Case Law Details
Philips Electronics India Ltd. Vs Commissioner of Central Tax (CESTAT Bangalore)
The appellants, Philips Electronics India Ltd. are a 100% EOU (Software Technology Park Unit) are engaged in developing and export of software. No part of the output services are rendered to any client in India. The appellants have entered into various agreements with their group companies in Netherlands to avail various services, inter alia, wide area network/global network (WAN/PGN) services which in the nature of providing internet connection and communication. Revenue alleges that this is a taxable service under “Online Information Database Access and Retrieval (OIDAR service)”.
Learned counsel for the appellant submits in respect of OIDAR services that the taxable service under Section 65 (105) (zh) means any service provided or to be provided to a client by any person in relation to OIDAR or both, in electronic form through computer network in any manner. In order to attract tax under this category, the service provider should provide data or information to a client through a computer network for some consideration; in the instant case no data or information belonging to Philips Netherlands and it does not provide any data to the appellant for consideration; Philips Netherlands provides computer infrastructure by way of network connectivity and associated services to the appellant to manage various IT requirements such as e-mail or access to own data or information; the service at best can be equated to Telecommunication Service as defined under Section 65 (109a) of Finance Act 1994; however the same is also not applicable as the appellants overseas entity is not a telegraph authority as defined under Indian Telegraph Act, 1885. He submits that Tribunal in their own case 2019 (21) GSTL 450 (Tri.-Chennai) has taken a view in favour of the appellants and this Bench in the case of United Telecom Ltd. 2009 (14) STR 212 (Tri.-Bang.) has also taken similar view; CBEC Circulars 137/21/2011-ST dated 15/07/2011, 91/2/2007-ST dated 12/03/2007 and 137/21/2011-ST dated 19/12/2011 have clarified that providing interconnectivity between two points for transferring of data or its transmission is specifically covered under Telecommunication Services only w.e.f. 01/07/2007. Therefore, the appellants are not liable to pay service tax either under OIDAR or Telecommunication Service.
The appellants rely on Tribunal judgment in their own case (supra). Understandably, the arrangements of working vis-a-vis the appellant and the overseas masters would not be different for different locations in India. Tribunal observed that
“5.3 The main take away from the definitions is that services provided should facilitate not only online information but also Database Access or Retrieval. From the facts on record, it appears to reason that the infrastructure services are nothing but a spider web group which connects Philips Netherlands to all its locations worldwide through the Wide Area Network (WAN) of internet protocol. For such Philips Global Network Services, payment is made on the basis of invoices raised by Philips Netherlands towards maintenance of server/portal, license fees, server software maintenance cost, infrastructure for global platform, hiring of web space for storing data, management and maintenance taxguru.in of web portal, licence cost for access for wireless WAN environment, Directory services for listing etc. Some of these services which can be availed by Philips locations and employees are of the nature of “Calendaring and Scheduling Directory, Philips e-mail, file back up etc. In any case, all these infrastructure services are only in the nature of providing intra connectivity between Philips locations worldwide and the payments made are obviously then for sharing of the maintenance cost between the Philips’ units and not as fees for supply of online information or retrieval of data from the portal.”
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