The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), ruled that Service Tax is applicable to Computer Network Services under “Information Technology Software Service”.
The appellant, M/s. Intimate Fashions Pvt. Ltd, claimed that the activity relating to graphical tool, Microsoft license, SAP implementation, SAP maintenance, server depreciation, provision is classifiable under ‘Information Technology Services’ only with effect from 16.5.2008, when the service was introduced and not during the period 2006, 2007 and 2008 up to 16.5.2008. Hence, they are not liable to pay service tax during the subject period.
However, it appeared to Revenue that the entire service activity including the preparatory activity of installation of server, graphical tool for upgradation etc. and allowing the use of the said common server and SAP software available in the premises of M/s. BPL Sri Lanka by the noticee for manipulation of data through computer network and through private international leased lines is rightly classifiable as a whole service under the category of Online Information and Data Access or Retrieval Service only. Hence a Show Cause Notice was issued to the appellant.
The Counsel for the appellant relied on the judgment in IBM India Pvt. Ltd. Vs. Commissioner of Service Tax, wherein it was held that ERP implementation falls under the category of ‘Information Technology Service’ only with effect from 16.5.2008. Hence, they were not liable to service tax before this date and the allegations of suppression / deliberate attempt to evade duty holds no ground.
The Counsel for the Revenue submitted that the amounts remitted to M/s. Bodyline in the name of charges for graphical tools, server depreciation etc. are nothing but charges paid in or in relation to accessing data from the server installed in Sri Lanka through the leased lines. So, the charges paid towards these services are for computer network and will be correctly subject to service tax levy under ‘Computer Network Services’ under reverse charge mechanism pas per Section 66A of the Finance Act, 1994.
The services rendered to the appellant, sourced from abroad on which duty is payable under the reverse charge mechanism by them, is correctly covered by the definition of “information technology software” service under Section 65(53a) and as a taxable service under Section 65(105)(zzzze) of the Finance Act, 1994 which is only liable to discharge duty from 16.5.2008
A Two-Member Bench of the Tribunal comprising M Ajit Kumar, Technical Member and CS Sulekha Beevi CS, Judicial Member observed that “we find that the disputed service to be defined under Section 65(53a), being a taxable service under Section 65(105)(zzzze) of the Finance Act, 1994 as ‘Information Technology Software’ service from 16.5.2008. We set aside the impugned order and order accordingly.”
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