TaxTMI 
TaxTMI 
2025 (6) TMI 1578
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....Cause Notices adjudicated in Impugned Order-In-Original S. No Show- Cause Notice date Period/ Services Total demand BSS BAS Taxable value Service Tax Taxable Value Service Tax Educatio n Cess 1. 31.08.2006 01.07.2003 to 24.10.2005 Card personalization, e- seva, bill generation service 319265394 29966078 29966078 10.09.2004 to 24.10.2005 Card personalization, e- seva, bill generation service 442485 442485 01.07.2003 to 30.09.2005 Card personalization, e- seva, bill generation service 136623860 12388081 12388081 10.09.2003 to 30.09.2005 Card personalization, e- seva, bill generation service 145817 145817 2. 06.04.2011 2006-07 to 2008-09 Card personalisation 232911686 28630385 ....
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.... taxable service. (ii) Personalisation of Credit/Debit Cards: Appellant had entered into agreements with various Indian and Foreign Banks for personalization of Credit/Debit cards provided by such Banks to their customers. The cards were manufactured by Visa/Mastercard companies and the banks provided blank cards or pre-printed cards to the appellant with duly incorporated magnetic strip along with data for personalization. The process of card personalization involved following activities viz., (a) Magnetic strip encoding; (b) Signature printing for photo cards; (c) Photo printing for photo cards; (d) Lamination; (e) Embossing; (f) Indent printing on the front of the cards for Debit card or electronic cards; (g) Indent printing on rear of the card; (h) Automatic insertion/affixing of the card into the card carrier; and (i) Packing the card along with other material. All the necessary infrastructure like hardware, software required for card personalisation was provided by the appellant at the space provided by the respective Banks. Even the manpower required for card personalisation was deployed by the appellant. The required data for personalisation was p....
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....ications for New water supply connections, filing of complaints in connection with electricity supply, filing of grievances in connection with MahanagarPalika, Sale of passport application form etc. Being the technological partner, the appellant provided hardware, software, networking to facilitate these services through online. According to the show cause notices dated 10.05.2011, 11.04.2012, 02.04.2013 and 01.04.2014 respectively, the appellant had provided support services to various Government Bodies and Societies in performance of their task, on which the appellant had failed to pay service tax. According to the show cause notices, the e- governance service has been outsourced to the appellant, which are provided on principal to principal basis in relation to business and commerce. Therefore, as per revenue, the said services would fall under "Business Support Service" as defined u/s. 65(104c) r/w section 65(105) (zzzq) ibid. However, in the show cause notice dated 31.08.2006, the very same services were stated to be falling under "Business Auxiliary Services" as defined u/s. 65(19) r/w Section 65(105)(zzb) ibid. 4. It is pertinent to mention that out of the six show cause ....
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....ill printing by the appellant takes place after billing performed by client's staff. In other words, the calculation of the amount to be billed along with accounting was done by the client prior to printing of bills by the appellant. Thus, the appellant was only engaged for the purpose of printing and stuffing bills in envelopes, as was also reflected in the scope of work under various agreement entered into by the appellant in this regard. Therefore, the said activity of the appellant cannot be equated with "billing" and, thus, would not fall under any clause of Section 65(105)(zzb) including clause (vii) as referred to in the show cause notice. (ii) Card Personalization Services covered under show cause notices dated 31.08.2006 and 06.04.2011: Appellant had entered into agreements with various Indian and Foreign Banks for personalization of Debit/Credit Card provided by the said Banks to their customers. The cards were manufactured by Visa/Mastercard companies and the banks provided the appellant with blank card or pre-printed cards with duly incorporated magnetic strips along with data for personalization. The appellant was engaged in data processing, card embo....
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....G2C), government-to-business (G2B), government-to-government (G2G) and government-to- employees (G2E) as well as back office processes and interactions within the entire government framework. Through e-governance, governments strive to make their services available to citizens in a more convenient, efficient and transparent manner. The National e-Governance Plan (NeGP) is an initiative of the Government of India to make all government services available to the citizens of India via electronic media. NeGP was formulated by the Department of Electronics and Information Technology (DeITY) and Department of Administrative Reforms and Public Grievances (DARPG). The Governments of various States in India had launched various e-Governance projects in order to create a one stop facility (CSC- Common Service Centre) for the rural and urban citizens. Various Government Departments like Education, Revenue, Health, Transport, Electricity, Election, Water, Registrar and other Government Utility services were covered in the scheme. In order to effectively implement the E- Governance Projects, the appellant was awarded various contracts by various State Governments under BOOT Model (Build, Own, O....
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....The appellant, with regard to the above activities, disputed and denied that the same would be classifiable under the taxable service category of "Business Support Services" and took the stand that the services provided by them were Statutory/ Sovereign functions which have to be performed by the concerned Government Department (State Government/ Centre Government/Municipalities/ Local Authorities etc.) as may be appreciated from the following table : Sl No. Description of Activity Applicable legislation 1. Issuance/amendment of Ration Cards National Food Security Act, 2013 2. Issuance of Driving Licenses Section 3 of the Motor Vehicles Act, 1988 3. Registration of Motor Vehicles/ issuance of Registration Certificates Section 39 of the Motor Vehicles Act 1988 4. Issuance of Voter ID Cards Representation of People's Act 1950 5. Registration of documents/deeds Indian Stamp Act 1899 6. Issuance of Birth Certificates/ Death Certificates Article 243 W of the Constitution of India ....
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....f data as well. Further, the appellant, being an IT company who internally create and maintain software for others and, as per appellant's agreement with Tata AT&T dated 21.11.2003, the appellant has also provided calculation software to them. Thus, appellant's activity is not merely printing but qualifies as billing. (ii) Re. Card Personalization: The process carried out by the appellant relating to card personalization does not amount to manufacture and, thus, cannot be held to be chargeable to central excise duty under CETG 85235290. The appellant applies necessary processes so that the simple plastic card is converted into a full-fledged credit or debit card and, in this way credit/debit card gets generated. The processes involved for card personalization viz., activities of flat printing, encoding, embossing, indenting, tipping, photo placement etc. qualify as Business Auxiliary Services by way of processing of plastic cards under Section 65(19) since the said activity is nothing but processing the plastic cards into credit/debit cards. Further, the said activity of card personalisation does not fall under the "works contract service" as defined under Section 65(105)(....
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....ant for the Appellant and learned Special Counsel on behalf of Revenue and perused the case records including the synopsis/written submissions and case laws placed on record by the respective sides. As the dispute in the present appeal pertains to three different services undertaken by the appellant, we shall be taking up and deciding each service separately under their respective heading and, thereafter, shall be deciding the common issues pertaining to invocation of extended period of limitation and penalty. BILL GENERATION/PRINTINT & DISPATCH SERVICE 8. The said issue is involved only in the show cause notice dated 31.08.2006. As per the said show cause notice, the appellant had entered into agreements with its clients for providing the service of generation of bills of the customers of the respective clients, based on the data/inputs provided by that client. For the said purpose, the appellant is required to use its own infrastructure, manpower and consumables. It further stated that the appellant is providing the support services such as bill printing, scanning and generation of documents, photocopying of documents, stuffing of bills in envelopes and despatch on their be....
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....ces, management or supervision, and includes services as a commission agent but does not include any activity that amounts to "manufacture" of excisable goods. ............. S. 65(105)(zzb): "Taxable Service" means any service provided or to be provided to a client by any person in relation to business auxiliary service. 11. We note that the relevant entry u/s. 65(19)(vii) ibid which is applied in the present case i.e. "a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing......", is the entry under which the appellant is sought to be taxed. The adjudicating authority observed that the activities of the appellant are not only restricted to printing of bills but the same involves processing of data as well. Further, the appellant, being an IT company internally create and maintain software for others. Thus, appellant's activity is not merely printing but qualifies as billing. We are afraid that we are not inclined to accept such finding of the Adjudicating Authority. The expression "billing" has not been defined under the Act and, therefore, common parlance needs to be applied. Billing involves a number of proces....
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.... be equated with "billing" and, thus, would not fall as business auxiliary service under any clause of Section 65(105)(zzb) including clause (vii). We also find that the adjudicating authority has invoked clause (vii) of Section 65(19) by coming to the conclusion that the services in question would also fall under clause (vi) of Section 65(19) which provides for "provision of service on behalf of the client". However, the fact is the appellant is nowhere connected with the provision of service on behalf of its clients as it did not have any contact with the customers of the clients and, thus, did not provide any service "on behalf of client" and, in case of any discrepancy in the bill the end customers of the clients would not contact the appellant but to their service provider. We also find that on somewhat identical facts in the matter of Commissioner of Central Excise, Delhi v Ricoh India Ltd.;2017 (3) GSTL 412 (T-Del) and also in the matter of Commissioner v Galaxy Data Processing Centre; 2011 (23) STR 375 (T), the coordinate Bench of this Tribunal has held that the Bill printing and despatch service could not be considered as "business auxiliary service". Accordingly we are se....
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....ent to evade payment of service tax and for invoking extended period of limitation in the Show Cause Notices. The adjudicating authority has held the said services to fall under "Business Auxiliary Services" whereas in the Show Cause Notice dated 06.04.2011 the proposal was to classify the said service as "Business Support Service" under Section 65(104c) of the Act, therefore the impugned order insofar it relates to Show Cause Notice dated 06.04.2011, is liable to be set aside on this ground alone, without going into the merits, being beyond the scope of the Show Cause Notice. 15. Now we take up the issue confined to Show Cause Notice dated 31.08.2006 as to whether the adjudicating authority is justified in confirming the service tax demand under Section 65(19) which defines "Business Auxiliary Service". The appellant entered into agreements with various Indian and Foreign Banks for personalization of Debit/Credit Card provided by the said Banks to their customers. The banks provided the appellant with blank card or pre-printed cards with duly incorporated magnetic strips along with data for personalization. The appellant was engaged in data processing, card embossing and indent....
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....ce does not amount to manufacture, by observing as under:- However, the notice has contended that subject debit and credit are smart cards, for the recording of other phenomena, classifiable under CETH 85235290. The Noticee has placed their reliance on chapter 85. Note 10 of Chapter 85 of the Schedule 1st of the Central Excise Tariff Act 1985 which reads as "for the purpose of heading 8523 "recording" of sound or other phenomena shall amount to manufacture. Therefore, the contention of the Noticee is that their activity of card personalisation amounts to manufacture and chargeable to central excise duty. However, I find no merits in the said contention of the Noticee for the following reasons: I observe that CETH 8523 reads as "smart cards and other media for the recording of the sound or other phenomena". It shows that the smart cards or other media which are for the purpose of recording sounds or other phenomena qualify under this heading. The usage of the proposition "for" shows that such smart cards or other media are yet to be recorded with sound or with other phenomena. Therefore, I find that smart cards only before recording of any phenomena will qualify un....
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....t even the SIM cards or for that matter Proximity cards would go out of CETH 8523 even though they are specific entries in the Tariff. 18. The adjudicating authority has also observed that the appellant is engaged in applying the necessary process on plastic cards provided by the bank in the form of flat printing, indenting, embossing encoding, tipping photo placement etc. All the processes undertaken by the appellant are mandatory to convert a simple plastic cards into credit/debit cards. This would clearly mean that the processes adopted by the appellant to convert simple plastic cards into credit/debit card will squarely fall within the meaning of "manufacture" as defined under Section 2(f) of the Central Excise Act 1944. In the matter of Brakes India Ltd. v Supdt. of Central Excise & Ors.;1998(101)ELT 241 (SC), the Hon'ble Supreme Court has very aptly brought out the test of character or end use and laid down as under: - "If by a process, a change is effected in a product, which was not there previously, and which change facilitates the utility of the product for which it is meant, then the process is not a simple process, but a process incidental or ancillary to th....
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....ces such as (i) municipal services including issue of Birth Certificates/Death Certificates, collection of property tax etc. (ii) Commercial tax services such as sales tax collection, issue of registration certificates etc; (iii) electricity services (bill collections); (iv) Road Transport Services such as issue of driving licenses, Registration Certificates, Tax collections etc. (v) Telephone bills collections for BSNL, etc. For the said purpose, the appellant had to build the required infrastructure, own it, maintain the entire system and transfer the same at the end of the contract period in working condition to the Department of Information Technology & Communication, Govt. of A.P. The concerned municipalities, where eSeva were providing services, had provided necessary buildings and furniture for running eSeva centres to the appellant and the charges collected for the services provided were shared between the appellant and eSeva. 20. The case of the revenue is that the appellant were providing eSeva services to the citizens of Andhra Pradesh as well as to the participating departments/agencies of the government, on behalf of eSeva, Govt of Andhra Pradesh by using its own in....
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.... although with different names such as 'e-seva', 'e-setu' etc. According to the Appellant various State Government, local bodies etc. entered into agreement with the appellant to provide E-Governance on their behalf which are as under:- (i) The Government of Madhya Pradesh, state Electronics Development Corporation (ii) The Government of Rajasthan - "e-mitra" (iii) District E-Governance Rajasthan - "e-mitra" (iv) The Government of Andhra Pradesh - "e-seva" (v) State of Maharashtra - "e-setu" (vi) Directorate of Registration and stamp Revenue -Government of West Bengal (vii) The Government of Punjab - Punjab Land Record Society (viii) Government of Gujarat - "e-gram" (ix) Government of Karnataka - Kaveri project (x) Government of Uttar Pradesh - "e-suvidha" 23. According to the appellant various State Governments had launched different schemes to provide certain facilities to their citizens where they can come and obtain the required information, pay the government charges, fees, taxes, etc. and submit application to the Government or the Government organisation, bodies for employment/jobs/ ....
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....ication forms for department various services, issued of birth and death certificates Zilla parishad Online submission of application forms for various services They entered into "E-Suvidha" Agreement with state of U.P. which is a major e-governance initiative of Uttar Pradesh Government. Under "E-Suvidha" the Uttar Pradesh Government provides, among others, the following services/facilities to its citizens : - a. Caste certificate b. Income Certificate c. Domicile Certificate d. Cause List Generation e. Case Tracking f. Final order Generation g. Issuance of Citation Recovery (RC) for h. Status of Recovery (RC) i. Recording of Payments j. Application for Khatauni k. Birth Certificate l. Death Certificate m. Handicap certificate n. Old age pension o. Family Benefit Scheme p. Application for (Gen & SC/ST) Scholarship q. Application for Marriage & illness Grant ....
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....irector of Registration and stamp Revenue, Government of West Bengal. The Appellant executed similar agreement with the Government of Karnataka for computerization of offices of the Inspector General of Registration and Commissioner stamps across the state and 98 sub-Registrar offices. 24. A perusal of the aforesaid terms/scope of agreements would show that through e-governance, governments strive to make their services available to citizens in a more convenient, efficient and transparent manner. The National e-Governance Plan (NeGP) is an initiative of the Government of India to make all government services available to the citizens of India via electronic media. NeGP was formulated by the Department of Electronics and Information Technology (DeITY) and Department of Administrative Reforms and Public Grievances (DARPG). The Governments of various States in India had launched various e- Governance projects in order to create a one stop facility (CSC- Common Service Centre) for the rural and urban citizens. Various Government Departments like Education, Revenue, Health, Transport, Electricity Election, Water, Mobile Operator, Registrar and other Government Utility services were c....
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.... means any service provided or to be provided to any person, by any other person, in relation to support services of business or commerce, in any manner. 26. It is specific submission of learned Chartered Accountant that neither the appellant is providing any service to the end users nor there is any tripartite agreement nor any such document has been produced on record by revenue. Therefore it will not fall either under 'Business Auxiliary Service' or 'Business Support Service.' She further submits that the appellant is doing this service on principal to principal basis. According to learned Chartered Accountant, for the period post 1.7.2012 i.e. during the negative list period, the amended provision was not invoked in any of the show cause notices therefore for the post negative list i.e. w.e.f. 1.7.2012 the demand is liable to be set aside being beyond the scope of show cause notices. 27. The allegation of the department, that the appellant had collected but not paid Service Tax, has not been supported by any documentary evidence. Rather it is the specific case of the Appellant that neither they charged nor the clients paid them Service Tax. The services included in E-seva....
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....are not reliable guide to interpretation of 'business' as deployed in Finance Act, 1994. It also appears that the emphasis on 'employed' in the dictionary meaning is misplaced; the definition does not, on the face, refer to hiring of persons but of engagement in. The erroneous reliance by the adjudicating authority on the meaning assigned to 'business' in the dictionary strikes at the foundation of the conclusion that the taxable entry covers the activity. 29. Taking the argument of the adjudicating authority to its logical conclusion, it would appear that all activities of governance are in the nature of service with the government machinery undertaking such for the President of India or the Governor, as the case may be, merely from civil servants being employed for the purpose and all of it being undertaken in the name of the President or Governor, as the case may be. Logically, the activity should, thereby, be taxable even if, for 'e- governance' a partner like the appellant has not been taken on board. We have nothing on record to suggest that such demands have been raised on government departments. The adjudicating authority also appears not to have thought through the pote....
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....ee therein for the transport department. Obviously what is not 'business' in 'business auxiliary service' cannot be 'business' in 'support service of business or commerce' under Finance Act, 1994. Likewise, in considering dispute over taxability of consideration in outsourcing of issue of PAN cards by the Income Tax authorities, this Tribunal in the matter of UTI Technology Services Ltd. Commr. of Service Tax, Mumbai; 2012(26) STR 147 (Tri.-Mum.) has held that undertaking of activity that is responsibility of the sovereign is not taxable. Judicial decisions, thus, also offer no scope for Revenue to contend that there is any support to business or commerce from the impugned activity. 32. We deem it proper to mention here that a co-ordinate Bench of the Tribunal in the matter of Sukhmani Society for Citizen Services vs. CCE&ST, Chandigarh; 2017(47) STR 172 (Tri.-Chan.) while dealing with the similar issue of e-governance service, wherein the Commissioner has taken the view that the e-governance services provided by the appellant therein to various government departments of State of Punjab is covered under the category of 'Business Auxiliary Service' which is chargeable to tax, has....
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.... show-cause notices in issue before us, does not survive. 33. It has been recorded in the impugned order that the appellant is essentially an Information Technology (IT) firm which provides to their clients IT infrastructure in the form of computer hardware, software, connectivity, integration, manpower, consumables etc. Learned chartered accountant without admitting any liability, submitted that had the e- governance services been taxable at the relevant time then the services herein would have been covered under IT services u/s. 65(53a) ibid and not otherwise as the appellant is an IT Firm and the same has been made taxable only w.e.f. 16.05.2008 and is outside the purview of 'support service of business or commerce' (BSS) or any other service. 34. Although on merits we have already set aside the demands raised in the show cause notices (supra) but still we like to deal with the issue of limitation as well. According to learned Chartered Accountant the activities of the appellant had come within the knowledge of the department in the year 2003 itself but the department issued the 1st show-cause notice only in the year 2006 on the basis of DGCEI Audit objection, hence the en....