The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) has held that softwares / Websites Development service or consultancy on the internet requires human intervention and cannot be categorised as Online Information and Data Based Access or Retrivial Services ( OIDAR Service ).
Trivedillc Marketing Pvt Ltd, the appellant/assessee is the service provider but not registered with the Department of Service Tax. Based on the intelligence about evasion of service tax by the appellant, the department found that appellant had provided services to M/s Trivedllic Global Ink, USA as their sole client. The services were delivered online to the client which involved continuous online assessment and the outcome of the efforts could be utilized by the appellant’s client on a continuous basis through the interest.
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Department formed the opinion that the said services fall under the category of ‘Online Information and Data Based Access or Retrivial Services’. As per Rule 9(b) of the place of provision of services Rule 2012 the place of provision of services in respect of OIDAR services is the location of the service provider. Since the services are provided by M/s TrivediLLC in India, the place of provision is the taxable territory of India.
It was observed that one of the mandatory condition of Rule 6(A) of Service Tax Rules 1994 for any service to be treated as Export of service is that place of provision of service should be outside India. Hence the service provided by the appellant cannot be called as the “Export of Services” as claimed by the appellant.
A Show Cause Notice was issued invoking the extended period of limitation, demand of service tax for the period 2013-14 till may 2016 has been proposed along with the appropriate interest and the appropriate proposal has been confirmed by the Adjudicating Authority below.
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The appellant has claimed activity to be called as ‘Export of Service’ with the mention that all conditions of Rule 6(9) of service tax rule 1994 stands compiled with due to which there is no tax liability for the appellant. On the contrary commissioner (Appeals) has alleged the impugned activity as OIDAR services to which applies Rule 9(2) of place of provision Rules 2012.
The appellant contended that the entire case of the department is the result of presumption. Since the beginning the department has wrongly presumed the activity of appellant as OIDAR services. It was further mentioned that the services as e-library where only data is accessed can be called OIDAR services whereas the appellant is developing a website for the USA company, not only this, after developing the customised products that are delivered under password security.
The appellant contended the services provided by the appellant are rendered over the internet from the location in India ( appellant’s office is in Bhopal ) to their recipient who is located outside India ( USA ). Thus the activity of the appellant is the “Export of Services” on which there arises no tax liability on the service provider located in the taxable territory in India. Due to this reason only, the appellant neither got itself registered nor has paid any service tax.
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The department contended that the findings of the Adjudicating Authority/ Commissioner (Appeals) below and has placed on record the notification no 28/2012-ST dated 20.06.2012 vide which introduced the place of provision of services Rules 2012, as applicable for the period of question. Rule 9(b) is impressed upon according to which the place of provision for OIDAR services shall be the location of the service provider.
The department contended that the appellant is the service provider and is located in taxable territory of India, hence is liable to pay service tax while providing OIDAR services. Impressing upon no infirmity in the order under challenged appeal is prayed to be dismissed. The issue raised was whether the activity rendered by the appellant amounts to rendering OIDAR services.
The tribunal held that the activity rendered by appellant is not merely of accessing or retrieving online data. It is rather a service of developing softwares/websites or consultancy on the internet which require too much human intervention.
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The two member bench of Rachna Gupta ( Judicial Member ) and Hemambika R. Priya ( Technical Member ) has observed that the online database access/retrival is firstly available through Internet Service Providers ( ISP ).
It was held that the appellant’s activity is wrongly hold as OIDAR. The confirmation of demand is held to be based on wrong presumption ( as elaborated above ) is denied to be called OIDAR. Rule 6(A) of Service Tax Rules is also held to have been wrongly invoked.
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