TaxTMI 
TaxTMI 
2010 (3) TMI 190
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....ep. 2007 Rs. 73,11,615 plus interest Rs. 200 per day (or) 2 per cent of service tax, whichever is higher (Section 76) 2. The learned senior counsel Shri N. Venkataraman submits that the appeals relate to the agreement dated 1-7-2003 between the appellants and M/s. TCS and the agreement dated 6-7-2005 between the appellants and M/s. Infosys. In regard to these agreements he submits as follows:- (A) Essence of Agreement with Infosys:- (1) Clause 1B defines Agreement "Agreement" means the sub-contracting Agreement, the appendices hereto, any Task Orders, and any duly executed amendments thereto". (2) Clause 1D defines deliverables "Deliverables" means all of the Object Deliverable works materials, software, documentation, methods, apparatus, systems and the like prepared, developed, conceived or delivered as part of or in connection with the services, and all tangible embodiments thereof the Consultant is required to deliver under the relevant Task Orders. (3) Clause 1G defines services "Services" shall mean the software development, modification or other tasks, including Deliverables to be performed by the Consul....
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....t task order (Clause 3B). (7) Clause 4 - Payment: • Infosys will pay appellant for services utilized in accordance with Appendix A (Clause 4A). (8) Clause 8 - Warranties: • Appellant warrants that the services shall be performed in accordance with the specifications and documentation set forth in the relevant task order (Clause 8-II). (9) Appendix E - Sample Task Order: • The appellants agree to provide services as set forth in the task order. Clause 1 of the Task Order identifies the services to be provided, scope of services, location of services, deliverables, milestone, acceptance procedures, reporting, the commencement and completion dates etc. (10) Clause 12 - Terms & termination: • What is sought to be terminated in case of failure to perform services, are only the task orders and not any staff, personnel or representatives. (Clause 12D). (B) Essence of Agreement with M/s. Tata Consultancy Services "Appellant willing to provide services in the nature of development, implementation, enhancement and maintenance works undertaken by TCS from its various clients by deputing i....
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....r, on the technical nature of activities being carried out by its employees. • Staff are deputed by Focus to TCS and the deputed Engineers are required to carry out the above task under the supervision of TCS. • The role is limited to supply of qualified technical people. • Focus are not even aware of the exact nature of software being/to be developed by the clients. Clients inform manpower requirement and Focus, in turn, supply manpower suited to the client's requirement (Para 7.3). The learned senior counsel states that the above findings are not at all supported by any of the provisions of the relevant agreements between the appellant and M/s. Infosys and M/s. Tata Consultancy Services. In regard to the finding that Focus are paying service tax on the same activity rendered to IBM and Capgemini, the learned senior counsel states as follows:- Since service tax has been collected, the same has been paid to the Government. No tax can be collected without the authority of law (Article 265 of the Constitution of India). There is no estoppel in taxation matters. 4. He does not press the issue of limitation in regard to these tw....
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....ower recruitment or supply agency". The purpose of the legislation should be inferred from the expressions used namely "recruitment", "supply". Both in the case of recruitment and in the case of supply of manpower, the obligation of the service provider would end once people are recruited or people are supplied. The definition does not obligate any other requirement to provide any other specified services to fall under the category of "Manpower recruitment or supply agency". Consequently, once the contract of service envisages deliverables in the nature of provision of services more specifically provision of a computer software service, such a provision of service cannot be classified as "Manpower supply", as it moves out of the said definition. As a matter of fact it is self-evident that all the contracts on record clearly indicate that the deliverables are not mere supply of manpower, but provision of computer software services. [Clause 1(d)), (g), (h), Appendix E of Infosys Agreement/Clause 3(a), (b) of TCS Agreement.] (b) Responsibility: Service Tax law is a contract driven legislation. It is the scope of the contract that would dete....
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....the case of M/s. Future Focus InfoTech Pvt. Ltd. Location therefore is immaterial. If performed from one zone/premises are termed as computer software services, it cannot become manpower supply merely because it is rendered or performed at the client's premises. As long as the scope of deliverables, responsibility and accountability is for provision or rendition of computer software services. The transaction would merit classification only under "Consulting Engineer" and will not become manpower supply. When a computer software service is rendered from the service provider's own premises or location using his own infrastructure, the presumption if any, should go in favour of such service providers, classifying the services as "Consulting Engineer". (e) Defect Liability:- The agreements on record very clearly evidence the fact that the end obligation is to provide computer software services. Failure to provide such a service or ineffective or defective provision of such a service, would contractually allow the service recipient to demand from the appellants, re-working the services to the absolute satisfaction of the service recipient. The agreemen....
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....ice irrespective of the mode of payment which could be a per-diem basis would still be consulting engineer service and not manpower service. (Clause 4 of Infosys/Clause 7 of TCS) (h) Identification of manpower vis-a-vis supply of manpower:- A contract for supply of manpower cannot stop with identification of manpower. It would start with identification and would culminate in its actual supply. Once manpower is supplied the complete control on such a manpower would wholly vest with the client. Such manpower would look for directions, obligations and commands only from the clients. These things are conspicuous by its absence in the contracts under question. A mere supervisory role does not vest control. (3) The contract in the instant cases stops with identification of the work force. It defines the scope of work and also defines who should perform the scope of work, it nowhere defines that such scope of work by such people should be performed under the exclusive control of the client. If so the entire contract contemplating deliverables, attaching responsibilities, fastening accountability, making the appellants work on defects, leading to termination for ....
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....on 65A is inapplicable to the cases since they deal with composite services. The remaining two clauses if invoked or applied would go squarely in favour of the appellants. Sub-clause (2)(a) of section 65A indicates that the specific description should give way to the general description. The definition of "Consulting Engineer" services, the exemption given vide Notification No. 4/99-ST, dated 28-2-1999 for computer software, the subsequent exclusion under section 65(105)(g) of the Finance Act, 1994 excluding computer software engineering discipline from the purview of taxable service, its later induction with effect from 16-5-2008 through an explanation and creation of a separate entry namely Information Technology Software Service with effect from 16-5-2008 would go to show that the transaction under question would have to be categorized under the specific description of "Consulting Engineer" and not a general description "Manpower Supply". (7) There is one more reason in classifying under consulting engineer. Section 65 of the Finance Act, 1994 is a definition clause, defining various notified services. There are several services which are identified and specifically not....
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....f section 65(105) ibid, (ii) Alternatively, the service fell under 'Business Auxiliary Service' in the field of Income-tax services and fell outside the scope of service tax; (iii) Or under Income-tax Services, which came to be levied only from 16-5-2008; (iv) Gross value to exclude the salary; (v) Demand time-barred; (vi) Penalty not imposable, when the scope of the service gave room for different interpretations. Point (i) Whether the services rendered by the appellant fell within the scope of 'Consulting Engineer's Service'? As per clause (31) of section 65 of the Act, 'Consulting engineer' means any professionally qualified engineer or any body corporate or any other firm who, either directly or indirectly, renders any advice, consultancy or technical assistance in any manner to a client in one or more disciplines of engineering. With effect from 1-5-2006, the words 'an engineering firm' were substituted by the words 'any body corporate or any other firm'. The words 'professionally qualified', and 'advice, consultancy or technical assistance' are words of significan....
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....ecessary for carrying on the particular profession. Mere work experience is not sufficient. In CCE v. Daylight Electronics (P.) Ltd. [2006] 4 STT 241 (Chennai - CESTAT), it has been held that to place a person within the ambit of 'consulting engineer', it must be first established that he is a professionally qualified engineer. Advice, consultancy or - technical assistance - The scope of the service is to render advice, consultancy or technical assistance. It may be noted that there is no 'comma' between the words, 'consultancy' and 'technical assistance'. Thus the word 'or' is not a disjunctive but a conjunctive. It is a settled law that the meaning of a word has to be derived from the company it keeps, vide judgment of the Apex Court in the case of Rohit Pulp and Paper Mills Ltd. v. CCE 1990 (47) ELT 491. Thus, 'technical assistance' would follow advice and consultancy, and also would not involve direct execution of the work. In any case, the appellant cannot render 'technical assistance' on matters not designed, developed or on which, he has no rights. It may be pointed but that TCS/Infosys were to execute....
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.... in relation to the staff. They specify the qualification, experience, skills, the expectations from them, performance based output, confidentiality conditions, training etc. They work under the team leaders and under their guidance and control, which no consultant, worth the name, would do. The compensation is based on the number of man-hours spent in the campuses of TCS/Infosys or at their clients' premises. If any staff is found wanting in performance, they will be sent back, and the appellant is to send replacement. Professionally qualified engineers or consultant is an independent person engaged because of their proficiency in the field, and if he is to take the guidance and training or work under another person, then he is no longer a professionally qualified engineer. Hence, the service rendered by the appellant does not fall within the ambit of consulting engineer's service. The true purport of the agreement will be clear, if we look at clause 4.4 of the agreement with TCS. "4.4. If BA defaults on providing continuous-technical support services during the project, TCS will deduct an amount not exceeding 2 months fee relating and attributable to the....
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....e requested the appellant to develop a software for them. In any case, so long as the definition of the Manpower recruitment or supply agency service is not changed, the service rendered would fall only under the category of manpower supply agency services. Further, the CESTAT have - held in - Diebold Systems (P.) Ltd. v. CST [2008] 12 STT 346 (Chennai - CESTAT) that introduction of service tax on a new service, presupposes its non-coverage in the already existing services. As against the above, the definition of Manpower Recruitment or Supply Agency under section 65(68), with effect from 16-6-2005 reads as: "manpower recruitment or supply agency" means any commercial concern engaged in providing any service, directly or indirectly, in any manner for recruitment or supply of manpower, temporarily or otherwise, to a client. The term 'commercial concern' was substituted by the term 'any person' with effect from 1-5-2006. 'Taxable service' means any service provided or to be provided to a client, by a manpower recruitment or supply agency in relation to the recruitment or supply of manpower, temporarily or otherwise, in any manner. Th....
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....rations cited by the appellant do not apply to this service. Point (v) Time-bar. The contention is not tenable. Since the returns have been filed, the time limit runs from the date on which the returns have been filed, vide section 73(6)(i)(a). Hence, the demand is not barred by time. Further, under proviso to section 73(1), in respect of suppression, there is no prefix of 'wilful' as found against 'mis-statement' of facts. Hence, once the appellant had suppressed the actual activity, the demand is justified. Paragraph 13.5 of the impugned order justifies this issue. Point (vi) Penalty. Admittedly, there was a query from the officers of Bangalore Service Tax Commissionerate; further, for similar services rendered to IBM and Cap Gemini, service tax has been paid under this category. Nothing prevented the appellant from seeking any clarification from the jurisdictional authorities. The failure is glaring, and not expected from such hi-tech companies. Findings in paragraph 13.5 of the Commissioner's order refers. From the foregoing submissions, it will be seen that there is no confusion on the taxability. Hence, the penalty imposed is jus....
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....ly define the scope of service assigned to the appellant. Only a blank Task Order has been filed in the appeal paper book. Hence, on the dates agreement was entered, no specific task in the field of software has been assigned to the appellant. (3) However, during the re-hearing on 7-1-2010, the counsel for the appellant submitted a copy of the Task Order dated 3-7-2006. It was pointed out that for the first time, such document was being filed and that too, during the re-hearing proceedings, and the same cannot be admitted. It was further pointed out that clause 1h of the agreement with Infosys, mandates that the Task Order will, amongst the minimum, specify the terms of the Task order, detailed description of the services covered by the Task order and the charges for the services covered by the Task order. The copy of the 'Task Order submitted at the time of re-hearing does not contain the charges to be charged. This Task Order contains the name of the resource person, thereby confirming the stand of the Revenue that the entire agreement, both with TCS and Infosys are staff-specific. If the appellant were to execute any software related work, nature/description of the ....
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....ng to 'deliverables' do not apply. (7) Service Tax is on the service rendered. The service rendered by the appellant was confined to supply of skilled manpower. It is immaterial as to what the men thus supplied ultimately turn out, at the hands of and in association with the receiver of the manpower. As per the definition of 'man power recruitment or supply agency' under clause (68) of section 65 of the Finance Act, 1994, any service rendered directly or indirectly by a person to another person, in any manner for recruitment or supply of manpower, temporarily or otherwise, falls in the category of 'man power supply'. The role of the appellant was just to supply the skilled man power to computer software companies, as per their requirements from time to time, and such persons so placed at the disposal of the borrowing companies, carried out the work under the control, guidance and supervision of the latter, on projects executed by the latter. The CBEC have in their Circular B1/6/2005-TRU, dated 27-7-2005 also clarified that such types of transactions attracted service tax under 'man-power supply agency'. The scope of the service rendered has ....
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....ct. 11. The learned special counsel further points out that the manpower supplied have to work under the guidance and control of TCS and Infosys. The appellants have no mandate to execute any work independently as normally a consulting engineer would do. He also brings it to our notice that if a person leaves, the appellants are required to provide suitable substitute. This indicates that the appellants are responsible only for supplying manpower, and they are not responsible for completion of any software project per se. 12. We find that the arguments advanced on behalf of the appellants are mainly based on the various clauses in the agreements executed between them and their clients namely TCS and Infosys. We are of the view that not only the wordings of these clauses are to be considered but also how different clauses of the contracts actually operate have to be seen. We find that the appellants are supplying various skilled personnel to TCS and Infosys to work on software projects undertaken by TCS and Infosys from their respective clients. The personnel deputed by the appellants appear to be working at the site of the clients of TCS and Infosys or in the premises of TCS ....