2014 (10) TMI 169 - AT - Service Tax

Tribunal rules IT services not Business Auxiliary, emphasizing service categorization for tax

The Tribunal ruled in favor of the appellant, setting aside the service tax demand for services received under 'Business Auxiliary Service.' The services ... Classification of service - Business Auxiliary service or Information technology service - Held that:- From a perusal of the agreement entered into between the appellant and SKF, Sweden, it is clear that the said agreement provided for development, maintenance and installation of software systems by the foreign entity to the appellant and supply of information, data, providing training, etc. In the IT software field, Information Technology Software service was specifically excluded from the scope of ‘Business Auxiliary Services' and the same was made taxable only w.e.f. 16/05/2008 when a separate entry for ‘Information Technology Software Services' was introduced in the statute book. Therefore, we agree with the appellant's contention that the services received by the appellant fall within the category of ‘Information Technology Services' and therefore, would not be liable to service tax for the period to 16/05/2008. On perusal of the agreement, it is seen that there are only two parties involved SKF, Sweden and SKF, India and there is no third party involved. Further, the service received by the SKF India, the appellant herein, is for its own use and not for providing any service to any other party. Therefore, the argument of the Revenue that the services received would fall within the ambit of ‘customer care' is totally bereft of any logic and devoid of any merit. various services received do not come anywhere near the definition of ‘business auxiliary service' or ‘customer care service' as has been held in the impugned order. Thus, we find that the impugned order is clearly unsustainable in law. - Decided in favour of assessee. Issues:Service tax demand on services received under 'Business Auxiliary Service' category.Analysis:The appeal challenged an Order-in-Original confirming a service tax demand against the appellant for services received under 'Business Auxiliary Service.' The demand included IT services from a foreign entity and various expenditures. The appellant argued that the services received fell under Information Technology Services, not Business Auxiliary Services, as they were related to IT software procurement. The definition of Information Technology Services supported this argument. The Tribunal agreed that the services were IT-related and therefore not liable for service tax before 16/05/2008.The Revenue contended that the services qualified as 'customer care services' under Business Auxiliary Services. However, the Tribunal found this argument lacking merit as customer care services involve three parties, while the agreement in question only involved two parties. The services were for the appellant's use, not for providing services to others. The Tribunal also noted that the impugned order did not consider the nature of the services and payments made by the appellant. Ultimately, the Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal.This judgment clarifies the distinction between Information Technology Services and Business Auxiliary Services concerning service tax liability. It emphasizes the importance of accurately categorizing services to determine tax obligations correctly. The Tribunal's detailed analysis of the services received and the legal definitions involved provides valuable guidance for similar cases involving service tax disputes.