2025 (1) TMI 74 - AT - Service Tax

Processing foreign entity's raw data through copyediting, typesetting, formatting doesn't qualify as OIDAR services under GST

M/s CJK Knowledge Works Global India Pvt. Ltd. Versus Commissioner of Central Excise & CGST, Noida

CESTAT Allahabad held that appellant's services of copyediting, typesetting, formatting, proofreading, graphic designing, indexing, and coding of foreign ... Classification of service - Online Information Data and Access Retrieval’ (OIDAR) Service or not - refund claims under Rule 5 of the CENVAT Credit Rules, 2004 - export of services or not - HELD THAT:- As per the agreement, foreign entity provides raw data to the Appellant in form of manuscripts, articles, photographs and other content required for carrying out the various activities by the Appellant such as copyediting, typesetting, formatting, proofreading, graphic designing, indexing, coding, etc. by using human skill and labour on such data and sends the same in electronic form through internet for access by foreign entity. In this whole process, the ownership of the data vests solely with the foreign entity and is not transferred to the Appellant. The services provided by the appellant do not qualify as OIDAR services as per the above definition. As per the provisions of the said services, appellants are not owing or providing any data through the network of computers to anybody, their services do not fall under the category of OIDAR Services. A basic requirement for classification under the said category that services should have been in respect of the data owned by the person by way of providing access and retrieval of the same to some other person. Nothing has been brought on record to show that appellants have provided any of such services. Just for the reason that appellants have got themselves registered under this category, cannot be a reason for holding that the services provided by the appellants fall under this category. The services provided by the appellants do not fall under the category of OIDAR Services, there are no merits for denial of the refund claims filed by the appellants under Rule 5 of Cenvat Credit Rules read with Notification No.27/2012-ST dated 18.06.2012. Conclusion - The classification of services must be based on the nature of the services provided, not merely on registration categories. Export of services is determined by the location of the service recipient and the nature of the transaction. The services provided by the appellants are not OIDAR services. The appellants are entitled to a refund under Rule 5 of the Cenvat Credit Rules as the services qualify as exports. Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the services rendered qualify as 'online information and database access or retrieval services' (OIDAR) within the meaning of the Service Tax Rules and therefore have place of provision at the location of the service provider under Rule 9 of the Place of Provision of Service Rules, 2012. 2. Whether the services rendered fall instead within 'Support of Business and Commerce' (business support services) such that place of provision is the location of the service recipient and the supplies may qualify as export of services eligible for refund under Rule 5 of the Cenvat Credit Rules, 2004 read with Notification No.27/2012-ST. 3. Whether denial of refund claims under Rule 5 of the Cenvat Credit Rules, 2004 without compliance with Rule 14 (show cause/notice requirement) is valid. 4. Whether Cenvat credit on input service invoices addressed to premises other than the registered address is admissible where no evidence is provided of the nature of input services or their use in providing the registered output services. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Characterisation as OIDAR and applicability of Rule 9 Place of Provision Legal framework: OIDAR is defined under the Service Tax Rules as services delivered by information technology over the internet or an electronic network, essentially automated with minimal human intervention, and includes provision of data or information retrievable to any person in electronic form through a computer network; Place of provision for OIDAR services is governed by Rule 9 of the Place of Provision of Service Rules, 2012 (location of service provider). Precedent treatment: The impugned order relied on the statutory definition and prior administrative/tribunal decisions treating OIDAR services as located at provider's location when they meet the definition. Interpretation and reasoning: The Tribunal examined the contractual and factual matrix: raw data/content was owned by the foreign entity, transmitted to the service provider, and the appellant applied human skill (copyediting, typesetting, proofreading, graphic designing, indexing, coding) to that data and returned processed output. The agreements did not demonstrate that the appellant provided automated data access/retrieval services or that ownership/control of data vested with the appellant. The education guide and statutory definition emphasize automation, minimal human intervention, and services that themselves supply data or access - features absent here. Ratio vs. Obiter: Ratio - where services involve human-intensive content processing on third-party-owned data (copyediting, typesetting, proofreading, etc.), they do not fall within the statutory OIDAR definition and thus are not OIDAR for Rule 9 purposes. Obiter - illustrative references to the education guide examples and list of services that are not OIDAR. Conclusion: The services do not qualify as OIDAR; Rule 9 (place at provider) is inapplicable to characterise these services as OIDAR. Issue 2 - Characterisation as Business Support Services and exportability under Rule 5 Cenvat Credit Rules Legal framework: Place of provision for 'Support of Business and Commerce' is addressed by Rule 3 of the Place of Provision of Service Rules, 2012 (location of service recipient). Exports of services and refund under Rule 5 of the Cenvat Credit Rules require that the place of provision is outside India and other conditions in Notification No.27/2012-ST be met. Precedent treatment: The appellate authority had earlier applied Rule 9 treating the services as OIDAR; appellants contended Rule 3 should apply. The Tribunal reviewed contractual evidence submitted at appeal stage to determine the true nature of services. Interpretation and reasoning: The Tribunal found that the actual services rendered were content/data processing and data management involving human skill on client-owned material, which falls within business support / content-processing services. Given that the foreign recipient owned the data and the processing was performed for that recipient, place of provision under Rule 3 could apply (location of recipient), and the supply may qualify as export of services if other conditions are satisfied. The Tribunal also noted that mere initial registration as OIDAR by the provider does not conclusively determine the nature of services; the substance of agreements and service delivery governs classification. Ratio vs. Obiter: Ratio - where services are human-intensive business support/content-processing on client-owned data and the place of recipient is outside India, such services can be exports of service and thus eligible for refund under Rule 5, subject to compliance with other statutory conditions. Obiter - remarks on impropriety of amending registration without evidential basis. Conclusion: The services qualify as business support/content-processing services rather than OIDAR; accordingly, denial of refunds solely on the basis of OIDAR classification was unsustainable and refunds under Rule 5 could not be denied on that ground. Issue 3 - Requirement of notice under Rule 14 for denial of refunds under Rule 5 Legal framework: Rule 5 refund proceedings under the Cenvat Credit Rules are subject to procedural safeguards including issuance of notice under Rule 14 before denial. Precedent treatment: The Tribunal referred to prior decisions holding that denial of refund under Rule 5 without issuing proper notice under Rule 14 is impermissible. Interpretation and reasoning: The Tribunal observed established precedent (including a recent decision of the Tribunal) that non-issuance of Rule 14 notice vitiates denial of refund and that the point had been decided consistently in favor of appellants in similar factual matrices. Ratio vs. Obiter: Ratio - denial of refunds under Rule 5 without issuance of statutory notice under Rule 14 is legally unsustainable. Conclusion: The impugned orders denying refunds are also unsustainable for failure to comply with the procedural requirement of Rule 14; this independently supports allowing the appeals insofar as refunds were denied without proper notice. Issue 4 - Admissibility of Cenvat credit on invoices addressed to unregistered premises Legal framework: Cenvat credit admissibility requires that input services be used for provision of taxable output services for which registration is obtained; invoices must reflect appropriate particulars and usage must be demonstrable. Precedent treatment: The adjudicating authority and Commissioner (Appeals) emphasized onus of the service provider to demonstrate nature and use of input services; absence of evidence renders such credits prima facie ineligible. Interpretation and reasoning: The Tribunal noted that the appellants failed to explain the nature of input services in question or to establish their receipt/use at registered premises. In the regime of self-assessment, the appellant bears the burden to demonstrate applicability of credit; mere production of invoices addressed to a different location, without evidence of use in providing the registered output services, is insufficient. Ratio vs. Obiter: Ratio - input service credit on invoices addressed to unregistered premises is inadmissible unless the claimant proves the nature of the services and their actual use in providing the registered output services. Conclusion: The Cenvat credit claim on invoices for an unregistered premise (Rs. 50,708/- in the record) was rightly disallowed for lack of evidentiary support. Cross-references Issues 1 and 2 are interrelated: correct legal characterisation (OIDAR v. business support) determines applicable place of provision rule (Rule 9 v. Rule 3) and thereby the eligibility for export treatment and refund under Rule 5. Issue 3 provides an independent procedural basis for relief where Rule 14 notice was not issued. Issue 4 is separable and concerns admissibility of specific input credit claims on evidentiary grounds. Operative Conclusion The Court concluded that the impugned denial of refunds based on classification as OIDAR was incorrect because the services were human-intensive content processing/business support services (not OIDAR); further, denial without compliance with Rule 14 was impermissible, and a specific input credit claim was rightly disallowed for lack of evidence. Accordingly the appeals were allowed to the extent reflected in the operative order.