, contending that they are availing services from M/s Equant Pte Ltd. for Virtual Private Network (VPN) to retrieve data from their own data centers in India, USA, and UK. They argued that M/s Equant Pte Ltd. is only providing VPN services, not the actual data retrieval service. The applicants relied on the definition of service under Sec. 65(75) of the Finance Act and the terms of the agreement with M/s Equant Pte Ltd. They also cited a Tribunal decision and a Board circular to support their claim.

The Revenue, however, relied on the statement of SBI's Asstt. General Manager admitting that the online connectivity to data centers is provided by M/s Equant Pte Ltd. The Revenue contended that the service falls under online information and database access or retrieval in electronic form through a computer network, benefiting the applicants by enabling data updating. The service provided by M/s Equant Singapore is through online computer network, justifying the demand made.

The Tribunal examined Sec. 65(75) of the Finance Act, defining "on-line information and database access or retrieval" as providing data or information in electronic form through a computer network to any person. Considering the arguments, the Tribunal found that the service is to be provided in electronic form through a computer network. While M/s Equant Pte Ltd. provides the Virtual Private Network facility, the applicants benefit from accessing their own database in the US, UK, and India. Therefore, it was concluded that the applicants have a case in their favor as they are not receiving the services in question. Consequently, the pre-deposit of dues was waived, and recovery stayed during the appeal's pendency.

The Tribunal directed the registry to list the appeal for further proceedings, allowing the stay petition in light of the involved revenue.

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