Customs & Central Excise v. Deloitte Tax Services India Pvt. Ltd.
In the High Court of Andhra Pradesh
C.E.A. No. 7 of 2009
Before Justice Goda Raghuram and Justice M.S. Ramachandra Rao
Decided on November 27, 2012

Relevancy of the case: Whether computerized data processing falls under “Information Technology Services” for the purpose of taxation?

Statutes & Provisions Involved

• Central Excise Act, 1944 (Section 35G)
• Finance Act, 1994 (Section 65 (19))
• The Information Technology Act, 2000 (Section 2(o))

Relevant Facts of the Case

• The respondent/assessee was registered under the category of “business auxiliary” and “management consultancy service” with the jurisdictional service tax authority. On 31-03-2006, it applied for a refund of Rs. 8,47,004/- as an input service credit for various services to the Commissioner of Customs & Central Excise, Hyderabad.
• The Commissioner held that the services provided by the assessee are nothing but computerized data processing which falls under the definition of “Information Technology”, which is not included in the category of “Business Auxiliary” and hence not eligible for claiming Cenvat Credit on input services.
• The assessee filed an appeal to the appellate authority. The authority set aside the order by noting that merely because the assessee is involved in the process of delivering serviced used computers and leased internet lines doesn’t qualify it as IT Services.
• The revenue filed an appeal in the CESTAT, Bangalore which upheld the above decision. The revenue then filed the present appeal.

Prominent Arguments by the Advocates

• Sri A. Rajasekhar Reddy, counsel for the Revenue relied upon the definition of the term “data” in Section 2(o) of the Information Technology Act, 2000 and contended that the activity of the assessee is in the relation of computer systems and therefore is “Information Technology”.
• He also relied upon the decision of the tribunal in Gandhi and Gandhi Chartered Accountants v Commissioner which was confirmed by the Supreme Court. In the said case it had been held that the activity of computerized data processing for billing and accounts management was held to be an Information Technology Service.

Opinion of the Bench

• The definition of the term “data” in section 2(o) of the Information Technology Act, 2000 cannot be of any assistance as the definition in the said act cannot be imported or read into any of the provisions of the Finance Act, 1994.
• In Gandhi and Gandhi’s case, the tribunal has seemed to have not noticed the words “primarily in relation to computer systems/programming” in the explanation to section 65(19) of the Act. There is no ratio decidendi discernible from the order of the Supreme Court. Therefore, the view of the Tribunal in the said case cannot bind us.
• The contention of the Revenue if accepted would require this court to ignore the words “primarily in relation to computer systems/programming” in the explanation in Section 65(19) of the Act. Such an interpretation cannot be given because it is a settled principle that effort should be made to give meaning to each and every word in a statute.

Final Decision

• The appeal is dismissed since the court found no merits in the case.