Decided on March 26,2015

Canvasm Technologies Ltd. Appellant
Commissioner Of C. Ex. And S.T., Noida Respondents


R.K.SINGH, MEMBER (T) - (1.)THE stay application along with appeal has been filed by the appellants against Order -in -Original No. 73/Commissioner/Noida/2013 -14, dated 27 -3 -2014 in terms of which the Service Tax demand of Rs. 6,54,64,554/ - has been confirmed for the period October, 2007 to March, 2011 (along with interest and penalties) under the category of Business Auxiliary Service (BAS) under reverse charge mechanism. The facts of the case are that the appellants were purchasing services from M/s. Canvasm America Inc., USA (CAI). As per the contract, (service provider agreement) entered into between the appellants and CAI, it is stated that: -
(i) The appellants are in the business of Value Added Services, in India and abroad.

(ii) Appellants are in the business of, inter alia, acting as a marketing service provider and rendering services for the development of computer software and other related services in the United States of America (USA).

(iii) Appellants have appointed CAI as its marketing service provider and billing/collection service provider and for rendering services for development of software on a non -exclusive basis in USA and which appointment CAI has accepted.

(iv) Appellants will be entering into contracts with the customers based in USA for development/modification of software and other related services to the customers based in USA.

(v) CAI in certain cases may enter into contracts in its own name with the customers based in USA while rendering the agreed services to the appellants.

(vi) At all times, CAI will be the service provider to the appellants as agreed between the two parties and at no times CAI will undertake business and entrepreneurial risk in the contracts entered in its own name.

(vii) At all times, appellants will direct, supervise and maintain control over the contract with the customers and be responsible for the overall quality and final delivery of the services to the customers irrespective of the contracts entered into by them or by CAI.

Ld. adjudicating authority held that CAI was doing the provision of service on behalf of the appellants and therefore, it was a case of import of service classified under BAS and therefore, the appellants were required to pay the impugned Service Tax under reverse charge mechanism in terms of Section 66A of Finance Act, 1994.

Ld. counsel for the appellants strenuously argued that the services received by them from CAI were not BAS but were "Technical Testing and Analysis" service and therefore, the demand was not sustainable. He further argued that it was not a case of provision of services on behalf of the client and the service was rendered to the customers directly. He referred to the judgment of CESTAT in the case of NBCC v. CCE&ST, Patna [2011 (23) S.T.R. 593 (Tri. - Kol.)] to contend that the services received from abroad were classifiable under "Technical Testing and Analysis" service. It was also contended that this case was revenue neutral and therefore, the extended period could not be invoked. The ld. Departmental Representative on the other hand argued that the services received are clearly covered under the definition of Business Auxiliary Service.

We have considered the contentions of the appellants. In the present case, it is seen that CAI were providing the services to the customers of the appellants as per the agreement between CAI and the appellants and the payment for the same was made by the appellants to CAI. Thus, CAI was engaged in providing services in relation to provision of service on behalf of client which in this case is the appellants. Thus, prima facie the services received by the appellants are classifiable under BAS. As regards judgment of CESTAT in the case of NBCC (supra), in para 8.2, CESTAT has noted as under: -

"8.2 Relying on the above definition issued on behalf of the Department that the sub -contractors have rendered services to M/s. NTPC on behalf of the client namely NBCC. On careful consideration, we are not able to accept this view. If this view is accepted it implies that the sub -contractors are rendering services indirectly to M/s. NTPC and that these sub -contractors are receiving payments indirectly from M/s. NTPC. The activities undertaken by the sub -contractors, in our considered opinion is only site formation services. These services have been rendered to the main contractors NBCC who are responsible to M/s. NTPC. If at all there is any doubt it could be whether the services rendered by NBCC could be treated as business auxiliary services and not the services rendered by the sub -contractors. This issue regarding the classification of service rendered by NBCC is only academic as the Commissioner has clearly held that NBCC is rendering services of site formation to M/s. NTPC and the Department is not in appeal against the said findings."

(2.)From the above para it is evident that the said judgment does not lay down any ratio. It is well settled that what is of precedential value is not the judgment but the ratio of judgment. As regards the contention of the appellants that they were receiving "Technical Testing and Analysis" service, it is seen that the said service is defined under Section 65(105)(zzh) as "to any person by a technical testing and analysis agency, in relation to technical testing and analysis". It can be hardly anybody's case that the appellants were receiving services from CAI in relation to "Technical Testing and Analysis" because nothing belonging to appellants was subjected to technical testing and analysis.
(3.)AS regards revenue neutrality argument advanced by the appellants, we are unable to locate any statutory or constitutional provisions which support the notion that in case of revenue neutrality the liability to tax abates. Further whether there has been willful misstatement or suppression of facts on the part of appellants is to be determined with reference to the facts and circumstances of the case which requires detailed analysis which can be taken up only at the time of final hearing.

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