By TIOL News Service

CHENNAI, MAR 26, 2018: THE appellants entered into an agreement with M/s. Verisign (Symantec) USA whereby appellant was authorized to use the software of digital signature and generate DSC (Digital Signature Certificate) and SSLC (Secured Socket Layer Certification).

M/s. Verisign have intellectual property right over the software and appellants are discharging service tax under IPR Services under reverse charge mechanism on the charges paid by them to Verisign for the right to use the software.

The department was of the view that providing digital signature services under DSC and SSLC are taxable under the following categories for the different periods.

SCN was issued and the demand was adjudicated thus -

++ DSC was classified under Information Technology Services and the demand was dropped for the period prior to 16.5.2008 and confirmed for the period from 16.5.2008 to 30.6.2012.

++ SSLC was classified under BSS for the period 1.5.2006 to 30.5.2007, under Development of Content and Supply Service and for period 1.6.2007 to 15.5.2008 and under Information Technology Service. The demand on SSLC was confirmed with interest upto 30.6.2012. Penalties were also imposed.

The appellant is before the CESTAT.

After considering the exhaustive submissions made by the appellant and the AR on the merits of the case as well on limitation, the Bench adverted to the definitions of Business Support Service, Development and Supply of Content Services and Information Technology Services as contained in the Finance Act, 1994and also extracted the letters F.No. 137/76/2008-CX.4 dated 05.06.2008 and dated 28.07.2008 addressed by the Commissioner (Service Tax), CBEC to The Controller of Certifying Authorities, Ministry of Communication and Information Tech., New Delhi and to the Deputy Controller (Technology), O/o The Controller of Certifying Authorities, New Delhi clarifying that activity of issuance of digital signature certificate would not fall under the taxable services of Technical Inspection and Certification Service or BAS or BSS or Information Technology Service and the letter dated 06.06.2008 addressed by the Deputy Director, Technology to the appellant intimating the above view of the CBEC.

The Bench further observed -

+ From the detailed explanation of the activity put forward …, we do not find that any of the steps/process involved in issuing DSC would fall within the definition of Information Technology Services. Further, the software is owned by M/s. Verisign, USA and appellants have obtained only right to use the software. Therefore their activity does not involve any development of software. In fact, appellants make use of the software already developed by M/s.Verisign and generate digital certificates. This is nothing but use of software just like use of windows software etc.

+ In para 6.3 of the Impugned Order, even the Commissioner has held that the process of issue of DSC and that of SSLC is akin to each other; the only difference being in SSLC, the certification is voluntary, whereas the issue of DSC is recognized by statute, Information Technology Act, 2000. The appellant issues DSC as per license issued to them by Controller of Certifying Authorities…Thus the activity of issuing DSC is statutorily recognised. The department vide letter dt.28.7.2008 has clarified that if the issuance of DSC does not involve development of IT Software, adoption or adaptation service related to IT software or certification of IT Software, the activity would not fall under Information Technology Services.

+ When the process of issue of both these certificates are akin to each other, merely because SSLC is issued under voluntary requirement of the customer, the same cannot be classified under Information Technology Services.

Concluding that the impugned order cannot be sustained, the same was set aside and the appeal was allowed with consequential reliefs.

(See 2018-TIOL-954-CESTAT-MAD)