TaxTMI 
TaxTMI 
2024 (6) TMI 447
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....ided by him are export of service and he was not paying service tax. 2.2 During the course of audit conducted it was observed that respondent was providing services under the category of "Online information and database access or retrieval service (OIDAR)" in respect of which the place of provider of the service is location of the service provider. Hence, these services were not export of services and hence were required to pay service tax. 2.3 A show cause notice dated 30.11.2016 was issued to the appellant asking them to show cause, as to why:- "(i) Service tax amounting to Rs.69,02,161/- (Rupees Sixty Nine Lacs Two Thousand One Hundred Sixty one) as mentioned above should not be demanded and recovered from them under Section 73(1) of Finance Act, 1994, invoking the proviso thereto. (ii) Interest on the above amount should not be demanded & recovered from them under Section 75 of the Finance Act, 1994. (iii) Penalty should not be imposed upon them under Section 78 of the Finance Act, 1994." 2.4 This show cause notice was adjudicated by the Original Authority by the order referred in para-1 above, by dropping the demand. 2.5 Aggrieved Revenue has filed the appeal before ....
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....ding verification report in electronic form through a computer network and therefore covered under the category of 'Online Database Services' the party's submission is that "dataflowgroup.com" is a corporate site domain name and registered with Net4India domain registrar. In fact all the data on the website is hosted on third party servers paid for by Dataflow Dubai. It is merely a medium via which the outcome of the Business Support Services provided by the party (i.e. reports) are shared and does not alter the nature of services provided by them. Further, irrespective, of the nature of services provided by them, the ownership of the group website "dataflowgroup.com" is not a relevant factor to determine the classification of services provided by them. I find that the party has filed a copy of Agreement dated 1 April 2012 ('Agreement) entered by them with Dataflow Dubai pursuant to which the parties may mutually agree in writing the scope of services to be rendered by them to Dataflow Dubai. In terms of the same, Dataflow Dubai has outsourced following support services to the Noticee during the period April 2012 to March 2015 ('Relevant Period'): a) Ver....
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....because it is more appropriate and specific. Even though the term 'Support Services of Business or Commerce' was not defined in the Act during the Relevant Period, for the purposes of classification, the definition prevailing prior to introduction of the negative list regime (i.e. 1 July 2012) shall be relevant. The same is reproduced below: "Support Services of Business or Commerce" means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing." I find the party's plea tenable that the definition of the service is divided into two parts, the means part and the inclusive part. The means part covers all services provided in relation to business or commerce within its sweep. The language employed in means clause of the definition....
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....ed by Dataflow Dubai to them. The services provided by them to Dataflow Dubai were required to be undertaken by Dataflow Dubai, in terms of contracts executed with its clients. Dataflow Dubai outsourced provision of the said services to them. Clearly, the service provided by them qualify as Business Support Services. I also observe that Section 66F of the Act deals with classification of services. The relevant extract of the said section is set out hereunder for ready reference: 66F. Principles of interpretation of specified descriptions of services or bundled services. (1) Unless otherwise specified, reference to a service (herein referred to as main service) shall not include reference to a service which is used for providing main service. (2) Where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description" I keeping in mind, the entirety of their activities and what has been confirmed in the Circular dated 28 February 2006 (supra), the services provided by the party qualify as 'Business Support Services', as it is the most specific description to the ....
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....the party have placed reliance on various case laws in which it has been held that principle of estoppel does not apply in taxation matters. Basis the above submissions, it is submitted that change in classification of services was undertaken by them to correct an inadvertent error, it is clear that they cannot be precluded from carrying out correction in the classification of service to accurately reflect its business operations. I also find reliance on various legal judicial precedents has been placed by the party which state that in order to render OIDAR services, the provider of the services should own the data and information. In other words, unless the data or information is owned by the service provider, in no situation can it provide OIDAR services. In the case of United Telecom Ltd. vs. CCE (2009 (14) S.T.R. 212), it was held that ownership of underlying data or information is very Important factor to determine whether the services are classifiable under OIDAR services or not. The relevant abstract of the said judgment is reproduced below for your reference: b. "Whenever, there is information and data retrieval, the ownership definitely becomes very relevant. Just beca....
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....ivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention, and impossible to ensure in the absence of information technology and includes electronic services such as,- i. advertising on the internet, ii. providing cloud services; iii. provision of e-books, movie, music, software and other intangibles via telecommunication networks or internet, iv. providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network; v. online supplies of digital content (movies, television shows, inusic, etc.), vi. digital data storage, and vii. online gaming:" Thus, the definition of OIDAR service was amended vide Notification No. 48/2016- Service Tax dated 09 November 2016 to include the following: That the service should essentially be automated, involving minimal human intervention; It should be impossible to ensure provision of service in the absence of information technology; and Examples to explain the nature of services it intends to cover under the scope of OIDAR services such as adver....
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....be received by the provider of service in convertible foreign exchange; and f) The provider of service and recipient of service should not be merely establishments of distinct person in accordance with item (b) of Explanation 3 of clause (44) of section 65B of the Act. Business Support Services provided by the party to Dataflow Dubai is tested on said parameters as follows:- a) the party is an Indian Company having offices in Noida, Uttar Pradesh. Thus Condition (a) stands fulfilled. b) they have entered into the Service Agreement with Dataflow Dubai for provision of outsourced services. In terms of the Service Agreement, Dataflow Dubai is required to pay consideration for services provided by them. Hence, Dataflow Dubai being the contractual service recipient, qualify as the service recipient. This view is also fortified by the clarification provided in Education Guide dated 20 June 2012 issued by the Tax Research Unit of Central Board of Excise & Customs. The relevant extract of the Education Guide is reproduced below: "5.3.3 Who is the service receiver? Normally, the person who is legally entitled to receive a service and, therefore, obliged to make payment, is the r....
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.... were classifiable as 'Online information and database access or retrieval service' (OIDAR) or 'Business Support Service' (BSS). 6. I have perused the flow chart submitted by the respondent giving step by step process undertaken by him which consists of receipt of verification requests forwarded by the client, data entry of requests, research & verification (through various modes), quality check of the outcome of verification, manual report compilation, manual quality check of final report, language translation as per requirement, customer support and delivery of final verification reports to the overseas clients through website/server/ Internet. In Service Tax Educational Guide released by the Board on 19-06-2012 (Official Guidelines for new System of Levy of Service Tax on the basis of Negative List w.e.f. 01-07-2012), vide para 5.9.1, it was clarified that important features of OIDAR services were that they were completely automated, and required minimal human intervention. In OIDAR services, ownership of data/contents was always with the service provider and such data/content could be given/provided to any customer against a consideration. However, in the inst....
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....icating authority or assessee not to decide classification as matter of subjective choice - Classification to be on analysis of characteristic of service, analyzed in terms of provisions of Finance Act considered in light of guidance in Section 65A of Finance Act, 1994". On application of the ratio of Hon'ble CESTAT's above verdict, I find that registration or submission of return or issuance of invoices under a category of service was not conclusive to correctly determine the nature of service and its classification. 8. I further find that the Board vide F. No. 334/3/2011- TRU, dated 28-2-2011 relating to budgetary changes in service tax has clarified the following: - "5. Business Support Service [section 65(105)(zzzq)]: 5.1 The scope of the service is being expanded to include operational or administrative assistance of any kind. The scope will cover all support activities for others on a contract or fee, that are ongoing business that businesses support functions that and organizations commonly do for themselves but sometimes find it economical or otherwise worthwhile to outsource." On examination of the 'service level agreement for outsourcing of services....
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.... or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention, and impossible to ensure in the absence of information technology and includes electronic services such as,- (i) advertising on the internet; (ii) providing cloud services; (iii) provision of e-books, movie, music, software and other intangibles via telecommunication networks or internet; (iv) providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network; (v) online supplies of digital content (movies, television shows, music, etc.); (vi) digital data storage; and (vii) online gaming; 4.6 The education guide issued by the CBEC on 20.06.2012 clearly explains OIDAR Services as follows: 5.9.5 What are "Online information and database access or retrieval services"? "Online information and database access or retrieval services" are services in relation to on-line information and database access or retrieval or both, in electronic form through computer network, in any manner. Thus, these services are essentially delivered over the internet or an electronic network which relies on t....
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....vices will be covered under OIDAR services? OIDAR services covers services which are automatically delivered over the internet, or an electronic network, where there is minimal or no human intervention. In practice, this can be either: i. where the provision of the digital content is entirely automatic eg, a consumer clicks the "Buy Now" button on a website and either: the content downloads onto the consumer's device, or the consumer receives an automated e-mail containing the content ii. where the provision of the digital content is essentially automatic, and the small amount of manual process involved doesn't change the nature of the supply from an OIDAR service All "electronic services" that are provided in the ways outlined above are OIDAR services. 4.7 Thus it is evident that the conditions required to be fulfilled for holding the services classifiable under the category of OIDAR can be enumerated as follows: Services whose delivery is mediated by information technology over the internet or an electronic network and; the nature of which renders their supply essentially automated and; involving minimal human intervention and; impossible to ensure....
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....s locations and employees are of the nature of "Calendaring and Scheduling Directory, Philips e-mail, file back up etc. In any case, all these infrastructure services are only in the nature of providing intra connectivity between Philips locations worldwide and the payments made are obviously then for sharing of the maintenance cost between the Philips" units and not as fees for supply of online information or retrieval of data from the portal." 4.10 Section 2 (17) of the IGST Act, 2017 defines Online Information And Database Access Or Retrieval Services as follows: "(17) "online information and database access or retrieval services" means services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention and impossible to ensure in the absence of information technology and includes electronic services such as,- (i) advertising on the internet; (ii) providing cloud services; (iii) provision of e-books, movie, music, software and other intangibles through telecommunication networks or internet; (iv) providing data or information....
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....nic network and the nature of which would render its supply essentially automated without and/or with minimal human intervention. It is far different from what is included in any of the electronic services as set out in clauses (i) to (vii) in the definition of OIDAR. 24. Thus, in our opinion, if the interpretation to the Agreement in question as rendered by the respondents is to be accepted, it would lead to an absurdity inasmuch as any communication of information or providing of service through the medium of emails or any electronic transfer of data would be required to be held as OIDAR service, which is certainly not the purport and meaning an OIDAR service as defined under Section 2(17) of the Act. 25. In the present case, there is clearly an agreement of the petitioner with a party, which is a foreign party, whose location is outside the Indian territory. The agreement is clearly for a specialised work of providing 3D city models of Abu Dhabi, AL Ain, AL Dhafra. These are not works which would be freely available on the internet and/or are materials of the nature Section 2(17) would contemplate. Also undoubtedly the consideration as received by the petitioner for providi....