The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that no service tax demand can be confirmed under a head not alleged in the show cause notice.
The bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has observed that the order has confirmed the demand under support services of business or commerce (BSS) though the demand made in the show cause notice is for online information and database access or retrieval services (OIDAR service).
Table of Contents
Background – Service Tax Demand
The appellant/assessee, M/s. Info Edge (India) Ltd. has filed this appeal for setting aside the order dated 28.01.2014 passed by the Commissioner adjudicating the three show cause notices covering the period from 18.04.2006 to 16.05.2008.
The Commissioner has held that the services received by the appellant from M/s Verio Inc, USA are classifiable under ‘support services of business or commerce’ under section 65 (104c) of the Finance Act 1994 and accordingly has ordered for recovery of service tax under the proviso to section 73(1) of the Finance Act with interest under section 75 of the Finance Act and penalties under sections 78 and 77 of the Finance Act.
The appellant claims to be engaged in the provision of ‘online information and database access or retrieval’ service defined under section 65(75) of the Finance Act and made taxable under section 65(105)(zh) of the Finance Act.
During the relevant period in dispute, the appellant entered into an agreement with Verio USA for providing NTTA platform hosting. Under the agreement, Verio USA was to provide various dedicated servers and an operating software Red Hat Enterprise Linux.
The scope of the agreement includes providing data storage and access services wherein Verio USA will make available various servers such as intel-based high end data base server, back linked server, high end application server for storage of data on server space. Verio USA would also provide operating software and equipment used for internet connectivity.
The agreement also provides that Verio USA would exercise no control over the content, accuracy or quality of information passing through or on the equipment.
The Commissioner has also confirmed the demand of service tax under BAS on the professional fee paid to Minik Enterprises for the period after 18.04.2006. The Commissioner also held that since the entire demand of service tax after 18.04.2006 has been deposited by the appellant prior to issuance of the show cause notice, the same would be appropriated without imposition of any penalty.
The Commissioner has also confirmed the demand of service tax of Rs. 54,51,304/- under advertisement services for the period after 18.04.2006. The same has been appropriated from the excess service tax of Rs. 73,43,016/- paid by the appellant without imposition of any penalty. However, the demand of Education Cess and SHE Cess of Rs. 19,289/- has been confirmed against the appellant.
Arguments
The assessee contended that the demand proposed in the first show cause notice which is mentioned at serial no. 1 of the aforesaid chart was under OIDAR service but it has been confirmed under BSS. This is not permissible as the Commissioner could not have gone beyond the show cause notice.
The department contended that it does not call for any interference in this appeal. Even if the demand was proposed under a particular category of service, it could be confirmed if it actually fell under a different category.
Conclusion – Service Tax Demand
The tribunal held that the order has confirmed the demand under BSS though the demand made in the show cause notice is for OIDAR service.
20. A show cause notice is the foundation and since the taxability under BSS was not proposed in the first show cause notice, the demand could not have been confirmed under the category.
Read More: No Service Tax Payable On Consideration Received On Execution Of Licence Agreement: CESTAT
Case Details
Case Title: M/s. Info Edge (India) Ltd. Versus Commissioner of Service Tax
Case No.: Service Tax Appeal No. 52518 Of 2014
Date: 11.11.2024
Counsel For Appellant: B.L. Narasimhan
Counsel For Respondent: Rajeev Kapoor
