Downloading image from website for price is OIDAR Service : Pay Tax : HC

V. Sridharan, Sr. Adv., Prakash Shah and Jas Sanghvi for the Appellant. Swapnil Bangur and Sham Walve for the Respondent.

JUDGMENT

A.S. Oka, J. – The appellant has taken an exception to the judgment and order dated 1st May 2016 passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench at Mumbai. The said appeal was directed against the order in appeal dated 21st August 2009 passed by the Commissioner of Central Excise (Appeals), Mumbai-I.

2. According to the case of the appellant, it is engaged in the business of licensing of images through its website. The case of the appellant was that no service tax was liable to be paid by the appellant as the appellant was dealing with copyrights and services of copyrights were not within the purview of service tax. A letter dated 15th February 2007 was received by the appellant from the office of the Assistant Commissioner of Service Tax, Mumbai by which the appellant was informed that the services are taxable under the category of “Online Information and Database Access or Retrieval”. The said decision was challenged by the appellant by preferring an appeal before the Commissioner of Central Excise (Appeals), Mumbai. The said appeal was dismissed by the Commissioner holding that the appellant was charging the monies to the customers for allowing them to download the images hosted on its website and, therefore, the service is covered under the category “Online Information and Database Access or Retrieval”. The view taken by the Commissioner has been confirmed by the Customs, Excise and Service Tax Appellate Tribunal (for short “Appellate Tribunal”).

3. The learned senior counsel appearing for the appellant has invited our attention to the questions of law formulated in the memorandum of appeal, which read thus:

He also invited our attention to the manner in which the agreements are entered into with the appellant. The submission of the learned senior counsel appearing for the appellant, based on CBEC Education Guide, is that the services rendered by the appellant are not covered by the category “Online Information and Database Access or Retrieval”. The submission of the learned senior counsel appearing for the appellant is that the appellant’s website contains collection of various images. Intellectual property in the said collection of images vests in the appellant. He submitted that no consideration is charged, if someone accesses to the website of the appellant and sees the images. He submitted that the accessing and viewing of its website is purely free, incidental to the licensing agreement being entered into with the customer. He pointed out that if the customer of the appellant wishes to use the image for the purpose of advertisement etc., a certain price is charged by the website for providing a non-exclusive licence to the customer for use of the said image. He submitted that access to the website and viewing of images does not amount to rendering of taxable service. He also invited our attention to sub-clause (zzzze) incorporated in clause (105) of section 65 of the Finance Act, 1994. He also invited our attention to the Circular No.334/1/2008-TRU dated 29th February 2008 and in particular paragraph-4 thereof which deals with information technology software service. Inviting our attention to the copy of the purchase order and the invoice, he would urge that the service rendered by the appellant will not be covered by the category “Online Information and Database Access or Retrieval”.

4. We have given careful consideration to the submissions advanced. In paragraph-2.3 of the memorandum of appeal, the nature of activities carried out by the appellant has been set out. Clause (b) of paragraph- 2.3 makes it clear that if the prospective buyer wants to download the image from the website of the appellant, a price quotation is offered by the appellant and only upon the receipt of payment by the prospective buyer that a link is provided for downloading the image. It is claimed that such amount is received by the appellant for permitting the customer to download the image.

5. Clause (105) of section 65 of the Finance Act, 1994 defines taxable services. In view of sub-clause (zh) of clause (105) of section 65, service provided to the customer by a commercial concern in relation to online information and database access or retrieval or both, in electronic form, through computer network, in any manner, is a taxable service. Clause (75) of section 65 defines online information and database access or retrieval, which reads thus:

’65. Definitions. In this Chapter, unless the context otherwise requires,—

(1) to (74) …. …… …… …… ……. ……. …….. ……. ……..

(75) “on-line information and database access retrieval” means providing data or information, retrievable or otherwise, to a customer, in electronic form through a computer network.’

Thus, providing a data or information to the customer through computer network, whether retrievable or not is covered by clause (75) of section 65. The service provided to the customer by a commercial concern i.e. appellant in relation to online information and database access in electronic form through computer network is a taxable service, whether it includes retrieval or not.

6. The learned senior counsel relied upon CBEC’s Education Guide and in particular clause 5.9.5 thereof, which reads thus:

‘5.9.5 What are “Online information and database access or retrieval services”?

“Online information and database access or retrieval services” are services in relation to online information and database access or retrieval or both, in electronic form through computer network in any manner. Thus, these services are essentially delivered over the internet or an electronic network which relies on the internet or similar network for their provision. The other important feature of these services is that they are completely automated, and require minimal human intervention.

Examples of such services are:—

The following services will not be treated as “online information and database access or retrieval services”:—

It is stated in clause 5.9.5 that web-based services providing access or download of digital content is a service covered by online information and database access or retrieval services. We have perused paragraph-2.3 of the memorandum of appeal and in particular clause (b) thereof. This paragraph shows that various images or photographs are visible on the website of the appellant. Those images and photographs are visible to a person who logs on to its website. The photographs or images, which are available on the website, are digital contents which are permitted to be downloaded by the appellant on payment of price. Thus, the appellant may not be charging anything for having accessed to its website on which images are visible but the appellant is charging its customers for downloading of the digital contents (photographs) hosted on the website. Thus, going by what is set out in paragraph-2.3 of the memorandum of appeal, the services rendered by the appellant will fall under the category of online information and database access or retrieval services. A copy of invoice, which is a part of the appeal compilation, shows that the amounts are charged by the appellant for “images sales” and the transaction is of purchase of images by downloading the same from the website of the appellant.

7. We have perused the impugned judgment. In paragraph- 3 of the impugned judgment, the Appellate Tribunal has noted the submissions canvassed on behalf of the appellant. A specific submission canvassed was that the appellant has got copyright over the photographs which are visible on its website and hence, the appellant charges the amount for copyright. The submission was that as the amount charged is for copyright, it will not be a service rendered falling under the category “Online Information and Database Access or Retrieval”. A reliance was placed on the decision of the Tribunal in the case of Dewsoft Overseas (P.) .Ltd. v. CST [2008] 16 STT 376 (New Delhi – CESTAT).

8. In paragraph- 6 of the impugned order, the Appellate Tribunal has recorded a finding that the appellant’s website allows access and retrieval of data or information contained therein which are free for the purpose of viewing on the monitor. However, the customer has to pay for downloading the data in the form of images for commercial use. The Appellate Tribunal has held that the copyright of the images becomes incidental as the main activity is of making the information available.

9. The Appellate Tribunal has also dealt with the law laid down in the case of Dewsoft Overseas (P.) Ltd. (supra). In the said case, the appellant was rendering an online computer teaching through website and was discharging the liability of service tax under the category of Commercial Training and Coaching Classes. The Revenue wanted to classify the services as Online Information and Database Access or Retrieval Services. Therefore, the Tribunal found, in our view rightly, that the fact situation in the said case was completely different.

10. The Appellate Tribunal has confirmed the findings of fact recorded by the first appellate authority about the nature of activities carried out and services rendered by the appellant. The said findings are in conformity with the factual statements made by the appellant in paragraph- 2.3 of the memorandum of appeal. In our view, information technology software service is completely different from the service rendered by the appellant in the facts of the case.

11. Hence, we find no merit in the appeal. No substantial question of law is involved. The appeal is dismissed with no order as to costs.

Related Topic on GST