Relief for Indian Acrylic Ltd: CESTAT Rules Subscription and Membership Fees Paid to Foreign Associations Not OIDAR Services [Read Order]

The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that subscription and membership fees paid by Indian Acrylic Limited to foreign associations did not qualify as Online Information and Database Access or Retrieval (OIDAR) services.

Indian Acrylic Limited, a manufacturer of acrylic fiber and yarn, paid membership fees to foreign associations. The department viewed these payments as consideration for OIDAR services and demanded service tax under the reverse charge mechanism.

Two show-cause notices were issued, covering the period from April 2007 to March 2010, seeking Rs. 97,872, along with interest and penalties. The adjudicating authority confirmed the demands, and the Commissioner (Appeals) upheld them, leading to the company’s appeal before the Tribunal.

The appellant’s counsel argued that no online services were accessed and that payments were made through regular banking channels, not via website logins. They further argued that there was no allegation in the show cause notices that any website had been accessed and that the findings were based on assumptions.

The counsel also submitted that the situation was revenue-neutral since any service tax paid under reverse charge would have been available as CENVAT credit. The department’s counsel argued that the appellant had received services from foreign entities, failed to disclose material facts, and was thus liable to tax and penalties.

The two-member bench comprising S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) observed that there was no evidence showing the appellant accessed any online database.

It explained that payments made through normal banking channels indicated no OIDAR service was used. The tribunal also observed that the case was revenue-neutral and that invoking the extended limitation period was not justified.

The tribunal set aside the demand, interest, and penalties, holding that the services were not OIDAR. It further ruled that the adjustment of Rs. 1,79,373 from a sanctioned refund was unlawful since the earlier demand was under appeal. Both appeals were allowed in favor of the appellant.

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