SIEMENS PRODUCTS LIFECYCLE MGMT. SOFTWARE INDIA P. LTD. Vs. C.S.T., DELHI
LAWS(CE)-2015-2-108
CUSTOMS EXCISE AND GOLD(CONTROL) APPELLATE TRIBUNAL
Decided on February 16,2015

Siemens Products Lifecycle Mgmt. Software India P. Ltd. Appellant
VERSUS
C.S.T., Delhi Respondents




JUDGEMENT

R.K.SINGH,MEMBER (T) - (1.)Stay applications alongwith appeals have been filed against Order -in -Original No. 27 -30/AKM/CST/ADJ/2013 dated nil issued on 1 -4 -2013 in respect of four show cause notices. The impugned demand confirmed by the said Order -in -Original alongwith interest and penalties is segmented as under:
Heard both sides with regards to the stay applications.

(2.)Regarding the major component of demand pertaining to outstanding balance regarding Debtors/Creditors for services provided/received, as explained during the hearing, the applicants have provided services to/received services from Siemens, USA and other associated enterprises. They in some cases receive consideration/make payment in respect of the above said transactions after the issue/receipt of the invoices. Till the time consideration is received/paid by them the said amounts lie as outstanding debtors/creditors in the books of accounts. On the said outstanding debtors/creditors balance, the impugned order has confirmed service tax demand in terms of Explanation to Sec. 67 of the Finance Act, 1994. The appellants have contended that:
(a) Service tax is not payable as the adjudicating authority did not consider the nature of transactions.

(b) The outstanding creditors balance includes:

(i) Domestic creditors (Indian service providers and suppliers) who are liable to pay tax;

(ii) Royalty paid to overseas affiliated companies, already forming part of demand under 'Franchise Service' on which they have already paid service tax;

(iii) Provisions created for expenses, statutory liabilities, amounts payable to employees etc.

(c) The outstanding debtors balance includes:

(i) Debtors pertaining to transactions with overseas customers for exports;

(ii) Debtors pertaining to repairs, maintenance and training services provided by the appellants on which service tax was already paid.

(iii) Debtors pertaining to sale of goods by the appellants on which sales tax was being paid;

(iv) Provisions created for bad debts, accounting code forming part of loans & advances, amount receivable from employees, audit adjustments entries etc. which do not fall within service tax net.

(d) The services wherever taxable, are being taxed separately. Therefore, taxing debtors/creditors again amounts to double taxation;

(e) Without prejudice, the appellants are not liable to pay service tax in respect of services rendered/received prior to 10 -5 -2008 as the provisions relating to 'associated enterprise' in Sec. 67 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994, came into effect on 10 -5 -2008 and the same are prospective in nature as held by CESTAT in case of M/s. Gecas Services India Pvt. Ltd. v/s. CST, Delhi -, 2014 -TIOL -1079 -CESTAT -Del :, 2014 (36) S.T.R. 556 (Tribunal).

We indeed find that the adjudicating authority has not indicated anywhere as to what are the services on which the service tax has not been paid in respect of the amounts shown as debtors and creditors. Prima facie thus it can hardly be anybody's case that all the outstanding amounts regarding Debtors/Creditors would be liable to service tax when it is not even indicated as to what are the taxable services they relate to. There is no legal basis for presumption to treat such outstanding balances to be relating to taxable services and therefore the contentions mentioned above, while needing to be examined in detail at the time of final hearing, prima facie, have force. Further the amendment to Sec. 67 ibid relating to associated enterprises was effective prospectively from 10 -5 -2008 as has been held by CESTAT in the judgment M/s. Gecas Services India Pvt. Ltd. (supra). In these circumstances we are of the view that the appellant have made out a case for waiver of the pre -deposit of this component of the impugned demand.

(3.)As regards the demand pertaining to Franchise Service, the appellants have contended that:
(i) They entered into 'Software Duplication, Reproduction and Distribution Agreement' dated 1 -12 -2006 with Siemens, USA wherein they were granted right to duplicate, reproduce, distribute and sublicense the softwares and were paying royalty for the said rights. On this the impugned order has confirmed service tax under 'Franchise Service' [Section 65(47) read with 65(105)(zze) of the Finance Act, 1994].

(ii) The rights granted under the agreement are not representational right. Therefore, the transaction is not classifiable under 'Franchise Service';

(iii) They have obtained copyright in the software so as to provide license to their customers;

(iv) The transaction is classifiable under 'Information Technology Software Service' as provided under Sec. 65(53a) read with Sec. 65(105)(zzzze) of the Finance Act, 1994. In this regard reliance was placed inter alia on SAP (India) Private Limited v/s. CCE,, 2013 TIOL -595 -CESTAT -Bang :, 2011 (21) S.T.R. 303 (Tribunal).

(v) That the services in relation to information technology became taxable w.e.f. 16 -5 -2008. Accordingly, they started paying service tax on the transaction under reverse charge mechanism under 'Information Technology Software Service' and already paid Rs. 2,75,65,909/ - for the period from 18 -5 -2008 to 31 -3 -2009.

In view of the foregoing and specially the judgment of SAP (India) Private Limited v/s. CCE,, 2013 -TIOL -595 -CESTAT -Bang :, 2011 (21) S.T.R. 303 (Tribunal), and having regard to fact that the appellants started paying service tax on this transaction under reverse charge mechanisms under Information Technology Software Service w.e.f. 16 -5 -2008, we are of the view that the appellants have been able to make out a case for waiver of pre -deposit of this component of demand.

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