Charges for SOFTEX certification and NoCs are taxable business support services absent compulsory statutory levies.

M/s Software Technology Park of India (STPI), an autonomous society registered under the Societies Registration Act, 1860 and functioning under the administrative control of the Department of Electronics and Information Technology, administered and facilitated the Software Technology Park Scheme.

It collected charges for certification of SOFTEX forms, issuance of No-Objection Certificates, and allied assistance to STP/software-exporting units.

In Appeal No. ST/20226/2014, service tax of ₹5,15,53,520 was demanded for 2007–08 to 2011–12, together with interest and penalties.

In Appeal No. ST/30531/2016, service tax of ₹2,06,792 was confirmed for April 2012 to June 2012; the Commissioner (Appeals) upheld the demand while granting cum-tax benefit.

STPI contended that the activities were statutory functions performed under the Foreign Trade Policy, FEMA and RBI directions, and that the collections were statutory fees rather than consideration for taxable services.

The Department argued that STPI was an autonomous society, not a Government department, and that the charges were consideration for services rendered to business entities and were retained for STPI’s administrative expenditure.

1. Whether certification of SOFTEX forms, issuance of No-Objection Certificates and allied assistance provided by STPI to STP/software-exporting units constituted taxable “Business Support Service” under the Finance Act, 1994, or were sovereign/statutory functions outside the scope of service tax.

2. Whether the charges collected by STPI were compulsory statutory levies deposited into the Government account, so as to fall within the exemption principle reflected in Board Circular Nos. 89/2006-ST and 96/7/2007-ST.

3. Whether invocation of the extended limitation period and imposition of penalties in respect of Appeal No. ST/20226/2014 were legally sustainable.

The Tribunal applied the provisions of the Finance Act, 1994 concerning taxable “Business Support Service,” under which services providing assistance or support in relation to the business or commercial operations of another person are taxable.

It applied the distinction between a sovereign/statutory function and a service rendered by an autonomous body for consideration: Government authorisation or statutory regulation does not, by itself, make an activity sovereign.

The Tribunal considered Board Circular Nos. 89/2006-ST dated 18 December 2006 and 96/7/2007-ST dated 23 August 2007, which distinguish non-taxable sovereign functions involving compulsory statutory levies deposited into the Government account from taxable services rendered for consideration.

It further applied the principle that classification depends on the nature of the particular activity and not merely on the status of the organisation performing it.

For limitation and penalty, the Tribunal held that a registered assessee must disclose all taxable receipts in its statutory returns; failure to declare the relevant taxable activity may justify extended limitation and penalties where the statutory conditions are satisfied.

Although STPI operated under Government supervision and was authorised to perform functions connected with the Software Technology Park Scheme, it remained an autonomous society and not a Department of the Central Government.

The certification of SOFTEX forms, issuance of NoCs and related assistance directly facilitated the export business, foreign-exchange realisation and regulatory compliance of STP units. These activities therefore had a direct nexus with business or commerce and constituted business-support services.

The Tribunal rejected STPI’s reliance on the Board circulars because the charges were not shown to be compulsory levies imposed by statute or payable into the Government Treasury.

Instead, the amounts were credited to funds maintained by STPI and used for its establishment and administrative expenditure; approval by STPI’s Governing Council could not convert them into statutory Government levies.

Exclusivity or statutory authorisation to perform the activity was also held insufficient to establish a sovereign character, since the decisive consideration was whether the collection was a compulsory exaction or consideration for an identifiable service rendered to a beneficiary.

As STPI was already registered under the service-tax law and paid tax on other services, its failure to declare the impugned receipts in its returns supported invocation of the extended period and penalties, subject to any statutory mitigation available under the Finance Act, 1994.

The charges collected were consideration for services and not compulsory statutory levies or sovereign collections payable into the Government Treasury.

The demand of service tax, interest and penalties was consequently sustained, including the invocation of the extended period in Appeal No. ST/20226/2014, while any statutory benefit concerning the quantum of penalty remained available if the prescribed conditions were fulfilled.

Both appeals were dismissed.