TMI Blog2020 (4) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... , not too unusual model in the software industry, is merely an extension of off-site activity pertaining to information technology software service that is not exigibile to tax. Appeal dismissed - decided against Revenue. - Service Tax Appeal No: 4 of 2011 WITH Service Tax Appeal No: 663 of 2011 - A/85484-85485/2020 - Dated:- 21-1-2020 - MR C.J. MATHEW, MEMBER (TECHNICAL) AND MR AJAY SHARMA, MEMBER (JUDICIAL) APPEARANCE: Shri M Suresh, Joint Commissioner (AR) for the appellant Shri Gajendra Jain, Advocate for the respondent PER: C J MATHEW The issue for determination in the first of the two appeals of Revenue is the merit of the claim that to the failure on the part of the adjudicating authority to consider three aspects pertaining to taxability as provider of manpower recruitment or supply service and to disregard of two decisions of the Tribunal as to well as inadequate appreciation of the definition of support services of business commerce must be attributed the dropping of ₹ 89,98,459, out of total demand of ₹ 2,99,02,891 in show cause notice dated 21st October 2008 for the period from 16th June 2005 to 31st March 2008, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax obligation. 3. The adjudication order found merit in the claim of the respondent herein that the activity occurring at the premises of the client was taxable only with effect from 16th May 2008 when information technology or software service was included in section 65(105) of Finance Act, 1994 and that, even if manpower recruitment or supply service was rendered, the activity undertaken at their own premises would not fall within the ambit of such tax. The claim of the noticee that offshore development centre was only intended to enable the confidentiality of work undertaken at their own premises was also found to be acceptable by the adjudicating authority to relieve them of the demand. The second notice, pertaining as it did to tax liability on charges recovered from overseas customers, was dropped in entirety on acceptance of the claim that these were exports on which tax liability, as provider of information technology software service , would not arise. The notice on identical lines for a further period was similarly dropped vide of order-in-original no. 09/P-III/STC/COMMR/2011-12 dated 8th September 2011 with the finding that it was merely a protective proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute the claim of these being exports. 5. The only two issues that now subsist are the taxability of that portion of the consideration received from the four customers in India computed in terms of employees utilised at the premises of the respondent for fulfilling the transaction contracted with them and the taxability of the receipts for operation of offshore development centre ; the latter of these, from the trajectory of the proposals in the two show cause notices disposed of in the first order impugned before us, is merely an extension of the former sought to be taxed under an entirely different entry. The decision on the former will squarely apply to the latter. We can now turn to the issues placed before us by Learned Authorised Representative and Learned Counsel for respondent on the grounds of appeal set forth by the competent reviewing authority. 6. The decision of the Tribunal in Cognizant Tech Solutions (I) Pvt Ltd v. Commissioner, LTU, Chennai [2010 (18) STR 326 (Tri-Chennai)] to the effect that 8. We find that the Department s case against the appellants is primarily based on the fact that the appellants have recruited the entire staff only on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal service to Pfizer. It is also not in dispute that such functional service relating to data management, bio statistics and reporting will be provided through the very same manpower which has been recruited, retained and trained during the first phase. It has to be appreciated that recruitment and training precedes provision of specialized services. If it is accepted that the same manpower will be providing specialized functional services to Pfizer in the second phase of the contract, it is logical to conclude that the manpower has been retained with the appellants during the first phase and not supplied to Pfizer though recruitment of manpower has no doubt been done at the instance of Pfizer. The assistance in recruitment provided by Pfizer to select suitable personnel and subsequent training provided by Pfizer is also understandable considering the strict standards Specified by FDA of USA, the export market for the pharmaceutical products of Pfizer. The assistance in recruitment and imparting of specialized training for the recruited personnel cannot be held against the appellants claim that they have not supplied the manpower but have merely recruited and retained the same fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , or the nature of the outlay or the nature of the receipt in each case was the decisive factor, or there was a combination of these factors. Each is thus an authority in the setting of its own facts. 8. The normal activities of a commercial transaction with the four customers, notwithstanding the deployment of staff at the premises of the latter being taxable as a service, which may have been recompensed by monetising the time spent by the employees of the respondent on discharging a contractual obligation cannot be construed as a service merely because another transaction, being taxable service, has been established. To extend the logic of the grounds of appeal would be tantamount to subjecting every commercial activity, other than manufacture, to the tentacles of Finance Act, 1994 which clearly is not the legislative intent. The designation of such deployed staff in a segregated portion of the premises of the respondent, not too unusual model in the software industry, is merely an extension of off-site activity pertaining to information technology software service that is not exigibile to tax. 9. In view of the above, we find no merit in the appeals of Revenue whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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