Computerization of billing system - whether classifiable under IT or BAS service

PJ/Case Laws/2011-12/1397

Case: COMMISSIONER OF C. EX., JAIPUR v/s GALAXY DATA PROCESSING CENTRE

Citation: 2011 (23) S.T.R. 375 (Tri- Del.)

Issue:- Computerization of bills using own developed software - Whether classifiable under Information Technology Services or under Business Auxiliary Services?

Brief Facts:- Respondent-M/s Galaxy Data Processors was given one order by Rajasthan State Electricity Board (RSEB) for computerization of energy billing and related MIS, relevant formats, performas and information. For carrying this order, the assessee developed and designed software, fed data into computer and processed such input data with the help of own developed software and generated 56 reports, including energy bills and other ad hoc reports as was required by RSEB. The charges paid by the RSEB included for all these works including for designing and development of software, and as per order, the software so developed by the assessee later on, became the property of the RSEB.

Respondent-M/s Business Information undertook work for M/s JVVNL and PHD in connection with preparation of energy bills and water bills.

Show cause notices were issued to the respondents alleging that the services rendered by them amounted to business auxiliary services and service tax was payable by them. Penalties were also sought to be imposed. The Original Authority confirmed the demand of service tax along with interest and equal amount of penalty under Section 78 against Respondent-M/s Galaxy Data Processors. In case of Respondent-M/s Business Information, the original Authority dropped proceedings against the appellant by holding that the service provided by them fell under Information technology service.

In appeal, the Commissioner (A) held that the service rendered by Respondent-M/s Galaxy Data Processors were in nature of information technology service which is not included under the category of business auxiliary service. And in the case of Respondent-M/s Business Information, the Commissioner (Appeal) revised the order and confirmed the demand of service tax with interest and also imposed penalties under Section 78 and Section 77.

Hence, the matter is before the Tribunal.

Respondent’s Contention:- The Assessee argued that they have merely undertaken Computer enabled service of data processing and generation of reports and bills and the same clearly come under the category of information technology services which are not covered under business auxiliary services for the period prior to 1.5.2006. The said service has been rendered after developing software as per the requirement of their customers. Further they submitted that they have not undertaken any service on behalf of their clients. Considering the nature of dispute, the invocation of extended period and imposition of penalties are not justified.

Further they relied on the following decisions, in support of their contentions:-

- Dataware Computers & Ors. V. CCE & CST (Appeals), Guntur reported in 2008 (87) RLT 325 (CESTAT-Bang)= 2008(12) S.T.R. 121 (Tribunal)

- CCE, Hyderabad v. Deloitte Tax Services India Pvt. Ltd. reported in 2008(11) S.T.R. 266 (Tri.-Bang)

- M/s. Cognizant Technology Solutions India Pvt. Ltd. v. Commissioner, LTU, Chennai reported in 2010-TIOL-698-CESTAT-MAD=2010(18) S.T.R. 326 (Tri.-Chennai).

Reasoning of Judgment:- The Tribunal perused the definition of Business Auxiliary Service before its amendment on 01.05.2006 and after its amendment. The Tribunal noticed that the activities undertaken by the assessees include feeding the data provided by their clients in the computer net work system with the help of software specifically developed for the clients and generating the bills and delivering bills and other reports to the clients. The assessees have not undertaken any service on behalf of their clients as they do not have any contact with the customers of their clients. The work of data processing using custom made software deserves to be considered as Information Technology Services.

It was held that as during the period prior to 01.05.2006, the definition clearly excluded the Information Technology Services from the ambit of “Business auxiliary services, the activities undertaken by the assessees are not taxable under the category of “Business Auxiliary Services”.

Decision:- Appeals disposed off accordingly.

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PJ/Case Laws/2011-12/1397

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