The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) set aside three service tax demands aggregating over Rs. 42 crore against MP Online Ltd., holding that the appellant did not provide Online Information and Database Access or Retrieval (OIDAR) services, data digitisation services, or earn taxable interest on fixed deposits. The tribunal clarified that merely facilitating access to government data does not constitute OIDAR, and interest on FDs is not consideration for any service.
Background & Facts
The Dispute
The appellant, MP Online Ltd., a joint venture of the Madhya Pradesh State Electronic Department Corporation and Tata Consultancy Services, operates the e-governance portal www.mponline.gov.in. Three separate service tax appeals (Nos. 50418/2017, 51646/2018, 52763/2019) challenged orders confirming service tax demands on the appellant’s revenue streams for the periods October 2009 - September 2014, October 2014 - March 2016, and April 2016 - June 2017, respectively. The revenue contended that the appellant provided Online Information and Database Access or Retrieval (OIDAR) services, data digitisation services, and earned taxable interest on fixed deposits.
Key Facts
- Appellant: MP Online Ltd., public sector company, joint venture of MPSCDC and TCS.
- Respondent: Principal Commissioner of Customs, Central Excise and Service Tax, Bhopal.
- Underlying service periods:
- First appeal (ST/50418/2017): October 2009 to September 2014 (Order-in-Original No. 46/PC/ST/BPL-ST/2016 dated 02.11.2016).
- Second appeal (ST/51646/2018): October 2014 to March 2016 (Order-in-Original No. 1/COMMR/ST/BPL-I/2018 dated 31.01.2018).
- Third appeal (ST/52763/2019): April 2016 to June 2017 (Order-in-Original No. 35/Pr.CommrST/BPL-II/2019 dated 31.07.2019).
- Show cause notices and demands:
- First SCN dated 16.04.2015: OIDAR demand Rs. 18,27,22,690; data digitisation Rs. 6,79,158; interest on FDs Rs. 2,19,71,468; total Rs. 20,53,73,316; service tax paid Rs. 4,79,66,722.
- Second SCN dated 07.03.2017: portal income to educational institutions Rs. 7,07,87,638 (exempt); portal income to private companies and govt depts Rs. 4,52,39,994 (tax paid same); interest on FDs Rs. 1,12,88,795; total Rs. 12,73,16,427; service tax paid Rs. 4,52,39,994.
- Third SCN dated 16.04.2019: portal income to educational institutions Rs. 8,05,61,546 (exempt); interest on FDs Rs. 1,00,94,906; total Rs. 9,06,56,452; service tax paid NIL.
- Nature of services:
- Government services: collection of statutory fees, retained for a day, earning interest.
- Educational services: fees deposited within five days.
- Bill collection services for corporations (BSNL, Airtel, LIC, SBI Life): commission charged, service tax paid under Business Auxiliary Service.
- Miscellaneous: data digitisation for MPUSD (no services rendered to citizens).
- Interest on fixed deposits: surplus funds from delayed remittances.
- The appellant claimed that OIDAR could not be alleged because data belonged to government, not the appellant; data digitisation was for sovereign functions; interest on FDs is not consideration for any service.
Procedural History
- 25.08.2026: Date of hearing before CESTAT.
- 06.10.2026: Date of decision (judgment).
- Final Order Nos. 51565-51567/2026 issued.
Relief Sought
The appellant sought to set aside the impugned orders, withdraw the demands, and obtain refund of any service tax erroneously paid under the disputed heads.
The Legal Issue
The central question was whether the appellant’s activities - namely, providing a portal for access to government data, undertaking data digitisation for government departments, and earning interest on fixed deposits from delayed remittances - constituted taxable services under the Finance Act, 1994, specifically as OIDAR services, data digitisation services, or interest liable to service tax.
Arguments Presented
For the Appellant/Petitioner
The appellant submitted that: (a) portal charges for IT infrastructure to government and educational institutions were business support services but not OIDAR, as the services were not rendered to business or commerce; (b) data digitisation was intended to enable the government to perform sovereign functions and did not fall under any taxable category; (c) commercial income from companies such as Airtel, BSNL, LIC and SBI Life was correctly charged as Business Auxiliary Service and service tax paid; (d) franchise fees from kiosk operators were taxed under franchise services; (e) interest on fixed deposits is a pure financial transaction and not taxable; (f) post-01.07.2012 portal income to educational institutions was exempt under Notification No. 25/2012-ST (Entry No. 9); (g) CENVAT credit on commission income was duly reversed under rule 6(3) of CENVAT Credit Rules, 2004; (h) service tax on franchise fees was duly paid and reported; (i) interest on FDs is exempt under section 66D(n)(i) of the Finance Act; (j) the show cause notices wrongly invoked extended period of limitation; (k) the appellant had not provided any online data to third parties, hence no OIDAR; (l) the portal merely facilitated government departments to access their own data; (m) services to educational institutions were not rendered to business entities; (n) services to corporations such as SBI, Airtel, BSNL etc. were correctly taxed; (o) commission from kiosks was taxed; (p) interest on FDs is not consideration for service.
For the Respondent/State
The authorised representative asserted that the appellant had provided OIDAR and data digitisation services before 01.07.2012 and, after that date, such services were chargeable as they were not in the negative list; that the extended period of limitation was correctly invoked because the appellant failed to disclose the correct classification in its ST-3 returns, a suppression discovered only during audit; and that under self-assessment the assessee must make a true and complete disclosure, which the appellant had not done, praying that the impugned orders be upheld.
The Court's Analysis
The tribunal first recalled the well-settled principle that OIDAR services can be alleged only if the data belongs to the service provider. It observed that the appellant had provided merely a network through which the government of Madhya Pradesh’s data could be accessed by its officers and citizens; the data remained owned by the government, not the appellant. Hence, no OIDAR service existed. The tribunal further noted that the data digitisation work was undertaken to enable the government to use its own data and conduct sovereign functions, not to support business or commerce, and therefore fell outside the taxable categories of business auxiliary or support services. Regarding services to government departments for collection of utility bills, etc., and to universities and educational institutions before 01.07.2012, the tribunal held these were support services but lacking a commercial character, so they did not attract service tax. After 01.07.2012, all services became taxable except those in the negative list; services to universities were covered by Exemption Notification No. 25/2012-ST (Entry No. 9(d)) and remained exempt. The tribunal also emphasized that interest earned on fixed deposits is a pure financial transaction, representing the time value of money, and is not consideration for any service, thus exempt both in the pre- and post-negative list regimes.
"The well settled legal principle is that OIDAR services can be alleged to have been provided only if the data belongs to the service provider."
"The appellant had provided only a network through which the data of the government of Madhya Pradesh could be accessed by the officers of the government of Madhya Pradesh and by the citizens."
The Verdict
The tribunal allowed all three appeals and set aside the impugned orders dated 02.11.2016, 31.01.2018 and 31.07.2019. Consequently, the demands aggregating Rs. 20,53,73,316 (first appeal), Rs. 12,73,16,427 (second appeal) and Rs. 9,06,56,452 (third appeal) were annulled, and any service tax collected under those heads is to be refunded.
What This Means For Similar Cases
OIDAR Requires Data Ownership
Practitioners must now establish that the alleged service provider actually owns the data accessed online. Mere facilitation of access to third-party data, as in a government portal, does not satisfy the OIDAR definition. This narrows the scope of taxable OIDAR claims and shifts the burden to the revenue to prove data ownership.
- Verify data ownership before asserting OIDAR liability.
- Argue that portal-only activities are non-taxable where data belongs to the government or another entity.
Interest on Fixed Deposits Not Taxable
Interest earned on surplus funds from delayed remittances is not consideration for any service and remains outside the service tax net. Departments cannot re-characterise such interest as taxable service income.
- Treat interest on FDs as a pure financial transaction exempt under section 66D(n)(i).
- Refrain from issuing show cause notices on interest income unless linked to an actual service.
Negative List Exemptions Apply Uniformly
Services to educational institutions continue to be exempt under Notification No. 25/2012-ST both before and after 01.07.2012. Similarly, support services rendered to government entities that lack a commercial character are not taxable as business auxiliary or support services.
- Claim exemption for educational-institution services irrespective of the date.
- Argue that government-support services (e.g., utility bill collection) are non-taxable absent a commercial nexus.
