Data digitization and indexing services don't qualify as OIDAR services requiring minimal human intervention

CESTAT Allahabad held that appellant's services of providing digitized, abstracted and indexed data from raw data received from third parties did not constitute Online Database Access and Retrievable (OIDAR) services. The services were classified as business support or telecommunication services using information technology tools, not OIDAR services requiring minimal human intervention for public access. Following precedent from State Bank of India case, appellant was not liable for service tax under OIDAR category. Extended limitation period was rejected as appellant maintained proper records, filed returns, and acted in bona fide belief regarding tax liability. Appeal allowed, impugned order set aside.

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Issues Involved:
1. Liability of the Appellant to pay service tax under 'Online Database Access and Retrieval (OIDAR) Services' for the period from July 2012 to November 2016.
2. Classification of services provided by the Appellant.
3. Applicability of extended period of limitation.

Summary:

1. Liability to Pay Service Tax under OIDAR Services:
The core issue in this appeal was whether the Appellant was liable to pay service tax under 'Online Database Access and Retrieval (OIDAR) Services' for the period from July 2012 to November 2016. The demand of Rs. 50,87,71,481/- was confirmed under section 73(1) of the Finance Act, 1994, along with interest under Section 75 and penalty under Section 78. Additionally, a penalty of Rs. 1,00,000/- was imposed on Shri Rajiv Nandvani, Director and VP (Facilities) of the Appellant company.

2. Classification of Services:
The Appellant, M/s Innodata India Private Limited, provided Content Support Services including data conversion, knowledge process outsourcing (KPO), and IT-enabled services to its holding company, Innodata Inc., USA. The Revenue alleged that these services were OIDAR services, which are taxable in India as per Rule 9(b) of the Place of Provision of Services Rules, 2012. However, the Appellant argued that these services were incorrectly classified as OIDAR services and should be classified under 'Business Support Services' (BSS). The Tribunal referred to various agreements and concluded that the services provided were not OIDAR services but were data conversion, KPO, and IT-enabled services, which involve significant human intervention and are not fully automated.

3. Applicability of Extended Period of Limitation:
The Tribunal found that the Appellant was under a bona fide belief that its activities were not liable to service tax under OIDAR services. The Appellant maintained proper records, complied with various laws, and filed ST-3 returns and refund claims regularly. The Tribunal held that the issue involved interpretation of the statute, and no mala fide intent could be attributed to the Appellant. Therefore, the extended period of limitation could not be invoked.

Conclusion:
The Tribunal concluded that the services provided by the Appellant did not fall under the category of OIDAR services and were correctly classified under Business Support Services. The demand for service tax, interest, and penalties was set aside, and the appeal was allowed with consequential benefits.

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