TaxTMI 
TaxTMI 
2025 (11) TMI 599
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....are registered for providing online information and database access services and retrieval services, business auxiliary services, GTA services, etc. The MVAS services are ring back tone services (RBT), missed call alert solutions, interactive voice response solutions, SMS and data access services for infotainment (news, cricket scores, horoscope, etc.,). On investigation, it was noticed that the appellant had not paid service tax on Online Information and Database Access or Retrieval (OIDAR) services provided by them from their Bangalore office to their customers located outside India, accordingly, show-cause notice dated 29.12.2017 was issued. After detailed analysis, the demand of Rs.99,95,26,779/- for the period 01.07.2012 to 31.07.2016 was confirmed along with interest and various penalties were imposed. Further, statement of demand dated 22.04.2019 was also issued based on which demand of Rs.4,71,18,400/- for the period 01.08.2016 to 30.11.2016 was confirmed in respect of the services provided to the customers located outside India and located in Jammu and Kashmir along with interest and penalty under Section 76 was imposed. Aggrieved by this order, the appellant is in appeal ....
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.... of that country. Through a Subsidiary Company incorporated in the respective Countries- The Appellant provides technology and support services such as Administrative, accounting, IT support, services, etc., to the subsidiary company by way of a transfer pricing agreement. The subsidiary company enters into an agreement with the telecom operator and provides the services and raised invoice for the same. Expenses incurred by the subsidiaries is recovered by the Appellant from the subsidiaries on a cost-to-cost basis. It is further stated that apart from the service fee, the Appellant also recovers certain reimbursements from its subsidiaries / branch offices which are towards expenses incurred by the Appellant on behalf of the overseas subsidiaries and overseas branch offices. These reimbursements are recovered in terms of the following agreements are undertaken: a. Market access fee agreement: At the time of setting up, for making available the necessary funds to the subsidiary, the Appellant makes payment(s) for and on behalf of such subsidiary. Such payments include one-time payments for the purposes of obtaining exclusive market rights to undertake MVA....
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....he content by the customers. The Appellant merely provides the software to the telecom operator who then renders the ring back tone to the end-users. For the purpose of provision of OIDAR services, the customer ought to be able to download the content. However, the customer cannot download the content from the platform. The telecom operator is required to deploy the mobile exchange for integration with the MVAS solution software for the customer to be able to access the MVAS services. 8. That the MVAS platform is a software which is deployed as the telecom operator's site and thereafter, integrated with the end customer's network. The hardware for the purpose of such deployment, is provided by the Appellant. The content herein is procured from third party content providers either by the Appellant or by the telecom operators. The same is delivered directly to the Appellant's server and the same is thereafter integrated with the MVAS platform. That the primary intention of the Appellant is provide ITSS. The other activities of procuring the content, integration of the same with the MVAS platform and further management, are ancillary to the MVAS platform services. The said services....
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....of MVAS services and therefore, the same constitutes a service in the nature of ITSS. In this regard, the Appellant places reliance on the decision in the case of Innodata India Pvt. Ltd. vs. Commissioner of Central Tax, GST and Central Excise: (2024) 17 Centax 331 (Tri. - All) wherein it was held that the services in the nature of data conversion services and IT enabled services provided by the Appellant fall under 'Business Support Services' and not under OIDAR. The relevant extract of the finding is reproduced below: "17. It is noted that using the internet, or some other electronic means of communication just to communicate processed data to the supplier and the owner of raw data/content does not mean that a business is providing OIDAR services. The suppliers/owners of raw data/content have all the rights to title, intellectual property rights and copy rights over the data before and after processing/digitization of data. The Appellant has no title or ownership over the processed data for being used over the internet for their business. OIDAR services as clarified by the CBEC in the Education Guide for Taxation of services on 20.06.2012 in Guidance Note 5.9.5 covers se....
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....ly deploy it on to the telecom operators network such that they are able to provide the value added services to its subscribers. Further, in certain contracts, the Appellant merely provides the platform and the content is either procured by the Telecom operator or any other service provider and the Appellant merely receives the data, undertakes necessary changes in the formatting and ingests the data onto the hardware maintained at telecom operators premises. Further, it is submitted that the as per Section 66F of the Finance Act, 1994 provides that where number of services are bundled together, then the principal service, which gives the essential character to such bundled service will be the service which is deemed to be provided and the tax liability will be determined accordingly. In the present case, the Appellant mainly provides a software which establishes and maintains the technology infrastructure enabling the telecom operators to provide the RBT value added services to its end-user. 11. The Appellant referring to the definition of OIDAR services and the Instruction F.No. B.11/1/2001-TRU dated 09.07.2001 contends that inter-connectivity services provided by the one ISP ....
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....per Section 66B of the Finance Act, 2012, for a service to be taxable under service tax, the same should have been provided in the taxable territory by one person to the other. The Place of Provision of Services Rules, 2012 ("PoPS Rules") Rule 3 of the PoPS Rules, the place of provision of service shall be the location of the recipient of service. The Appellant submits that Rule 9 of the PoPS Rules, which is applicable for the period under consideration, provided that the place of provision of service for OIDAR services will be the location of provider of services. Since the agreement for provision of services is entered by the Subsidiary located in non-taxable territory with the Telecom operator and the invoices were issued by the overseas subsidiary, indicates that services were provided by that location. The Appellant, hence, submits that the services if construed to be in the nature of OIDAR, the place of provision of such service and the provider of said service will be both outside the taxable territory and the same cannot be subjected to Service tax in the hands of the Appellant. Further, it is submitted that as per the agreement between the Appellant and the overseas compan....
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....port of service which were replaced by the pops Rules and 'export of services' was subsequently inserted and defined by the Service Tax Rules. Reliance is placed on Principal Commissioner of C. Ex., Pune-I v. Advinus Therapeutics Ltd 2017 (51) S.T.R. 298 (Tri. - Mumbai), wherein it was made clear that the intention of the legislation was never to deviate themselves from the foundational understanding of what qualifies as an export of service. Therefore, it is submitted that when the understanding and intent of the phrase 'export of services' remained the same throughout the various enactments, a different interpretation cannot be made applicable to the case of the Appellant. Since the service rendered were outside the taxable territory, the Appellant has rightfully considered the same as 'export of services'. 17. The Appellant further submits that they have entered into a Market Access Agreement with its overseas subsidiaries under which the Appellant incurs various expenses on behalf of the subsidiaries, claimed as 'reimbursement' without any markup. Additionally, the Appellant has entered into an Administrative Services Agreement with its overseas group companies which include....
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....ied on the Appellant provided by the Respondent, it is evident that out of the demand of Rs. 104,66,45,179/-, only Rs. 17,10,78,097.63/- shall be liable to be discharged by the Appellant. 19. With regard to limitation, it is submitted that as per Section 73(1) of the Finance Act, 1944, the longer period of limitation is invocable only in cases where there is fraud, collusion or any wilful misstatement or suppression of facts on the part of the Appellant. The Appellant submits that it was under a bona fide belief that they are not required to discharge service tax for services provided to telecom operators outside the country since the same are outside the taxable territory. Further, the services provided by the foreign branches and subsidiaries of the Appellant cannot be taxed at the hands of the Appellant since requisite tax have been discharged by the said offices in the respective countries. Therefore, it cannot be alleged that there was an element of fraud, collusion or any willful misstatement with the intent to evade payment of tax. With regard to this submission, they relied on the following decisions: * Pushpam Pharmaceuticals Company vs. Commissioner of Central....
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....lly, appellant provides the content to the customer through an on-line information and data access platform. The services rendered are generally called 'Mobile Value-Added services' (MVAS) or MVAS solutions. * MVAS rendered by appellant includes providing, caller ring-back tone services, missed call alert solutions, IVR solutions, SMS, data access services for infotainment (news, jokes, horoscopes, games and sports updates etc.) * appellant has its own on-line platform comprising Servers, Racks (memory devices), colour graphic cards etc., which are integrated with the network of Telecom operators by establishing connectivity thro' satellite links. * Through this connectivity appellant provides the above services on real- time basis to the customers of / subscribers of the concerned telecom operators whether within or outside India. * The number of accesses by the customers is captured by a billing Software tool and invoices are based on the same. The data is retrieved, consolidated and the bills are generated by the Bangalore Office of appellant. * It is the responsibility of appellant to procure, maintain and operate the on-line platfor....
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....orks. These contents are then stored in the content management servers in Bengaluru which are the shared via the communication lines to the respective operator locations in India or abroad, as per requirements. Whenever the subscribed customer accesses the contents, it is retrieved from the on-line system deployed at the customer site. * Once the contents are procured and made ready for telecom access, the same are continuously stored and maintained in the content management servers. These contents get shared/distributed/pushed to the customers' sites as per the content agreements making them available for on-line access by the customers. * In general, the services provided to Customers, i.e., telecom operators in India and foreign countries is the same with an exception in respect of services provided by the wholly owned services of appellant. 20.4. Appellant also vide letter dated 22/8/2016 projected that they appellant offer is a mix of hardware and software deployed at the customers' location which is used by the telecom operators and that the solution offered by appellant is not in the nature of OIDAR services. RBT service is provided by the overseas Custo....
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....he use of electronic communication medium, but it is not the primary function of MVAS. The solution provided is essentially a composite solution where content is primary and software is ancillary to it. Software provides the key but the solution provided comprises in the main, storage, maintenance and management of content, which is accessed by using the appellant's MVAS platform. Secondly, adaptation, upgradation, enhancement, implementation and other similar services in relation to IT software refers obviously to an existing application software. It does not cover proprietary software loaded in APPELLANT's own hardware and located in the premises of operators for the use of the operators. Thirdly, this is not a case where appellant is merely 'providing the right to use, IT software for commercial exploitation ....." and collecting a licence fee. The services rendered include provision of content and other technical services. This clause is not applicable to the present case. The MVAS solution of appellant is not merely analysis, designing and programming of software or and implementation thereof. Integral to the solution is provision of content. For, if MVAS is only an IT softwar....
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.... internet or an electronic network which relies on the internet or similar network for their provision. The other important feature of these services is that they are completely automated and require minimal human intervention. The requirements stated above are fully met in the present case as the services rendered by appellant, viz. provision of proprietary s/w on hardware, for enabling access and charging per access network integration and management and provision of content, are certainly in relation to on-line information and access. In sum, therefore, the MVAS solutions rendered by appellant to telecom operators both within the country and abroad are squarely covered by the definition of OIDAR services. 21.1. Appellant has been describing the services i.e. MVAS solutions rendered by them under OIDAR since 2008. Copies of the ST-3s filed by them for the periods from 2007-2008 to 2015-2016, On MVAS services rendered to local customers appellant had been paying Service Tax under the head of OIDAR. No dispute has been raised by appellant in this context. However, they claimed that similar services provided to the Customers located outside India were covered under 'Export of Ser....
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....ators and in terms of Rule 9 of POPS,2012, what is relevant is the location of the provider in the case of OIDAR services. 21.3. In the case of branches of appellant set up in various countries, as stated by Shri. Sasikiran, there is revenue earned by appellant India, where appellant's MVAS solution as a whole, including the software platform and contents are used. Bills are stated to be raised to the customers for the consideration including the provision of the platform and content charges, though no break-up is available. Such revenue accrues to appellant India and the revenue earned for MVAS solutions supplied through the branches is exigible to S tax under OIDAR services. In the case of services provided to J&K customers, the nature of services is the same as MVAS solutions provided to customers in India and abroad. Such services would qualify to be called as OIDAR services. Exemption has been claimed by APPELLANT on the consideration that the Finance Act is not applicable to J&K. Going by appellant's argument, services provided in J&K would be similar to services provided in countries abroad. Hence, the services so rendered to J&K customers would not be eligible for exempt....
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.... the services rendered to their foreign customers viz telecom service providers. There was a clear default on their part to evade S tax. Given the fact that appellants were working under the self- assessment scheme the default cannot be condoned. Hence the invoking of the extended period of limitation cannot be faulted. 22. Heard both sides. 22.1 The demand in the present proceeding has been computed on the amounts which can be categorized as under: Sl. No. Particulars Tax liability 1. Revenue from foreign telecom operators for provision of RBT platform - where content is provided by the telecom operator 7,89,67,623 2. Revenue from foreign telecom operators for provision of RBT platform - where content is paid by the Company 17,10,78,098 3. Revenue from foreign subsidiaries of the Company for provision of RBT platform - as per the agreed transfer pricing model 25,58,49,203 4. Revenue from other export services 2,14,33,340 5. Re-imbursement / Recovery of expenses 25,64,92,411 Sub-Total 74,87,16,847 6. Tax on branch turnover 25,29,30,880 7. Tax on turnover from the states of J&K 98,93,624 ....
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....omplex consisting of two or more interconnected computers whether or not the interconnection is continuously maintained;" 22.3. A perusal of the Sections 65(75) and 65(105)(zh) of the Finance Act, 1994 and the above quoted provisions of the Information and Technology Act, it would show that an activity can be classified under the category of OIDAR service providing data or information which is provided to any person and such data or information should be accessible or retrievable or both and such data or information has to be provided in electronic form through computer network in any manner. It, therefore, follows that the expression "providing data/information" in the context of OIDAR service would mean to supply such data/information which was previously not available to the service recipient. Thus, what is of paramount is the ownership of such data/information intended to be provided. In other words, for rendering OIDAR services, the service provider should be able to provide data/information for access or retrieval by the service recipient only when such data/information belongs to the service provider. 22.4. On the other hand 'Information Technology Software Service' (I....
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....ncludes providing the Ring Back Tone (RBT) to the telecom operators. Other than the RBT, the value added services provided by them also include providing alerts under different categories, like jokes, horoscopes, games and sports updates etc. with regard to the process of providing the aforesaid services, he stated that M/s. OnMobile has its own online platform comprising of Servers, Racks (memory devices) etc. in their Bengaluru premises which are integrated with the Telecom operators' network by establishing connectivity through satellite links. Through this integrated connectivity. M/s. OnMobile provides the above services on real-time basis to the customers/subscribers of the concerned telecom operators. For example. BSNI. is a telecom service provides in India. BSNL, enters into a contract with Mis. OnMobile for obtaining the RBT services to their subscribers. Accordingly, M/s. OnMobile will establish a real time connectivity between the online platform of M/s. OnMobile with BSNL telecom network. When a customer of BSNI. subscribes for RBT, the specific ring back tone will be played to the callers of such customer by accessing the customer specified ringtone directly from ....
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.... customers abroad." 22.7. Shri Verghese Antony Joji, Associate Vice-President-Technology Solutions in his statement dated 16.06.2016 submitted as follows: 'M/s OnMobile is a value added service provider in the telecommunication space in multiple telecom operators around the world. The company is based in Bengaluru and the central infrastructure is placed in Bengaluru offices and they have third party data centres also located in Bengaluru. He clarified that the third party data centres means where M/s. OnMobile has installed its servers, hardware and software in rented space provided by these third party data centres. Further, at the customers' site, M/s. OnMobile deploys hardware and software solutions which are connected to the Operator network (e. Telecom operators). The company has the Global Network Operations Centre (GNOC) at Bengaluru which manages the day to day operations of the online platforms deployed by the company. The Central infrastructure deployed at Bengaluru is connected online (24/7) to all the customer sites vin communications lines i.e. leased lines. MPLS or Internet bandwidth via VPN. They provide those services by operating and maintaining th....
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.... their platform and this data is transferred through the online network to Bengaluru on a daily basis for reporting and revenue monitoring purpose. Based on this transaction data, they raise invoices from their Bengaluru offices to their customers/operators on monthly basis. (iii) Content distribution platform: Basically, they are providing online real time access of the contents to the customers. The contents can be music, customized ring back tones or non-music contents like jokes, horoscopes, etc. All these contents are either procured by them, created by them or the right to use are obtained by them. They physically ingest this content from the sources and carryout the necessary technical modifications in their Lab/Studios in Bengaluru, to enable them to be played on the telecom networks. These contents are then stored in the content management servers in Bengaluru which are then shared via the communications lines to the respective operator locations in India or abroad, as per requirements. Whenever the subscribed customer accesses the contents, it is retrieved from the online system deployed at the customer site. The operations like online monitoring and ope....
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....s, like jokes, horoscopes, games and sports updates etc. The Global Network Operations Centre (GNOC) at Bengaluru i.e. the Central infrastructure located at Bengaluru is integrated with the operators' network located at various telecom operator premises and ensure the seamless functioning of the value added services. The customer premises is either in India or abroad are connected to Central infrastructure in Bengaluru through online communication lines. The operations like online monitoring and operations of the Value added services, reporting platform, content distribution platform etc., are all managed and executed by GNOC from their Bengaluru Central Infrastructure. The technical operation persons in the customer locations basically do the basic trouble shooting of hardware and other issues and also technical coordination with the customers. It is also pertinent to note that the content services received from abroad, is procured from foreign countries mostly for the purpose of operation in that particular country. The content is procured and received in their Bengaluru lab through their AVP-Technology Solutions and the invoices are raised by the supplier in foreign country ....
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....al scope RING BACK TONE (RBT) OnMobile shall provide the Ringback Tone ("RBT") service to Unitel. OnMobile will provide Unitel with RBT service with the following features: * RBT provisioning through Voice, SMS, Web, WAP, USSD & Customer Care * RBT for specific numbers or for group * Copy a RBT on Voice * Copy a RBT on SMS * Shuffles * Gifting a RBT on Voice * Gifting a RBT on SMS * RBT Viral * Time of the day RBT * Song Search on SMS, WAP, Web, Customer Care * Social RBT * Info RBT * Multimodal numbers on IVR * User based language preference on IVR * Differential Charging based on access mode * Any other new feature which is mutually decided between Unitel & OnMobile for deployment * Service Lifecycle Management Services for RBT Clause 1.1.19 hardware includes hardware system, platform, applications, customized applications as is specified at Annexure-B of the agreement. The service charges and revenue share details are provided at Annexure-C of the agreement. Clause 1.1.27 states 'Plat....
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....dded services are content like audio content, video content etc; for these value added services the subscriber would be required to pay a specific amount to enable him to enjoy the value added services. 23.4 The RBT provided to the subscribers is actually obtained from the third parties and such content is uploaded on to the appellant server and is managed by the appellant. The appellant carries out requisite modifications on the quality and then it is uploaded to the tone player which is a combination of hardware and software owned by the appellant which integrates with the telecom operators equipment. In other words, the mobile switching center of the telecom operator is connected to the MVAS solution pursuant to which the callers to the subscribers are able to hear the ringtone when a caller places a call to the subscriber of the telecom service the originator of the call i.e, the caller is connected to the MSG of the telecom service provider and is able to hear a ringing tone. In place of the ringing tone where the subscriber has opted for a customized ring back tone service, the customized tone would be played by the appellant servers through which the originator of the cal....
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....ant and the CRS Companies cannot be treated as provision of OIDAR service by the CRS Companies to the appellant. 31. Once the ticket of the appellant is booked, the records of the appellant are also updated. There is an automatic and direct decrement in the remaining seats of the flights of the appellant. Thus, what is perceived by the department as provision of some data to the appellant, is a data which is already existing with the appellant. The appellant, in fact, is not dependent on the CRS Companies to be informed of the tickets which are booked with the airlines of the appellant. There is, therefore, no provision of any data to the appellant. The appellant had not associated with the CRS Companies for receiving such data/information, for the purpose of the agreement was to promote and increase the number of bookings by providing seamless interface by the travel agents and the consideration is dependent on the number of bookings. Consideration is not payable for the provision of data. It also needs to be noted that data pertaining to other airlines is not provided to the appellant. 32. In any view of the matter, even if it is assumed that there is provision ....
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.... available with the person who is providing and not available with the person who is receiving". 36. The meaning of the term "providing" in dictionaries is as follows: Cambridge Dictionary Providing: present participle of provide Provide: (verb): to give something to a person, company, or organization, or to make it available for them to use: to give someone something that they need. Collins Dictionary Provide Word forms: provides, providing, provided (3) Verb : If you provide something that someone needs or wants, or if you provide them with it, you give it to them or make it available to them. Merriam-Webster Dictionary provided; providing transitive verb a : to supply or make available (something wanted or needed) Britannica Dictionary provide verb provides; provided; providing a : to make (something) available : to supply (something that is wanted or needed) 37. Thus, "providing" necessarily means supplying or giving something to someone, which is needed or sought for. The phrase "to supply" has been defined in Strouds Judicial Dictionary, to mean, "pass anything from one who has it to those who want it". 24 ST/52780/2014 38. I....
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....n of the service provider :- (a) Services provided by a banking company, or a financial institution, or a non-banking financial company, to account holders; (b) Online information and database access or retrieval services; (c) Intermediary services; (d) Service consisting of hiring of means of transport, upto a period of one month. 24.1. With the introduction of the Negative List and the issue of POPS Rules 2012 in terms of Rule 9 of the place of provision of OIDAR services shall be the location of the service provider and therefore, the data retrieved from the appellants GNOC location in India to be considered as service provider in India, hence, the OIDAR services rendered to the subscribers abroad also are liable to tax as the same cannot be considered as Export of Service. This definition read with Rule 6A of Export of Services Rules, the provision of any services provided or agreed to be provided shall be treated as export of service when the above conditions are fulfilled. There is no dispute that the appellant is providing the above services to the customers both located in India and abroad. The appellant themselves admitted that MVAS i....