The Allahabad bench of the Customs Excise & Service Tax Appellate Tribunal ( CESTAT ) held that an extended period of limitation was not invokable in the absence of malafide intention to evade duty under the Excise Act, 1944.
Shri Abhinav Kalra, Chartered Accountant appeared for the Appellant and Shri Sandeep Pandey, Authorized Representative appeared for the Respondent.
The issue was whether the Appellant, M/s Innodata India Pvt. Ltd is liable to pay service tax under the head ‘Online Database Access and Retrievable ( OIDAR ) Services during the period from July 2012 to November 2016. The service tax demand of Rs. 50,87,71,481/- has been confirmed under section 73(1) of the Finance Act, 1994 (the Act) along with interest under Section 75 of the Act and penalty of Rs. 50,87,71,481/- under Section 78 of the Act vide Adjudication Order passed by the Commissioner, Central Goods & Service Tax, Greater Noida. A penalty of Rs. 1,00,000/- under Section 78(A) of the Act has also been imposed on Shri Rajiv Nandvani, Director and VP ( Facilities ) of the Appellant company.
The Appellant, M/s Innodata India Private Limited ( formerly M/s Innodata Isogen Private Limited ) ( ‘IIPL’ ), are providing Content Support Services to its ultimate holding Company, Innodata Inc., USA, which mainly include data conversion, knowledge process outsourcing ( KPO ) and IT enabled services.
It was noticed by the Revenue that the Appellant had taken centralized registration from the Service Tax Commissionerate, Noida and had subsequently changed their address for providing various taxable services. On perusal of the ST-3 returns filed by the Appellant, it was noticed that the taxable services being provided/exported by them had been described as ‘OIDAR services’ in their ST-3 returns filed up to June 2012, and from July 2012 to March 2013, the services exported were described as ‘Development and supply of contents for use in Telecom services’, ‘Advertising agency’ etc., and from April 2013 onwards the services exported were described as ‘Business support services’.
It appeared to the Revenue that the Appellant was exporting OIDAR services which were taxable in the hands of the service provider ( the Appellant ) in the taxable territory of India in terms of Rule 9(b) of the Place of Provision of Services Rules, 2012, and not covered within the definition of ‘Export of Services’ provided under Rule 6A of Service Tax Rules, 1994 for being eligible for refund/rebate of service tax paid on input services under Notification No. 39/2012-ST dated 20.06.2012, and therefore, it was alleged that the Appellant had deliberately, to evade payment of service tax, changed the classification of ‘OIDAR service’ to ‘Business Support Service ( BSS )’ for the period July 2012 onwards.
It was found that the Appellant was under a bona fide belief that its activity was not liable to service tax further, the Appellant has maintained proper records of its activity and has compliances with various laws including the Income Tax Act, Companies Act, and had been filing ST-3 returns under service tax, filing refund claims on quarterly basis in respect of service tax paid on input services used in the services exported out of India.
In the absence of mala fide intention, the two-member bench comprising Mr P K Choudhary, Member ( Judicial ) And Mr Sanjiv Srivastava, Member ( Technical ) held that an extended period of limitation cannot be invoked and set aside the impugned order.
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