NIIT SMARTSERVE LTD. Vs. COMMISSIONER OF SERVICE TAX

JUDGEMENT

(1.) THE appellant are engaged in providing Call Centre Services mainly to the clients abroad. They also receive certain services - purchase of space and time slots in foreign magazines, journals published and circulated in those countries for the purpose of advertisement training of their employees in the conferences organized and held abroad, convention service and service of software up gradation done remotely from outside India through Internet (management, maintenance and repair service). The period of dispute in this case is from 1 -1 -2005 to 31 -3 -2008. The department treated the service of purchase of time and spaces lots in foreign magazines and journals published and circulated there as Business Auxiliary Service taxable under Section 65(105)(zzb) of the Finance Act, 1994. Similarly, according to the department, the service of convention centers, training of their employees abroad and software upgradation done from outside India through internet were also taxable service chargeable to service tax under Section 65(105)(zc), Section 65(105)(zzc) and Section 65(105)(zzg) respectively. According to the department, since these services had been received by the appellant from foreign service providers not having any office or establishment in India, the appellant being service recipient, were liable to pay service tax in respect of the same. On this basis, the Commissioner vide order -in -original dated 30th September 2010 confirmed the service tax demand of Rs. 52,34,008/ - against the appellant along with interest and beside this, while penalty of Rs. 5,000/ - was imposed on the appellant under Section 77, penalty of Rs. 52,34,008/ - was imposed under Section 78 of the Finance Act, 1994. Of the total service tax demand of Rs. 52,34,008/ - confirmed against the appellant, the demand of Rs. 41,12,109/ - is in respect of purchase of space and time slots in foreign magazines and journals which according to the department was Business Auxiliary Service chargeable to Service Tax under Section 65(105)(zzb), the remaining service tax demand of Rs. 11,31,899/ - is in respect of services taxable under Section 65(105)(zc), Section 65(105)(zzc) and Section 65(105)(zzg) alleged to have been received by the appellant from foreign service providers. Against this order of the Commissioner, this appeal along with stay application has been filed. Heard both the sides in respect of stay application.

(2.) SO far as the services falling under Section 65(105)(zc)(convention centre's service), Section 65(105)(zzc) (commercial training or coaching service) and Section 65(105)(zzg) [software upgradation done remotely from outside India, treated as maintenance and repair service] which the appellant have received from outside service providers, we find that for these services to be treated as having been received in India from offshore service providers, in terms of the provisions of Rule 3(ii) of the Taxation of Service (Provided from Outside India and Received in India) Rules, 2006 these services should have been performed in India. However, admittedly none of these services have been performed in India. Therefore, so far as these services are concerned, the same, in terms of the provisions of Rule 3(ii) of the Taxation of Service (Provided from Outside India and Received in India) Rules, 2006, the same cannot be treated as having been received in India by the appellant and we are of prima facie view that the appellant cannot be saddled with duty liability under Section 66A of the Finance Act, 1994 in respect of these services. As regards, the service of purchase of space and time slots in foreign magazines and journals by the appellant, there is no dispute that this service became taxable w.e.f. 1 -5 -2006 under Section 65(105)(zzm) and, hence, during the period prior to this, the same could not be treated as taxable. The bulk of the service tax demand is in respect of this service for the period prior to 1 -5 -2006, beside this, it is also doubtful as to whether the extended period under proviso to Section 73 can be invoked. In view of the above discussion, we hold that there is merit in the appellant's plea for waiver from the requirement of pre -deposit. Accordingly, the requirement of pre -deposit of service tax demand, interest and penalty is waived for hearing of the appeal and recovery thereof stayed till the disposal of the appeal. The stay application is allowed.