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2013 (9) TMI 431 - AT - Service TaxSoftware Development Service OR Manpower supply Service - stay - The appellant had entered into agreements with several clients for providing service as software development - Revenue was of the view that appellant was in fact engaged in providing manpower for development of software and therefore the services provided by them has to be treated as manpower supply service Held that - Following Future Focus Infotech India Pvt. Ltd. Vs. Commissioner of Service Tax, Chennai 2010 (3) TMI 190 - CESTAT, CHENNAI - what was provided was actually manpower supply service , even though the assessee claimed it under information technology service - No doubt there were clauses relating to deliverables and quality of work in the contracts but these by themselves do not indicate that the appellants are providing information technology software services to TCS and Infosys - Any person or organization obtaining skilled personnel had to ensure that such men deliver work of standard quality - No one would employ a person who was not skilled enough and no one would pay for shoddy work even if done by a skilled man. Waiver of Pre-deposit - prima facie case is against the assessee - stay granted partly.
Issues:
1. Classification of services provided by the appellant as manpower supply service or information technology service. 2. Liability to pay service tax for rendering services. 3. Applicability of Section 66A of Finance Act 1994 for services received from abroad. 4. Imposition of penalties under various sections of Finance Act 1994. 5. Consideration of limitation in issuing show-cause notice. Issue 1: Classification of services provided: The appellant had agreements with clients for software development services, but the department viewed it as manpower supply service. The Commissioner concluded that the appellant's activity was manpower supply service based on payment terms and clauses in the agreements. The Tribunal found that the appellant was responsible for supplying skilled personnel to work on software projects under the client's supervision, leading to the classification as manpower supply service. The Tribunal emphasized that clauses related to deliverables and quality did not indicate the provision of information technology services. The Tribunal relied on previous decisions and concluded that the appellant failed to establish a prima facie case for reclassification. Issue 2: Liability to pay service tax: The impugned order confirmed a demand for service tax amounting to over Rs. 12.84 crores for manpower supply service and Rs. 12,02,940 for imported services. The appellant argued that they had been paying service tax under information technology service classification post-2008, which the department accepted. The Tribunal directed the appellant to make a pre-deposit of Rs. 1.25 crores, considering limitation, classification, and agreement interpretations for final hearing. The Tribunal granted a stay against recovery pending the appeal upon compliance with the pre-deposit. Issue 3: Applicability of Section 66A of Finance Act 1994: The department initiated proceedings under Section 66A for services received from abroad for development purposes due to the absence of an office in India by the service providers. The Tribunal did not delve into this issue in detail in the judgment. Issue 4: Imposition of penalties: Penalties under various sections of the Finance Act 1994 were imposed along with the confirmed service tax demands. The Tribunal did not provide specific details on the penalties imposed in the judgment. Issue 5: Consideration of limitation in issuing show-cause notice: The appellant argued that the show-cause notice was issued after more than three years from the audits conducted in 2007-08, indicating a strong case based on limitation. The Tribunal did not provide a detailed analysis of the limitation aspect in the judgment but considered it as part of the overall assessment of the case. This comprehensive analysis of the judgment covers the various issues involved, including the classification of services, liability to pay service tax, penalties imposed, and the consideration of limitation in the case.
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