TaxTMI 
TaxTMI 
2021 (2) TMI 1093
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....oked to the Revenue is a serious prejudice caused to the interest of the Revenue, in the absence of discussing the Order dt.04.08.2020 in C.M.A.No.655 of 2020 relevant facts, and giving reasons, for arriving at a particular conclusion. We are restraining ourselves from expressing anything further on the tenor of the order passed by the learned Members of the Tribunal in the present case. 8. We hope and expect that the learned Members, and even other Members, who deal with the appeals from now onwards, in such Revenue matters, should understand the letter and spirit of these observations of the High Court. 9. We accordingly set aside the said order of the learned Tribunal on the said issue no.4, regarding taxability of manpower services and application of extended limitation in the present case and restore the appeal back to the learned Tribunal, with a request to hear the appeal de novo on the said issue and decide the same as expeditiously as possible. We are not in a position to answer the questions raised by the Revenue in the present appeal at this stage, for the aforesaid reasons. 10. The appeal is accordingly disp....
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....vices. He relied upon the decision of the Hon'ble Supreme Court in the case of Indian National Shipowners Association - 2011 (21) STR 3 (SC) and argued that when a specific new service is introduced without carving out any scope from the existing service category, such services can be liable to service tax only from the date of introduction of such new service. Similar view was taken in the case of Commissioner of Vs. IBM India Pvt. Ltd. - 2010 (18) STR J137 (SC). In this case, the Apex Court upheld the Tribunal's finding that ERP management services were classifiable under Information Technology Software Services with effect from 16.5.2008 and therefore could not be taxed under Management Consultancy Services for the period prior to 16.5.2008. The case of the department that service tax is liable on the same activity under MRSA prior to 16.5.2008 will not survive because the same transaction is accepted by the department to be Information Technology Software Services for the period after 16.5.2008. 5. Moreover, the services are predominantly provided by the appellant to companies who are not in the field of IT or software development. This will go to show that the a....
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....vices. In fact, the transactions under dispute clearly stipulate that the agreement with the appellant was for IT related services only. It is admitted that the appellant has deputed its employees to client locations for carrying out specific task as required by the client. However, the appellant retains direct control over its employees who work on specific client projects at the client locations. From a fair perusal of the contract, it is beyond doubt that the characteristics of the transaction are software services and the personnel are only resources deputed for providing the said software services. 9. He pointed out that in the Show Cause Notice as well as Order in Original, the department has recorded the transactions under dispute as being various IT related services only. In the Order in Original, the adjudicating authority has discussed only three contracts before misconstruing the obligations emanating out of these contracts. The adjudicating authority has wrongly relied upon the decision of the Tribunal in M/s. Future Focus Infotech Pvt. Ltd. The decision in M/s. Future Focus Infotech Pvt. Ltd. and the entire line of decisions following M/s. Future Focus Infotec....
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....216) ELT 177 (SC) to argue that there must be positive act on the part of the assessee to justify invocation of extended period. The department having failed to establish such act of suppression with intent to evade payment of service tax, the extended period is not invocable in the present case. 12. This very same issue of MRSA came to be considered by the Tribunal on 3.3.2010 in two different matters in Future Focus Infotech and Cognizant Tech Solutions. After considering the factual matrices in each appeal and the applicable provisions, the Tribunal upheld the demand in Future Focus Infotech India Pvt. Ltd. (supra 2010) while the Tribunal set aside the demand in Cognizant Tech Solutions (supra 2010). Since there was a very narrow distinction between the facts in these cases, the same was discussed by the Tribunal in Coromandel Infotech India ltd. Vs. Commissioner - 2019 (1) TMI 323 - CESTAT Chennai. The Tribunal set aside the demand in Coromandel Infotech for the extended period of limitation on a finding that the issue was interpretational. In various cases, it has been held that when the issue involves interpretation of application of legal provisions and applicabilit....
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....uppression cannot be arrived. It is also requested by her that the appellant may be given sufficient time to submit the rest of documents and issue may be reheard again. 14. Heard both sides and perused records carefully. 15. Before we proceed, it would be helpful to notice the definition of Manpower Recruitment Supply Agency (MRSA) and services as it stood during the relevant period: Section 65(68) of Finance Act, 1994 "Manpower recruitment or supply agency" means any [person] engaged in providing any service, directly or indirectly, in any manner for recruitment or supply of manpower, temporarily or otherwise, [to any other person]" Section 65(105)(k) of Finance Act, 1994 "To any person, by a manpower recruitment or supply agency in relation to the recruitment or supply of manpower, temporarily or otherwise, in any manner Explanation - for the removal of doubts, it is hereby declared that for the purposes of this sub-clause, recruitment or supply of manpower includes services in relation to pre-recruitment screening, verification of the credentials and antecedents of the candidate and authenticity of documents submitted by the ca....
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....over the staff / qualified personnel supplied. The agreement was for fulfilling development, information technology software activities to be done by Cognizant Tech Solutions. From the facts in Cognizant Tech Solutions, the agreement was for carrying out IT related services by Cognizant Tech Solutions though staff / qualified personnel were to carry out such activities in the premises of the client. The Tribunal held that activity will not fall under manpower supply services. 19. Later, in another case, M/s. Future Focus Infotech Pvt. Ltd., for subsequent periodical demand, the Tribunal vide Final Order No. 41108/2018 dated 27.2.2018 had distinguished the decision rendered in Cognizant Tech Solutions. An argument was put forward during the hearing of that appeal by the counsel appearing for the appellant that there is a conflict in the decisions rendered by the Tribunal in their own case dated 3.3.2010 and the decision rendered in Cognizant Tech Solutions on the same date. A request was made to refer the issue to larger Bench. (Para 3(i)of the decision in Future Infotech Final Order dated 27.2.2018). The Bench looked into the facts of both these decisions and came to the c....
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.... higher performance 3. Review and correct all Oracle init.ora parameter files 4. Review critical time taking queries and rewrite without affecting functionality to get performance. 5. Build batch process to collect stat to have COB of work better 6. Review current VB load programs and make necessary changes to get the benefit of partitioned tables rather than creating periodic multiple tables. For this assignment, two software engineers will work onsite at ABN AMRO Bank, Noida. One database specialist (Project Leader / Project Manager) would interest with the onsite team to provide the required guidance and monitor progress. For the purpose of commercials, it is assumed that this person would dedicate 50% of his working time for this purpose. Weekly reports would be provided to ABN AMRO Bank. The revised pricing for providing the recourses / assignment is INR 200,000. The rates for the resources are programmers (PL/SQL, BO)-INR85,000, Project Manager / BA - INR1,20,000 (ii) Central Bank of India Annual Maintenance Contract • Preventive and corrective maintenance of the computer systems / machines and will include supply and replacement of u....
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....000/- Total Rs. 82,00,000/- (viii) ScopePvt. Ltd. International Professional Services Agreement Services and activities relating to back office transaction services relating to retail, credit cards, corporate, treasury operations etc. software development and activities relating to maintenance of software and hardware infracture. • If any one of the personnel of service provider (M/s. Saksoft Ltd.) makes an application to join the organization (M/s. Scope International Pvt. Ltd.) and if she/he is found suitable for such appointment, M/s. Scope International Pvt. Ltd. Agree to reimburse M/s. Saksoft Ltd. With 10% of placement cost incurred by M/s. Saksoft Ltd. At the time of recruiting such employee • In any eventuality of the contract being terminated by them before its expiry, M/s. Scope International Pvt. Ltd. shall have an option to recruit 50% of the total number of employees assigned by M/s. Saksoft Ltd. in the subject project assignment and any exception to the above shall be mutually discussed and agreed. In such case, M/s. Scope International Pvt. Ltd. Sha....
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....op periodical reports to maintain the integrity of data on a continuous basis. Develop MIS and charts / graphs / dash boards and other reports in a presentable format to management executives • Monitor the progress of the data integrity of the bank and help in developing • To resolve the BO server technical and architectural issues • To maintain the users and client requirements for BO • To develop the Bo universes and help team members to produce the reports from the client • To provide on the job consultancy / clarify to other team members on issues connected to BO and crystal reports • Software design / programming / writing / debugging / modifying / business analysis / project management (one or more or all of these activities) for the products and subsystems of client • Troubleshooting & maintenance of reports (i) ABN AMRO Bank From the second column which mentions the scope of work, it can be seen that the agreement is for software application development, application support and related services etc. On perusal of the agreement entered by the appellant with ABN AMRO B....
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....he scope of work and mentioned the same in this column. The scope of work does not show anything related to MRSA. (iv) GE Money (GE Capital Corporation) The department has heavily relied upon the clause in the agreement that the appellant / contractor has requested for skills, personnel and legal right to perform such software related services. On perusal of the master services agreement in page 682, it reads as under:- "The contractor is not obligated to sign and accept the Company's task Orders, however, the contractor will use its best efforts to accept such Tax Orders and fulfill its requirements. Once the contractor accepts a Task Order, the contractor must perform the work specified in such Task Order. In performing such work and subject to this agreement or Task Order, the contractor shall be free to exercise its discretion as to the method and means of performance of its services. The Task Order could be a Fixed Price engagement or a Time and Material engagement." Clause 3.2, 3.3 and 3.4 reads as under:- "3.2 The contractor will be entirely responsible for staff selection and hiring in order to fulfill the task orders, including, without lim....
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....es and has to use the best skilled personnel to perform such services. The control and supervision of the staff / qualified personnel supplied at the premises of the client is wholly on the appellant. For these reasons, the activity will not fall under MRSA. (v) HDFC Bank It is seen from the show cause notice itself, that the work order is for software annual maintenance services. The relevant portion of the agreement is noticed as under:- (A) "HDFC Bank is a banking company and wishes to obtain maintenance services for the various software applications developed and deployed by Saksoft under CC Offline and Way Forward Projects. (B) The supplier has expertise in providing maintenance services in relation to software of various kinds and has represented to HDFC Bank that it is able to provide such services. (C) The parties have therefore agreed that the supplier shall provide maintenance services to HDFC Bank in relation to software in accordance with the terms and conditions of this agreement. This agreement accordingly describes the scope of the services and the rights and obligations of the parties in relation t....
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....bsp; The service provider is capable and competent to provide such ancillary service and is willing to undertake assignments from Scope. (c) Now, therefore, in consideration of the mutual covenants and conditions contained herein and for any other good and valuable consideration, the sufficiency of which is hereby acknowledge, the parties agree as follows." In page 292 of Vol. I of the appeal book, clause 7.2.5 and 7.2.6 reads as under:- "It shall be the sole and exclusive responsibility of the service provider to carry out the assigned task effectively and as efficiently as agreed to and entered into with Scope by this agreement. Service provider shall upon the request of Scope take adequate measures to rectify, if in the opinion of Scope, the services provided by service provider are not satisfactory. The service provider shall ensure that all of its personnel will at all times, during the term of this contract while on Scope's premises:- • Act diligently, ethically, soberly and honestly • Not take or use any drug unless prescribed by a medical practitioner or lawfully available without prescription and used in accorda....
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....essence of control and supervision which distinguishes the facts in Future Focus Infotech and Cognizant Tech Solutions. When the personnel is supplied to the premises of client and the employees still remain in the payroll of appellant, would strongly indicate that there is no provision of MRSA services. From the discussions made by the original authority, it is seen that he is carried away by misconstruing the clarifications issued by the Board by Circular F. No. B1/6/2005-TRU dated 27.7.2005 wherein supplying staff / qualified personnel to the premises of the client would be supply of manpower. The discussion in para 12.3 indicates that mere supply staff / qualified personnel to premises of client is construed as MRSA by the lower authority which is erroneous. Even if parties agree that consideration will be based on the number of persons employed, what has to be looked into is whether the agreement is to execute the work for the client or merely supply the work force. What has to be examined is the core activity for which the agreement is entered between parties. The clients are not in IT related fields. They need services in the nature of annual maintenance of systems, te....
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....MRSA. The MRSA was introduced on 16.6.2005. When the department has not objected to the classification of the services under ITSS after 16.5.2008 and has accepted the appellant's classification, they cannot demand service tax under a different category for transactions of the very same nature for the period prior to introduction of ITSS. In Indian National Shipowners Association (supra), the Hon'ble Supreme Court had categorically held that when a specific new service is introduced without carving out from the existing service category, such service can be liable to service tax only from the date of introduction of the new service. On this ground also, the demand under MRSA cannot sustain. 25. On scrutiny of the show cause notice and the evidences placed before us, we have to say that there is no iota of evidence to show that the appellants were rendering MRSA service during the disputed period. On merits, we hold that the issue is settled by the decision in the case of Cognizant Tech Solutions cited supra. The demand under MRSA cannot sustain and requires to be set aside which we hereby do. 26. The Hon'ble High Court has remanded the matter to reconsider t....