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2016 (2) TMI 475 - CESTAT MUMBAI

2016 (2) TMI 475 - CESTAT MUMBAI - 2016 (42) S.T.R. 575 (Tri. - Mumbai) - Export of services - taxability of ‘management, maintenance or repair' service rendered by the respondent prior to the amendment of Export of Service Rules, 2005 - Assessee submitted that 97% of their services are rendered to foreign clients and are provided by accessing the server/system of the client located outside India through internet and that, to the extent that these services have the effect of making the software .....

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employees sitting in India have to access the servers/computer networks abroad. The performance of these operations is manifested in the efficient and smooth working of the software in the operations of the client. The location of the client cannot be uncoupled from the performance of the service. And as at least some portion of the service is, thereby, rendered outside the country and hence the renders these services outside the ambit of taxation even before 1 st March 2008. - Demand of se .....

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f Central Excise, Pune-III covering six show cause notices in connection with 369 projects executed by the respondent, M/s HSBC Software Development (India) Pvt Ltd. 2. The impugned order has confirmed tax demand of ₹ 5,42,40,164/- while dropping the demand for ₹ 1,27,12,457/- in show cause notice dated 5 th August 2008 and dropping proceedings entirely in the other five show cause notices. The dropped demand in the first show cause notice relates to technical testing and analysis .....

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kes software development and software implementation for the HSBC group companies across the globe. In the course of handling these project, their activities include technical testing and analysis agency' service and maintenance and repair service'. In terms of the Export of Service Rules, 2005 which has, with effect from 15 th March 2005, fine-tuned the ambit of export of services' beyond the hitherto existing concept of receipt of consideration in convertible foreign currency, show .....

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der maintenance and repair service, (iv) dated 23 rd October 2009 for the period from April 2008 to March 2009 for demand of ₹ 1,27,68,912 under technical testing agency' service, (v) dated 22 nd October 2009 covering the period from April 2008 to September 2008 for demand of ₹ 81,13,754 under maintenance and repair' service and (vi) dated 15 th April 2010 covering the period from October 2008 to March 2009 for demand of ₹ 1,31,12,461 under maintenance and repair' s .....

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are taxable. 4. According to the respondent in appeal of Revenue, 97% of their services are rendered to foreign clients and are provided by accessing the server/system of the client located outside India through internet and that, to the extent that these services have the effect of making the software functional at the client's end, at least a part of the service is performed outside India. According to the assessee, the reasoning of the adjudicating authority was no less applicable for th .....

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, Ahmedabad v BA Research India Ltd [2010 (18) STR 439 (Tri-Ahd) which was followed in Commissioner of Central Excise Ludhiana v Nestle India Ltd [2014 (36) STR 563 (Tri-Del)] , in C3i Consultants India Pvt Ltd v Commissioner of Central Excise, Customs & Service Tax, Hyderabad -II [2014 (35) STR 556 (Tri-Bang)] and in Commissioner of Central Excise, Pune v Aztecsoft Ltd [2014 (33) STR 257 (Tri-Mumbai)]. 6. We have considered the rival submissions and contentions. On a careful perusal of the .....

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in the impugned order. Indubitably, the incorporation of information technology software' in section 65 (106) of Finance Act, 1994 defining technical testing and analysis' can have no implication other than it being outside the tax net prior to 16 th May 2008. That the activity of the respondent is in relation to software has been accepted by Revenue. The reliance placed by the original authority on the amendment to the statutory provision with effect from 1 st March 2008 viz. second pr .....

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e taxability of management, maintenance or repair' service rendered by the respondent prior to the amendment of Export of Service Rules, 2005 discussed supra. That export of taxes along with commodity or invisible exports renders them unviable in the international market place and handicaps exporters, so vital to robustness of the domestic economy, is an accepted parameter that governments build into policy and framework of taxation. Consequently, within the rigour of tax administration, the .....

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analysis' or management, maintenance or repair' that is performed on software of the clients of the respondent, it is accepted that expert employees sitting in India have to access the servers/computer networks abroad. The performance of these operations is manifested in the efficient and smooth working of the software in the operations of the client. The location of the client cannot be uncoupled from the performance of the service. And as at least some portion of the service is, there .....

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wever, the certificates have been forwarded to the clients of the respondent abroad. It is in such circumstances the Tribunal concluded that the facts in the case of Commissioner of Service Tax Ahmedabad Vs. M/ s.B.A . Research India Limited which is a Tribunal's decision and reported in (2010) 18 STR 439 (Tribunal Ahmedabad) which was followed by the Tribunal's single member in the case of KSH International Pvt.Ltd Vs. Commissioner of Central Excise, Belapur reported in 2010(18) STR 404 .....

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vision and particularly the circular relied upon. In the circular which is relied upon and at page 17 of the paper book, the Government of India in the Ministry of Finance (Department of Revenue) exempted the taxable service specified in subsection 48 of section 65 of the Finance Act, 1994 provided to any person in respect of which payment is received in India in convertible foreign exchange, from the whole of the service tax leviable thereon under section 66 of the said Act. The proviso to this .....

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nt case, the Tribunal has found that the assessee like the respondent rendered services, but they were consumed abroad. The clients of the respondents used the services of the respondent in inspection/test analysis of the goods which the clients located abroad intended to import from India. In other words, the clients abroad were desirous of confirming the fact as to whether the goods imported complied with requisite specifications and standards. Thus, client of the respondent located abroad eng .....

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