TMI Blog2023 (3) TMI 1172X X X X Extracts X X X X X X X X Extracts X X X X ..... dicates, shall apply for services provided from outside India and received in India, when Section 66A ibid is applicable. There is no difficulty for this proposition as the very Rule 3 ibid. starts with subject to Section 66A of the Act . A conjoint reading of the above provisions points only to the fact that they shall apply when services are provided from outside India , and not if the services are provided by a person in India, to any other person in India. This follows, therefore, that both the statutory provisions would apply only when the location of the service provider is outside India and the recipient is located in India. Further, the Adjudicating Authority has negated the claim of the appellant that it is the second proviso to Rule 3(ii) of the Taxation of Services Rules ibid. that would apply, by holding that the software which was supplied by the foreign company was very much available in India upon its receipt by the appellant, which was only thereafter forwarded within India to the customers - It is in the second proviso that we see the reference, inter alia, to the service provided in relation to any goods. There is no dispute here that the software is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from were duly reflected in their balance-sheet as Annual, Paid-up, MES and Academic and from the break-up details that were available from the appellant s balance-sheet, it was ascertained that the expenses related to Academic, Paid-Up Annual And Monthly, were related to the purchase of software and MES-ME related to maintenance, enhancement and support of the software provided by the foreign companies to the appellant. 3.1 The above facts appear to have weighed in the mind of the Revenue that the same constituted management, maintenance or repair service with effect from 10.07.2004 and that therefore, the appellant being the recipient in India was liable to pay Service Tax under reverse charge mechanism in terms of Section 66A of the Finance Act, 1994 read with Rule 2(i)(d)(iv) of the Service Tax Rules, 1994. 3.2 To quote the Show Cause Notice: - 4.0 It appears that such service provided by the foreign company in respect of the software imported by the assessee falls under the category of management, maintenance or repair services with effect from 10.07.2004. As the expenses incurred by the assessee towards maintenance service relates to services provided by a person f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant to the foreign company. 4.4 The situation was different for the period prior to May 2006 as compared to the period post May 2006. During the period prior to May 2006, all software as well as periodical upgrades, maintenance and other activities were performed through the medium of a CD, which was imported by the appellant and thereafter, sold to the customers in India. 4.5 However, post May 2006, the sale of the software in question as well as its upgrades, maintenance, enhancement and support were done through electronic downloading only. Upon receipt of such purchase order, the same was forwarded to the US company and the US company, thereafter, provided the password and the internet site address through which a customer / purchaser could receive his software, which could then be downloaded into his computer and be used later on for his own purposes. 5. In their reply, the appellant had also taken a very strong objection to the invoking of extended period claiming that the alleged expenditure in foreign currency towards purchase, etc., of Abaqus software were picked up by the audit team during the course of verification of the appellant s balance-sheets, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but holds that only after downloading the software could the services be said to have been used by the customer and no part of the service activity was directly provided from the foreign country through internet. In other words, according to him, the Abaqus software was very much available in India and the password and the internet site address, which are received by the appellant from the foreign company, was only forwarded within India to the customers who use such password and internet site for downloading the service. 7.2 With regard to invoking the extended period of limitation, the Adjudicating Authority has not accepted their plea for the reason that the appellant had not declared any details of the expenditure incurred by them in foreign currency in respect of the maintenance service received by them from the foreign company. 8. Aggrieved by the above order, the appellant preferred appeals before the First Appellate Authority, who vide common impugned Orders-in-Appeal has upheld the demands raised in the Order-in-Original, thereby rejecting the appeals filed by the appellant. It is against this common Orders-in-Appeal that the present appeals have been filed before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether the Revenue was justified in demanding Service Tax from the appellant under the category of management, maintenance or repair service? ; (2) Revenue neutrality; (3) Whether the Revenue was correct in invoking the extended period of limitation? 14. We note that the following Sections/Rules are relevant: 15. Section 65 (64) of the Finance Act, 1994 reads as under: - During the period from 01.05.2006 to 01.06.2007 (64) management, maintenance or repair means any service provided by (i) any person under a contract or an agreement; or (ii) a manufacturer or any person authorised by him, in relation to, (a) management of properties, whether immovable or not; (b) maintenance or repair of properties, whether immovable or not; or (c) maintenance or repair including reconditioning or restoration, or servicing of any goods, excluding a motor vehicle; During the period from 01.06.2007 to 16.05.2008 (64) management, maintenance or repair means any service provided by (i) any person under a contract or an agreement; or (ii) a manufacturer or any person authorised by him, in relation to, (a) manag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stablishment of the provider of service directly concerned with the provision of service is located, shall be treated as the country from which the service is provided or to be provided. (2) Where a person is carrying on a business through a permanent establishment in India and through another permanent establishment in a country other than India, such permanent establishments shall be treated as separate persons for the purposes of this section. Explanation 1. A person carrying on a business through a branch or agency in any country shall be treated as having a business establishment in that country. Explanation 2. Usual place of residence, in relation to a body corporate, means the place where it is incorporated or otherwise legally constituted. [(3) The provisions of this section shall not apply with effect from such date as the Central Government may, by notification, appoint. 17. Rule 3 (ii) of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 is reproduced below:- 3. Taxable services provided from outside India and received in India.- Subject to section 66A of the Act, the taxable services provided from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from outside India and received in India, when Section 66A ibid is applicable. There is no difficulty for this proposition as the very Rule 3 ibid. starts with subject to Section 66A of the Act . 19.3 A conjoint reading of the above provisions points only to the fact that they shall apply when services are provided from outside India , and not if the services are provided by a person in India, to any other person in India. This follows, therefore, that both the statutory provisions would apply only when the location of the service provider is outside India and the recipient is located in India. 20.1 Further, the Adjudicating Authority has negated the claim of the appellant that it is the second proviso to Rule 3(ii) of the Taxation of Services Rules ibid. that would apply, by holding that the software which was supplied by the foreign company was very much available in India upon its receipt by the appellant, which was only thereafter forwarded within India to the customers. We have seen the second proviso supra, which is extracted for the sake of convenience at paragraph 17 of this order, and it is the second proviso which specifically refers to the taxable service ..... X X X X Extracts X X X X X X X X Extracts X X X X
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