Full Judgment
(d) The appellant pays licence fees for the software and also pays maintenance service fees as a percentage of licence fees at the beginning of each period; each affiliates (member of Tata group companies) was also required to enter into a separate tripartite agreement with SAP India and the appellant; The appellant bills the affiliates depending upon the number of users in the affiliates.
(e) During the period from 1-3-2000 to 9-9-2004 the appellant have received a sum of Rs. 30,63,46,151/- from the affiliates (according to the appellant they have received only Rs. 25,54,27,802/- after taking into account the credit notes issued by them).
3. The Commissioner has held the appellant to be providing "management consultancy services to the appellants" and demanded Rs. 1,77,45,021/- as service tax besides confirmation of interest. In addition he has imposed penalties under various sections including penalty of Rs. 1,77,45,021/- under Section 78 of the Finance Act.
4. According to the appellant they are only acting as "coordinating agency" or "pass through agency" between SAP India and the affiliates who are their group companies. The role played by them cannot be treated as the one that provides management consultancy services. They are not concerned with the job of configuration and customization of SAP software as stated in the statements given by the officers and relied upon in the show cause notice. Alternatively, even if they are treated to be rendering any service it can only be services of "consulting engineer" and not that of management consultancy. If they are treated as 'consulting engineer' they are eligible for concession under Notification 4/99-ST dated 28-2-1999 which exempted the taxable service provided to any person by a consulting engineer in relation to computer software from the whole of service tax leviable thereon.
5. We have carefully considered the submissions. The definition of "consulting engineer" and "management consultant" are reproduced below: Consulting Engineer' means any professionally qualified engineer or an engineering firm who, either directly or indirectly, renders any advice, consultancy or technical assistance in any manner to a client in one or more discipline of engineering.
'Management Consultant' means any person who is engaged in providing any service, either directly or indirectly, in connection with the management of any organisation in any manner and includes any person who renders any advice, consultancy or technical assistance, relating to conceptualizing, devising, development, modification, rectification or up gradation of any working system of any organization.
6. It appears that the development of software and maintenance of the software in question SAP R/3 are done only by SAP India. The role of the appellant, prima facie, appears to a wholesale procurer of service and distributor of service to the affiliates. This may not be fitting into the category of management consultancy services. They have prima facie made out a case for waiver of pre-deposit of the dues as per order-in-original and accordingly pre-deposit is waived.
7. Considering the high stake involved the appeal itself is posted for final hearing on March 26, 2007.