By Puloma Dalal, Jayesh Gogri, Mandar Telang, Chartered Accountants
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Data processing services provided to banks cannot be treated as “business auxiliary service” as it is not customer care, it is excluded from its scope.
Facts:The appellant provided collection and sales service, call centre services and computerised data processing services and discharged service tax liability on the same with effect from 01-07-2003, 01-05-2006 and 01-05-2010 respectively under the categories of business auxiliary service and business support service.
On the activity of data processing, service tax was demanded with effect from 01-07-2003 under “Business Auxiliary Services” alleging that the customers of the bank submitted physical documents at the bank’s branches and the appellant performed computerised processes on the input submitted to the bank using the bank’s systems and saved the output on the bank’s system, which amounted to services incidental or auxiliary to the customer care services rendered by the bank. However, the reasoning recorded in the impugned order was that the appellant collected data from the clients’ customers, and the banks during the course of providing banking services also provided customer care services, and the services rendered by the appellant to the bank were incidental or auxiliary to the customer care services provided by the bank. It was also contended that the services provided by the appellant were not customer care services but banking and financial services as provided by the bank to its customers. The services of computerised data processing as specifically excluded under business auxiliary service cannot be taxed under the said category. Moreover the majority of the clients were located outside India and since the consideration was received in foreign exchange, the services were to be treatedas exports and thus there would be no liability of service tax.
Held:
Observing that the order-in-original deviated from the charges made in the show cause notice, the Hon. Tribunal held that since there was a complete variation between the grounds alleged in the show cause notice and the grounds on which the demands were confirmed, the impugned order was liable to be set aside on that ground alone. The Hon. Tribunal also considered the other submissions of the appellant and held that no service tax was liable to be paid under business auxiliary service.
