CESTAT, BANGALORE BENCH
IDS Systems (P.) Ltd.
Commissioner of Central Excise, Bangalore
STAY ORDER NOS. 657 & 658 OF 2012
STAY APPLICATION NOS. 855 OF 2010 & 361 OF 2011
APPEAL NOS. ST/1488 OF 2010 & 573 OF 2011
APRIL 18, 2012
M. Veeraiyan, Technical Member
Heard both sides on the stay petitions.
2.1 In the case dealt with in appeal No.ST/1488/2010, there is a total demand of around Rs.3.65 crores on two counts, one of Rs.1.82 crores under the category of “Manpower Recruitment & Supply Agency Service” and other relating to denial of credit amounting to Rs. 1.79 crores (approximately) on the ground that separate Returns have not been filed as required under Rule 9(9) of CENVAT Credit Rules, 2004.
2.2 In the case in appeal No.ST/573/2011, there is a demand of about Rs.60 Lakhs under the head “Manpower Supply Service” on amounts claimed to be reimbursable expenses in respect of persons who work at the clients’ premises at USA.
2.3 There are also demands of interest and penalties under various Sections.
3.1 The learned advocate for the appellant assails the demand in appeal No. 1488/2010 mainly on the following grounds:
(a) The work undertaken by them is development of software and the same was undertaken by deputing their skilled employees to the premises of their clients and the employees were working directly under Project Managers appointed by the appellant. The ‘intellectual property right’ on the software so developed is with the appellant and that the same may be specifically assigned to the clients in certain cases. In such a situation, the activities cannot be treated as relating to ‘supply of manpower’. In this regard, he relies on the Stay Order No. 1391/2011, dated 15.12.2011 in the case of ASM Technologies Ltd., Bangalore wherein in similar circumstances, the activities were treated as’ ‘technology supply of software service’ which became taxable only with effect from 16.5.2008.
(b) He also submits that the demand relating to April 2004 to September 2007 has been raised by show-cause notice dated 2.2.2009 and, therefore, the entire demand is hit by time bar and there is no justification for invoking the extended period.
(c) He submits that there is no requirement of filing separate Returns in respect of CENVAT credit taken by the appellant and the relevant details were furnished in ST-3 Returns submitted by them as service provider. Therefore, the denial of credit and, consequential demand of service tax under the head ‘manpower supply service’ are not justified.
3.2 As regards the demand of about Rs. 60 lakhs on reimbursable expenses relating to employees deputed to USA, he submits that the same relates to activities undertaken entirely at places ‘outside India’ and therefore, the question of demand of service tax does not arise.
4. The learned Additional Commissioner (AR) reiterates the finding and reasoning of the Commissioner.
5. We have carefully considered the submissions from both sides and perused the records.
6.1 We, prima facie, hold that the activities of the appellant may not deserve to be considered as ‘supply of manpower’ but as rendering of ‘information technology software service’ and in the light of the stay granted in the case of ASM Technologies Ltd. (supra), the appellants are eligible for waiver of pre-deposit. As regards, the denial of CENVAT credit, we have not been shown that there is a requirement of filing separate Returns under Rule 9(9) of the CENVAT Credit Rules, 2004 and therefore, there is no warrant to order pre-deposit.
6.2 As regards the reimbursable expenses relating to employees deputed to USA, undisputedly, the activities have taken place in USA and, therefore, the liability to service tax may not arise.
7. In view of the above, we waive pre-deposit of the dues as per the impugned order and stay of recovery thereof till the disposal of the appeals.
8. Both the stay applications are allowed.