AZTECSOFT LTD. Vs. COMMISSIONER OF C. EX., BANGALORE

JUDGEMENT

(1.) HEARD both sides extensively on the stay petition.

(2.) THE appellant is a 100% EOU operating under STP Scheme. They undertake services to parties like Philips Software, Oracle and Yahoo in India. They have also rendered certain services to overseas clients by using the services of a company based in USA. The Commissioner has confirmed a demand of service tax of Rs. 1,12,86,898/ - under the category of manpower recruitment and supply agency service in respect of the activities undertaken by the appellant in India. The Commissioner has also confirmed a demand of service tax of Rs. 4,69,45,582/ - under the category of business auxiliary service in respect of services received from overseas service provider. In addition, he has ordered recovery of interest and imposed penalties.

(3.) 1 Learned Sr. Advocate appearing for the appellant challenges the order on various grounds. 3.2 Referring to the various clauses of the agreement with M/s. Philips, he submits that it is not a case of supply of manpower supply services but a case of undertaking full -fledged project work. The work was undertaken either in their premises or in the premises of the clients like M/s. Philips. The entire responsibility of developing the software, testing the same and installing the same to the satisfaction of the clients is on the appellant. For the said purpose, they deployed qualified personnel who were directly supervised by a Project Manager under their employment in respect of each of the project. The clients have right to ask for modifications of the project and seek rectification of errors and if the errors were attributable to the appellant, then the rectification has to be done at the cost of the appellant. The entire responsibility relating to taking insurance of the project as well as for the personnel deployed for the project is on the appellant. Basically, it involves executing the project to the satisfaction of the clients and it is not a mere supply of manpower to be utilized by clients at their discretion. In this regard he also relies on the Stay Order Nos. 795 -796 dated 7 -9 -2010 of the Tribunal in the case of M/s. Integra Micro Software Services Pvt. Ltd. and Anr. in Service Tax Appeal No. 701 and 2291/2010 [2012 (25) S.T.R. 369 (Tri.)]. 3.3 In respect of services received from overseas service providers which was sought to be taxed under the category business auxiliary services, he submits that a sizeable portion of the demand relates to period prior to 18 -4 -2006. He claims that even otherwise, no tax on these activities can be demanded from the appellants as all these are activities undertaken in USA using the services of foreign service provider. In this regard, he relies on the Stay Order No. 1239/2011, dated 22 -11 -2011 in the case of M/s. Tech Mohindra Ltd. in Appeal No. ST/2030/2011, wherein a prima facie view has been taken that activities relating to marketing of products and client services relating to products sold and services undertaken in foreign territories shall not attract service tax in India.