TMI Blog2021 (2) TMI 1093X X X X Extracts X X X X X X X X Extracts X X X X ..... lified personnel to premises of client is construed as MRSA by the lower authority which is erroneous. Even if parties agree that consideration will be based on the number of persons employed, what has to be looked into is whether the agreement is to execute the work for the client or merely supply the work force. What has to be examined is the core activity for which the agreement is entered between parties. The clients are not in IT related fields. They need services in the nature of annual maintenance of systems, testing, developing of software etc. The disputed transactions as per agreement do not reflect ingredients required for MRSA. There is no iota of evidence to show that the appellants were rendering MRSA service during the disputed period. On merits, the issue is settled by the decision in the case of Cognizant Tech Solutions [ 2010 (3) TMI 328 - CESTAT, CHENNAI ] where it was held that 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 for providing specialized services to Pfizer utilizin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. 8. We hope and expect that the learned Members, and even other Members, who deal with the appeals from now onwards, in such Revenue matters, should understand the letter and spirit of these observations of the High Court. 9. We accordingly set aside the said order of the learned Tribunal on the said issue no.4, regarding taxability of manpower services and application of extended limitation in the present case and restore the appeal back to the learned Tribunal, with a request to hear the appeal de novo on the said issue and decide the same as expeditiously as possible. We are not in a position to answer the questions raised by the Revenue in the present appeal at this stage, for the aforesaid reasons. 10. The appeal is accordingly disposed of, without any order as to costs. 2. Issue No. 4 is in regard to the demand of service tax on Manpower Recruitment or Supply Agency Service (hereinafter referred to as MRSA services) for the period 16.6.2005 to 2007 08. 3. The appellant is engaged in providing information technology related solutions including maintenance of software etc. They are paying service tax under Information Technology Soft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8) STR J137 (SC). In this case, the Apex Court upheld the Tribunal s finding that ERP management services were classifiable under Information Technology Software Services with effect from 16.5.2008 and therefore could not be taxed under Management Consultancy Services for the period prior to 16.5.2008. The case of the department that service tax is liable on the same activity under MRSA prior to 16.5.2008 will not survive because the same transaction is accepted by the department to be Information Technology Software Services for the period after 16.5.2008. 5. Moreover, the services are predominantly provided by the appellant to companies who are not in the field of IT or software development. This will go to show that the appellant was providing Information Technology Software Services to these clients and not MRSA service. The facts are similar to the facts in the case of Cognizant Tech Solutions decided by the Tribunal as reported in 2010 (18) STR 326 (Tri. Chennai). In Cognizant Tech Solutions, the Tribunal observed that though personnel had been recruited specifically to fit the standards specified by Pfizer, the responsibility of the assessee therein did not end with sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices and the personnel are only resources deputed for providing the said software services. 9. He pointed out that in the Show Cause Notice as well as Order in Original, the department has recorded the transactions under dispute as being various IT related services only. In the Order in Original, the adjudicating authority has discussed only three contracts before misconstruing the obligations emanating out of these contracts. The adjudicating authority has wrongly relied upon the decision of the Tribunal in M/s. Future Focus Infotech Pvt. Ltd. The decision in M/s. Future Focus Infotech Pvt. Ltd. and the entire line of decisions following M/s. Future Focus Infotech Pvt. Ltd. are distinguishable on facts from the appellant s contracts. The workforce allocated to the customers premises by the appellant is only a means of rendering said software services. Therefore, the decision in Cognizant Tech Solutions (supra) would be wholly applicable with the instant case and the demand cannot sustain. 10. It is also argued by the ld. Counsel that the appellant is not a manpower supply agency. They are not engaged in supply of manpower in any manner. The objects of Memorandum of Assoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions, the Tribunal upheld the demand in Future Focus Infotech India Pvt. Ltd. (supra 2010) while the Tribunal set aside the demand in Cognizant Tech Solutions (supra 2010). Since there was a very narrow distinction between the facts in these cases, the same was discussed by the Tribunal in Coromandel Infotech India ltd. Vs. Commissioner 2019 (1) TMI 323 CESTAT Chennai. The Tribunal set aside the demand in Coromandel Infotech for the extended period of limitation on a finding that the issue was interpretational. In various cases, it has been held that when the issue involves interpretation of application of legal provisions and applicability of facts, the invocation of extended period cannot sustain. He further stated that the decision in Cognizant Tech Solutions (supra) has attained finality as the department has accepted the ratio therein. Once the dispute has been accepted by the Revenue, they are not permitted to agitate the same issue in another assessee s case. To support this argument, he relied upon the decision of the Hon'ble Supreme Court in the case of Boving Fouress Ltd. Vs. CCE 2006 (202) ELT 389 (SC). In the case of Calcutta Industrial Supply Corporatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any manner for recruitment or supply of manpower, temporarily or otherwise, [to any other person] Section 65(105)(k) of Finance Act, 1994 To any person, by a manpower recruitment or supply agency in relation to the recruitment or supply of manpower, temporarily or otherwise, in any manner Explanation for the removal of doubts, it is hereby declared that for the purposes of this sub-clause, recruitment or supply of manpower includes services in relation to pre-recruitment screening, verification of the credentials and antecedents of the candidate and authenticity of documents submitted by the candidate 16. Further, Information Technology Software Services which was inserted by Finance Act, 2008 with effect from 16.5.2008 is defined under section 65(53a) as under:- Section 65(53a) of Finance Act, 1994 Information technology software means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment 17. From the def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Order No. 41108/2018 dated 27.2.2018 had distinguished the decision rendered in Cognizant Tech Solutions. An argument was put forward during the hearing of that appeal by the counsel appearing for the appellant that there is a conflict in the decisions rendered by the Tribunal in their own case dated 3.3.2010 and the decision rendered in Cognizant Tech Solutions on the same date. A request was made to refer the issue to larger Bench. (Para 3(i)of the decision in Future Infotech Final Order dated 27.2.2018). The Bench looked into the facts of both these decisions and came to the conclusion that although on the first blush, the facts may appear similar, there is discernable differences. The Tribunal observed that M/s. Future Focus Infotech was providing manpower to their clients TCS, Infosys etc. and that the software or IT development was done only TCS, Infosys etc. It was concluded in Final Order dated 27.2.2018 that the activity rendered by the assessee would fall under MRSA and that the decision in Cognizant Tech Solutions will not apply. 20. The Tribunal in the appeal before us, in its earlier order dated 27.2.2019 while disposing the appeal had referred to both these decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er / Project Manager) would interest with the onsite team to provide the required guidance and monitor progress. For the purpose of commercials, it is assumed that this person would dedicate 50% of his working time for this purpose. Weekly reports would be provided to ABN AMRO Bank. The revised pricing for providing the recourses / assignment is INR 200,000. The rates for the resources are programmers (PL/SQL, BO)-INR85,000, Project Manager / BA INR1,20,000 (ii) Central Bank of India Annual Maintenance Contract Preventive and corrective maintenance of the computer systems / machines and will include supply and replacement of unserviceable parts All maintenance / repairs shall be attended by the contractor (M/s. Sak Soft Ltd.) or authorized personnel of the contract. M/s. Sak Soft Ltd. Shall provide remote defect management support for the EBT-FX software used by Central Bank of India (iii) Citigroup Information Technology Operations and Solutions (CITOS) Service Agreement Supplier (M/s. Sak Soft Ltd.) will provide CITOS software services su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 6,00,000/- 4 Deployment 6 weeks ₹ 6,00,000/- Total ₹ 82,00,000/- (viii) ScopePvt. Ltd. International Professional Services Agreement Services and activities relating to back office transaction services relating to retail, credit cards, corporate, treasury operations etc. software development and activities relating to maintenance of software and hardware infracture. If any one of the personnel of service provider (M/s. Saksoft Ltd.) makes an application to join the organization (M/s. Scope International Pvt. Ltd.) and if she/he is found suitable for such appointment, M/s. Scope International Pvt. Ltd. Agree to reimburse M/s. Saksoft Ltd. With 10% of placement cost incurred by M/s. Saksoft Ltd. At the time of recruiting such employee In any eventuality of the contract being terminated by them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucts. Scope of Services :- Creating universes with multiple database and to develop reports in BO applications Develop better reporting procedures to maximize the business growth Decision on Business Objects related problems like developing the reports, load balancing, query design and maintenance of BO Server Develop periodical reports to maintain the integrity of data on a continuous basis. Develop MIS and charts / graphs / dash boards and other reports in a presentable format to management executives Monitor the progress of the data integrity of the bank and help in developing To resolve the BO server technical and architectural issues To maintain the users and client requirements for BO To develop the Bo universes and help team members to produce the reports from the client To provide on the job consultancy / clarify to other team members on issues connected to BO and crystal reports Software design / programming / writing / debugging / modifying / business analysis / project management (one or more or all of these activities) for the products and subsystems of client Troubleshooting maintenance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (CTIOS) It is clearly noted in Col. 2 that the scope of work is to provide software services such as application development, testing and quality assurance etc. After perusal of the agreement, the department has comprehended the scope of work and mentioned the same in this column. The scope of work does not show anything related to MRSA. (iv) GE Money (GE Capital Corporation) The department has heavily relied upon the clause in the agreement that the appellant / contractor has requested for skills, personnel and legal right to perform such software related services. On perusal of the master services agreement in page 682, it reads as under:- The contractor is not obligated to sign and accept the Company s task Orders, however, the contractor will use its best efforts to accept such Tax Orders and fulfill its requirements. Once the contractor accepts a Task Order, the contractor must perform the work specified in such Task Order. In performing such work and subject to this agreement or Task Order, the contractor shall be free to exercise its discretion as to the method and means of performance of its services. The Task Order could be a Fixed Price engagement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fshore and Onsite resources. From the above clauses in the agreement, it can be seen that the appellant who is the contractor mentioned in the agreement is responsible for carrying out software related services and has to use the best skilled personnel to perform such services. The control and supervision of the staff / qualified personnel supplied at the premises of the client is wholly on the appellant. For these reasons, the activity will not fall under MRSA. (v) HDFC Bank It is seen from the show cause notice itself, that the work order is for software annual maintenance services. The relevant portion of the agreement is noticed as under:- (A) HDFC Bank is a banking company and wishes to obtain maintenance services for the various software applications developed and deployed by Saksoft under CC Offline and Way Forward Projects. (B) The supplier has expertise in providing maintenance services in relation to software of various kinds and has represented to HDFC Bank that it is able to provide such services. (C) The parties have therefore agreed that the supplier shall provide maintenance services to HDFC Bank in relation to software in acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... special care, skills, knowledge, experience, expertise and capability to perform some ancillary tasks (b) The service provider is capable and competent to provide such ancillary service and is willing to undertake assignments from Scope. (c) Now, therefore, in consideration of the mutual covenants and conditions contained herein and for any other good and valuable consideration, the sufficiency of which is hereby acknowledge, the parties agree as follows. In page 292 of Vol. I of the appeal book, clause 7.2.5 and 7.2.6 reads as under:- It shall be the sole and exclusive responsibility of the service provider to carry out the assigned task effectively and as efficiently as agreed to and entered into with Scope by this agreement. Service provider shall upon the request of Scope take adequate measures to rectify, if in the opinion of Scope, the services provided by service provider are not satisfactory. The service provider shall ensure that all of its personnel will at all times, during the term of this contract while on Scope s premises:- Act diligently, ethically, soberly and honestly Not take or use any drug unless prescribed by a medi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntenable. In fact, this is the underlying essence of control and supervision which distinguishes the facts in Future Focus Infotech and Cognizant Tech Solutions. When the personnel is supplied to the premises of client and the employees still remain in the payroll of appellant, would strongly indicate that there is no provision of MRSA services. From the discussions made by the original authority, it is seen that he is carried away by misconstruing the clarifications issued by the Board by Circular F. No. B1/6/2005-TRU dated 27.7.2005 wherein supplying staff / qualified personnel to the premises of the client would be supply of manpower. The discussion in para 12.3 indicates that mere supply staff / qualified personnel to premises of client is construed as MRSA by the lower authority which is erroneous. Even if parties agree that consideration will be based on the number of persons employed, what has to be looked into is whether the agreement is to execute the work for the client or merely supply the work force. What has to be examined is the core activity for which the agreement is entered between parties. The clients are not in IT related fields. They need services in the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry carved out of MRSA. The MRSA was introduced on 16.6.2005. When the department has not objected to the classification of the services under ITSS after 16.5.2008 and has accepted the appellant s classification, they cannot demand service tax under a different category for transactions of the very same nature for the period prior to introduction of ITSS. In Indian National Shipowners Association (supra), the Hon'ble Supreme Court had categorically held that when a specific new service is introduced without carving out from the existing service category, such service can be liable to service tax only from the date of introduction of the new service. On this ground also, the demand under MRSA cannot sustain. 25. On scrutiny of the show cause notice and the evidences placed before us, we have to say that there is no iota of evidence to show that the appellants were rendering MRSA service during the disputed period. On merits, we hold that the issue is settled by the decision in the case of Cognizant Tech Solutions cited supra. The demand under MRSA cannot sustain and requires to be set aside which we hereby do. 26. The Hon ble High Court has remanded the matter to reconsider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court has held as under:- 11. Factual position goes to show the Revenue relied on the circular dated 23.5.1997 and dated 19.12.1997. The circular dated 6.1.1998 is the one on which appellant places reliance. Undisputedly, CEGAT in Continental Foundation Joint Venture case (supra) was held to be not correct in a subsequent larger Bench judgment. It is therefore clear that there was scope for entertaining doubt about the view to be taken. The Tribunal apparently has not considered these aspects correctly. Contrary to the factual position, the CEGAT has held that no plea was taken about there being no intention to evade payment of duty as the same was to be reimbursed by the buyer. In fact, such a plea was clearly taken. The factual scenario clearly goes to show that there was scope for entertaining doubt and taking a particular stand which rules out application of section 11A of the Act. 12. As gar as fraud and collusion are concerned, it is evident that the intent to evade duty is built into these very words. So far as misstatement or suppression of facts are concerned, they are clearly qualified by the word willful , preceding the words mis-statement or suppression of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
