TMI Blog2013 (9) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... ndled services provided by the assessee require to be analysed for identifying the appropriate classification, in accordance with the guidance provided by provisions of Section 65A (2)(b). The assessee has offered a bouquet comprising different services which include information technology services and Business Auxiliary Services as well. Which of this complex of services provides the essential character to the asessee’s transaction is the issue. Exclusion of information technology service from BAS - Held that:- from the definition of BAS qua Section 65(19) of the Act, it is clear that to fall within (the excluded) information technology service, the service should primarily be a service in relation to designing or developing software or system networking or any other services in relation to operation of computer system. If however, the designing or developing of computer software or systems networking or services in relation to operation of a computer system is a mere adjunct of another or other substantial raft of services to be provided, the service would not amount to information technology service within the meaning of the expression and the context in which this exclusiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided by the assessee either constituted information technology service or support service for business or commerce. 3. After following the due process and on analysis of the several agreements between the assessee and DVVNL, the adjudicating authority concluded that the assessee was providing the taxable BAS and confirmed liability of service tax of Rs.4,36,216/-; interest under Section 76; penalty under Section 76; penalty in an amount equal to the service tax demand under Section 78 of the Act; and penalty as stipulated under Section 77 of the Act. 4. Aggrieved, the assessee preferred an appeal which was allowed by the Commissioner (Appeals) by the order dated 26.2.2008. The appellate authority on independent analysis of the agreements which are the basis for the services provided by the assessee, concluded that services provided are comprehended within support service of business or commerce and not BAS. The appellate Commissioner rejected the contention of the assessee that the services provided by it are covered under information technology service, which is an excluded component of BAS. In the result, the appellate Commissioner set aside the adjudication order. 5. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information regarding consumption, payment, etc. Clause (2) of the agreement details the time schedule for execution of obligations under the agreement and specifies that the assessee should operate the counters for six days a week for processing electricity bills; and for software maintenance, updating of input data and other management processes relating to the computer; the assessee should operate during the first to the third of each month and during these days normal billing operations would not occur. Clause (3) of the agreement specifies the number of centres and the category of consumers to be serviced at those centres. The total number of consumers to be serviced under this agreement is 51,650. Clauses (4) and (5) deal respectively with inputs to be provided by DVVNL, and outputs obligated on the assessee. The responsibilities of DVVNL are set out in clause (6) and that of the assessee in clause (7). Clause (7) enjoins that apart from the design and development of software relevant to the operation of running Spot Billing Centres, the assessee should arrange necessary manpower for operating the counter six days of the week during specified timings; and would be wholly resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port services of business or commerce and rejected the alternative contention of the assessee that the services amounted to information technology service, and excluded component of BAS. To determine whether the services provided by the assessee fall within one or the other of the three categories of service, it is necessary to set out the definition of these three services. 9. Business Auxiliary Service is defined in Section 65(19) of the Act: Business Auxiliary Service means any service in relation to: (i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or (ii) promotion or marketing of service provided by the client; or (iii) any customer care service provided on behalf of the client; or (iv) procurement of goods or services, which are inputs for the client; or Explanation For the removal of doubts, it is hereby declared that for the purpose of this sub-clause, input means all goods or services intended for use by the client; (v) production or processing of goods for or on behalf of the client; or (vi) provision of service on behalf of the client; or (vii) a service incidental or auxiliary to any activity specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecified categories of service. Further analysis of the definition of Infrastructural Support Services is not necessary for the purposes of this appeal. 11. Section 65(A) was incorporated into the Act by the Finance Act, 2002 with effect from 14,.5.2003, to provide guidance for determination of classification of taxable services. Clause (1) of this provision provides that classification of taxable services shall be determined according to the terms of the sub-clauses of Section 65(105). Clause (2) provides that if for any reason, a taxable service is, prima facie, classifiable under two or more sub-clauses of Section 65(105), classification shall be effected according to the norms set out in sub-clauses (a) to (c) of Section 65A. Sub-clause (a) provides that the sub-clause of Section 65(105) which provides the most specific description shall be preferred to sub-clauses providing a more general description. Sub-clause (b) states that composite services consisting of a combination of different services which cannot be classified in the manner specified in clause (a), shall be classified as if consisting of a service which gives them their essential character, insofar as this criter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice is excluded from the definition of BAS by an exclusionary clause. Information Technology Service is defined to mean any service in relation to designing or developing of computer software or system networking or any other service primarily in relation to operation of computer system. 14. from the definition of BAS qua Section 65(19) of the Act, it is clear that to fall within (the excluded) information technology service, the service should primarily be a service in relation to designing or developing software or system networking or any other services in relation to operation of computer system. If however, the designing or developing of computer software or systems networking or services in relation to operation of a computer system is a mere adjunct of another or other substantial raft of services to be provided, the service would not amount to information technology service within the meaning of the expression and the context in which this exclusionary clause is designed in the frame work of the definition of BAS, under Section 65(109) 15. In CCE, Vs. Deloitee Tax Services India Pvt. Ltd 2008 (11) STR (266) (Tri.-Bang.) - this Tribunal had occasion to consider whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he payments received. 17. Ld. Counsel for the respondent/assessee would place substantial reliance on the judgement of this Tribunal in Gandhi Gandhi Chartered Accountants Vs. CCE Hyderabad 2010 (17) STR 25 (Tri.-Bang.). Earlier to Gandhi Gandhi Charered Accountants, this Tribunal in Bellary Computers Vs. CCE 2007 (8) STR 470 (Tri.-Bang.) clearly rejected the contention that services rendered by the assessee to M/s Gulbarga Electricity Supply Co. Ltd. do not amount to BAS. This Tribunal held in Bellary Computers that the assessee was not actually promoting the business of electricity supply company (GESCOM) and the only services rendered were providing software and hardware to facilitate implementation of revenue management to the electricity supply company and would clearly fall within BAS. However, the Tribunal considered that a component of the bundled service relating to supply of computer printers and other software items for which the assessee received hiring charges and other aspects like data processing and generation of MIS reports constitute information technology service. On the basis of this observation the matter was remanded for recomputation. 18. In Gandhi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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