2025-VIL-467-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Business Auxiliary Services, Reverse Charge Mechanism, Time Limit for Adjudication, Revenue Neutrality – Appellant is engaged in the development of telecommunication billing and customer care software – under the Product Export and Distribution Agreement with its 100% subsidiary company, appellant granted UCT an exclusive license to purchase the software products and further sublicense them to end customers outside India. The consideration received by the appellant from UCT was 60% of the total net revenue received by UCT from the end-users - Whether the transaction between the appellant and UCT amounted to the appellant providing 'Business Auxiliary Services' to UCT, thereby making the appellant liable to pay service tax under the reverse charge mechanism – HELD - The agreement between the appellant and UCT was for the supply and sale of software and related services, and not for UCT to act as a commission agent for procuring orders on behalf of the appellant. The consideration received by the appellant from UCT was for the supply of software and related services, and not in the nature of commission – Further, the agreement clearly stated that UCT was not an agent of the appellant, and both parties were independent contractors. Therefore, the transaction did not amount to the appellant providing 'Business Auxiliary Services' to UCT, and thus, the demand under the reverse charge mechanism was not sustainable - the Order-in-Original is also set aside on the grounds of delay in passing the order and revenue neutrality – The appeal is allowed - Whether the extended period of limitation for issuing the show cause notice and passing the order was correctly invoked by the revenue authorities – HELD - The Tribunal, relying on the decisions in Kopertek Metals Pvt. Ltd. v. Commissioner of CGST (West) and IDFC First Bank Ltd. v. Union of India, held that the time limit prescribed under Section 73(4B) of the Finance Act, 1994 for passing the order is mandatory and not directory. The Tribunal observed that the Order-in-Original was passed after the expiry of the one-year time limit, and the revenue authorities failed to provide any justification for the delay. Accordingly, the Tribunal set aside the Order-in-Original on the ground of the delay in passing the order - Whether the demand raised under the reverse charge mechanism was sustainable on the ground of revenue neutrality – HELD - The Tribunal, relying on the decisions in Jet Airways (I) Ltd. v. CST Mumbai and Eldyne Electro System Pvt. Ltd. v. Commissioner of Service Tax, held that since the services in question were input services for the appellant, the service tax paid, if any, under the reverse charge mechanism would be eligible for Cenvat credit. Therefore, the Tribunal concluded that it was a case of revenue neutrality, and the extended period of limitation could not be invoked by the revenue authorities.
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