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2017 (10) TMI 453

100% EOU - Reverse charge mechanism - Online information and database access to retrieval services - classification of services - cost relating to lease line charges for e-mail and internet services, software maintenance and software licence fee, maintenance of IT services, systems support, etc are managed centrally - contention of the appellant is that payment made to BC Components International BV, Netherland is not consideration but it is cost sharing - Held that: - For the purpose of Finance Act, 1994, BC Components International BV, Netherland and the appellant are two different entity. Accordingly the relationship is clearly of service provider and service recipient. - As per Section 65(75) of the Finance Act, online information and database access for retrieval means providing data or information retrieval or otherwise to the consumer in electric form or through computer network. As per 65(105)(zh) taxable service means any service provided or to be provided to any person by any person in relation to online information and database access or retrieval or both in electronic form through computer work in any manner - In the present case appellant have booked communication .....

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fee, maintenance of IT services, systems support, etc are managed centrally. These costs are then allocated to various companies of the group based on logical basis like the number of users, system usages. The share of such of IT cost allocated to the appellant is paid by them. During the scrutiny of the financial records and related document of the appellant it was revealed that the appellant had made payment to M/s. BC Components International BV, Netherland towards the costs for the said services provided to the appellant and the appellant had shown the same as communication expenses and technical fees under the heading of Expenditure in Foreign Currency. As the said services provided by the M/s. BC Components International BV, Netherland to the appellant appeared to be taxable services classifiable under Online information and database access to retrieval services being the recipient of the service, the appellant appeared liable to pay service tax under reverse charge mechanism, in terms of sub rule (ii)(d)(iv) of Rule 2 of the Rules for the period 2006-07, 2007-08 and 2008-09(up to 15.5.2008) amounting to ₹ 46,84,276/- for which show cause notice dated 29-6-2011 was iss .....

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of Service Tax, Bangalore[2009(14)S.T.R. 212(Tri. Bang.)] He submits that it is well settled law that cost sharing within the group company, no service tax is charged. In this support, he placed reliance on the following judgments: (a) Intercontinental Consultations & Technocrats Pvt Ltd Vs. Union of India[2013(29)S.T.R. 99(DEL)] (b) State Bank of India Vs. Comm. Of Service Tax, Mumbai-II[2013-TIOL-767-CESTAT-MUM] (c) British Airways Vs. CCE, (Adjn), Delhi[2014(36)STR 598(Tri. Del)] (d) Jet Airways (I) Ltd Vs. Commissioner of ST, Mumbai[2016(44)STR 465 (Tri.Mum)] (e) Reliance ADA Group Pvt Ltd. Vs. Commissioner of S.T. Mumbai IV[2016(43)S.T.R. 372(Tri. Mum)] (f) Tetrapack India Pvt Ltd Vs. Commissioner[2015(39) S.T.R. 995(Tri. Mum)] He further submits that BC Components International BV, Netherland provided facility namely AT & T Service, Licensing Charges, BCs Global IT support, that BCCGN team was a central gateway for managing the corporate IT service/application/infrastructure and charges cost without mark up used to get allocated based on the site users and communication link. In the said arrangement there is no provision of service from BC Components International BV, .....

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nents International BV, Netherland. As per this arrangement, we find that M/s. BC Components International BV, Netherland providing service to the appellant for which appellant is making payment. This clearly shows that there is relation of service provider and recipient of the service and the payment made towards such service is a consideration paid by the appellant to service provider, BC Components International BV, Netherland. The contention of the appellant is that payment made to BC Components International BV, Netherland is not consideration but it is cost sharing. Since against the service payment is made, whether it is of cost sharing basis or otherwise the same is considered as gross value of the service and merely by giving term cost sharing it does not take the nature of consideration towards service. For the purpose of Finance Act, 1994, BC Components International BV, Netherland and the appellant are two different entity. Accordingly the relationship is clearly of service provider and service recipient. As regard the classification of service, we find that as per Section 65(75) of the Finance Act, online information and database access for retrieval means providing da .....

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