Aircom International India Pvt. Ltd. Vs Commissioner of Service Tax (CESTAT Chandigarh)
CESTAT Chandigarh allowed the appeal filed by M/s Aircom International India Pvt. Ltd. against the Order-in-Original dated 04.07.2013 passed by the Commissioner (Adjudication), Service Tax, New Delhi. The appellant was engaged in providing Consulting Engineer, Maintenance or Repair, Commercial Training and Coaching, Software Development and Product Deployment services and had made payments to its parent company in the U.K. towards license fee, support and maintenance charges, training fee, management fee, out-of-pocket expenses, salary and wages, consultancy and repair and maintenance. The Department had issued Show Cause Notices covering FY 2003-04 to 2007-08 and FY 2008-09, proposing service tax demands of Rs.1,16,53,293/- and Rs.2,81,94,672/- respectively, besides inadmissible CENVAT credit of Rs.3,90,743/-. The Tribunal held that the appellant could not be treated as a representative of Aircom International Company, U.K., since the agreement expressly recorded that the parties were independent parties and no representative rights were granted. Mere licensing and distribution of software did not make the appellant a franchisee. Following Union of India v. Intercontinental Consultants and Technocrats Pvt. Ltd. and mPortal India Wireless Solutions Pvt. Ltd., the Tribunal also found that the denial of CENVAT credit on the ground that invoices were received at an unregistered premises could not be sustained. More importantly, the Show Cause Notice dated 22.04.2010 did not identify the specific taxable service, service recipient or consideration and merely extracted figures from the balance sheet under different heads. Relying upon Brindavan Beverages Pvt. Ltd. and Shubham Electricals, the Tribunal held that the vague and unsubstantiated Show Cause Notice and the consequential Order-in-Original could not be sustained. The Tribunal therefore allowed the appeal and did not consider it necessary to examine the remaining submissions concerning extended limitation and computation mistakes.
CESTAT Chandigarh’s Findings on Service Tax Demand
Software Licence and Franchise Service
The major portion of the demand related to Franchise Service. The appellant submitted that its parent company in the U.K. granted a licence to use its software, which the appellant supplied to customers in India along with support and assistance. Under the agreement, 45% of the gross amount realised was remitted to the parent company.
