Syntel International Private Limited Vs State of Maharashtra (Maharashtra Sales Tax Tribunal, Mumbai)
MVAT Tribunal holds IT/ITES services outside the ambit of “Job Work or Labour Work”; allows set-off and excludes out-of-state turnover
The Appellant is engaged in providing Information Technology Services and Information Technology Enabled Services (IT/ITES) from its approved Special Economic Zone unit at Talawade, Pune. During the assessment proceedings under the MVAT Act for the period 01.04.2014 to 31.03.2015, the authorities denied set-off of the taxes paid on eligible purchases amounting to Rs. 20,49,932/- by invoking Rule 54(d) of the MVAT Rules, 2005. The denial was primarily based on the allegation that the Appellant was rendering services through human skill and technical manpower and that such activities fell within the category of “job work or labour work”, while the Appellant was not engaged in manufacture or sales of goods except incidental sale of crap. In addition thereto, the authorities included turnover of Rs. 62,599/- pertaining to transactions of the Appellant’s Tamil Nadu branch while computing taxable turnover in Maharashtra and raised consequential tax, interest and penalty. Hence, the appeal was filed.
The Hon’ble Tribunal set aside the order and allowed the appeal. It held: (i) an IT/ITES service provider cannot be treated as a dealer principally engaged in job work or labour work merely because services are rendered through skilled employees or technical manpower; (ii) Rule 54(d) contemplates activities involving work upon goods/materials resulting in generation of scrap or waste, and cannot be extended to highly specialised software and technology services involving intellectual and professional skill; (iii) turnover pertaining to transactions outside Maharashtra cannot be mechanically included in Maharashtra taxable turnover in the absence of material establishing territorial nexus; (iv) accordingly, the denial of set-off and consequential additions were set aside and the matter was remanded only for limited verification of invoices, payment of tax, used in authorised SEZ operations and other statutory compliances.
