TMI Blog2020 (11) TMI 956X X X X Extracts X X X X X X X X Extracts X X X X ..... ronically supplied services. The European VAT Committee had agreed that for the assessment of the notion of minimal human intervention , it is the involvement on the side of the supplier which is relevant and not that on the side of the customer. We have already detailed the entire process involved in conducting the Type-3 test and it is seen that scoring by a human scorer is just one of the processes involved in a computer-based test. One of the major benefits of a computer based test is the facility of obtaining immediate grading. While grading of multiple-choice questions is done instantaneously using an algorithm, grading of essays involves the use of AES (Automated Essay Scoring) which is a specialized computer program to assign grades to essays. The Respondent has an entity in the United States which has developed an AES for reliable scoring of essay responses in a computer-based test. How does one know that the automatic scoring system works well enough to give scores consistent with consensus scores from human scorers? Any method of assessment must be judged on validity, fairness and reliability. An AES would be considered valid if it measures the trait that it purports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the KGST Act. 2. The present appeal has been filed under section 100 of the Central Goods and Service Tax Act 2017 and Karnataka Goods and Service Tax Act 2017 (herein after referred to as CGST Act, 2017 and SGST Act, 2017) by the Principal Commissioner of Central Tax, Bangalore West Commissionerate, (herein after referred to as Appellant/Appellant Department) against the advance Ruling No. KAR/ADRG 37/2020 dated 22nd May 2020 = 2020 (6) TMI 182 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA . Brief Facts of the case: 3. M/s. NCS Pearson Inc, a Minnesota Corporation, having its registered office at 5601 Green Valley Drive, Bloomington, Minnesota - 55437, USA, (hereinafter referred to as Respondent Company ) has a business division Pearson VUE engaged in the provision of computer-based test (alternatively referred to as exams ) administration solutions to its clients (test sponsors) like educational institutes, professional licensing organizations, etc. M/S NCS Person Inc is regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and supervised by an invigilator (proctor) as described in the type 2 test above. The candidates may create a profile, schedule the appointment and remit payment using a registration centre (call centre). The test is completed in parts viz. at the end of the exam, the test-taker is able to see the final score for multiple choice questions and an indicative score (which is not final) for essay-based questions marked by the computer-based algorithm. However, the essay-based questions are then sent to a human-evaluator in the USA for assessment and final scoring. In addition to this, the essay is scored by an automated essay scorer. In case the difference in score for a single essay question between the electronic computed based algorithms scoring vis-a-vis human scoring is more than I point, then the essay-based questions are again sent to an expert evaluator for assessment and scoring. Once the entire aforesaid scoring activity is completed, the test-taker is then e-mailed a URL to access their official score. 5. In India, the Respondent Company has entered into contractual arrangements with independent third-party service providers including a subsidiary company of the Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est from outside India to candidates in India would be treated as an import of services and inter-state supplies in terms of section 2(11) and 7(4) of IGST Act, respectively; that as per serial no. 1 of Notification 10/2017-lntergrated Tax (Rate) dated 28 June 2017, any service supplied by any person who is located in a non-taxable territory to any person other than non-taxable online recipient is taxable under reverse charge mechanism in the hands of the service recipient who is a person other than non-taxable online recipient. Further, in terms of serial no. 10(a) of Notification No. 9/2017-lntegrated Tax (Rate) dated 28 June 2017, an exemption is provided on services (other than OIDAR service) supplied by a provider of service located in a non-taxable territory to an individual in relation to any purpose other than commerce, industry or any other business or profession. Accordingly, for the type 2 and the type 3 test, IGST would either be exempt in case of supply by the Respondent Company to non-taxable online recipient or taxable under reverse charge mechanism in case of supply to other than non-taxable online recipients. 8. The Authority for Advance ruling examined the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hm and it is only for the quality testing of the outcome that the human evaluation is brought into the picture. 9.2. The Appellant has contended that there is no direct human interaction of individualistic nature between the service provider and the service recipient and hence, the same should be considered as minimum human intervention. The Appellant submitted that minimum human intervention can be broadly classified under 2 categories as detailed below (as per European Commission VAT Committee Guidelines): Passive human intervention: It is a situation where direct human interaction of individualistic nature between the service provider and the service recipient cannot be established. In such cases it may be considered as minimum human intervention irrespective of the service involved. Active human intervention: It is a situation where direct human interaction of individualistic nature between the service provider and the service recipient can be established. In such cases it may be considered as minimum human intervention on case to case basis so as to ensure the mitigation of the misuse of the term minimum human intervention . 9.3. The Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntervention is involved merely for ensuring accuracy of the algorithm and there is no direct submission of question paper from the test taker to the human evaluator and hence, the Type 3 test fulfils all essential requirements to be classified as an OIDAR service. 9.6. In view of the above, the Appellant prayed that the order of the lower Authority with regard to the Type-3 test not being an OIDAR service, be set aside. PERSONAL HEARING: 10. The Appellant-Department and the Respondent Company were called for a virtual personal hearing on 6th October 2020 but the Respondent sought an adjournment. Accordingly, the virtual hearing was fixed on 20th October 2020. 10.1. The hearing on 20th October 2020 was conducted on the Webex platform following the guidelines issued by the CBIC vide Instruction F.No 390/Misc/3/2019-JC dated 21 st August 2020. The Appellant-Department was represented by the Additional Commissioner Ms Priya Goel and the Respondent Company was represented by their Advocate Shri. Harish Bindumadhavan. The Additional Commissioner representing the Appellant narrated the facts of the case and stated that the Department is aggrieved by the ruling given by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the final score cannot be issued to the candidate. He submitted that the Appellant s contention that the human intervention is only to check the efficacy of the computer-based testing, is not factually correct; that the human evaluation is critical without which the final score cannot be issued. He reiterated the fact that in the Type-3 test, human evaluation is not for the purpose of quality checking or improvement of the algorithm, but it is in fact a parallel evaluation which is done along with the algorithm and plays a critical role in the evaluation process directly intervening where they can make a difference in the scores achieved by the test takers and hence, should be classified as more minimal human intervention; that since there is substantial human intervention in the Type-3 test, the same does not get covered under the purview of OIDAR services as rightly held by the lower Authority. In view of the above submissions, the Respondent pleaded that the appeal filed by the Department may not be allowed. DISCUSSION FINDINGS: 11. We have gone through the records of the case. This is an appeal filed by the Department against the ruling given by the Authority for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Respondent. This candidate registers for the test online and remits the registration fees also online. The test is taken by the candidate at designated test centres in India where the candidate is assigned a computer workstation and the entire duration of the test is administered and supervised by a physical invigilator as well as an online proctor. The candidate accesses the test electronically via the internet at the test centre. The format of a Type-3 test involves a mixture of multiple-choice questions and analytical writing assessment questions i.e essay-based questions. On completion of the test, the Quantitative and Verbal elements of the test (multiple-choice questions) are scored based on a computer algorithm and the candidate is immediately given an indicative score report which provides the score only for the multiple-choice questions of the test. The score of the essay-based questions involving Integrated Reasoning and Analytical Writing elements, do not form part of the indicative score. The essay responses are sent by the Respondent to their scoring entity in the United States of America where the evaluation of the essays is done independently by a professional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... multiple-choice and the essay-based questions will be provided to the candidate electronically within a period of three weeks from the test date. 18. We find from the information furnished by the Respondent that their activity is primarily to conduct computer-based tests for their clients. The type of computer-based test i.e whether the test is purely multiple-choice questions or a mix of multiple-choice and essay questions depends on the purpose of the test and what the test sponsor aims to measure in a test taker. We are concerned only with the Type-3 test which is a mix of multiple-choice questions and essay-based questions. It is the responsibility of the Respondent to provide the software to enable the candidates to take the online Type-3 test; appoint or establish test centres from where the candidates will take the online Type-3 test; provide for the candidate s test registration validation at the test centre; provide for online and offline proctoring during the test-taking process, provide software for scoring the tests and deliver the test results electronically to the candidate. From the above it is abundantly clear that the Type-3 test is conducted over the internet u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of assessment must be judged on validity, fairness and reliability. An AES would be considered valid if it measures the trait that it purports to measure and it would be considered reliable if its outcome is repeatable. Before computers entered the picture, essays were typically given scores by two trained human raters. If the scores differed by more than one point, a more experienced third rater would settle the disagreement. In this system, reliability was measured by the degree of agreement among the human raters. The same principle applies to measuring a computer program s performance in scoring essays. An essay is given to a human scorer as well as to the AES program. If the AES score agrees with the score given by the human scorer, the AES program is considered reliable. A machine-human score correlation serves as a good indicator whether the AES is returning a stable consensus score of the essay. Therefore, the role of the human scorer is in effect a means to ensure the reliability of the AES program. We do not discredit the importance of a human scorer in the process of assessment of essay responses. However, the focus here is on a computer-based test where the intent is ..... 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