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ST – Demand is not on sale of software but on services rendered by Appellant post sales and same has been correctly made under category of 'Information Technology Software Services': CESTAT

By TIOL News Service

MUMBAI, APRIL 10, 2018: THE Appellant is engaged in manufacture of excisable goods and also trading of packaged software namely SCADASOGT75TAGSMAS.

Vide their letter dt. 02.12.2011, the appellant informed the audit that they were also engaged in resale of packaged software procured from M/s Autovue Electronics to their customers after adding 25 – 30% to the value of said software towards octroi, Courier and for extending necessary after sales technical support service viz. customer training, screen development and online support.

Resultantly, a service tax demand came to be confirmed against the appellant and since the same was upheld by the Appellate Commissioner, the appellant is before the CESTAT.

It is submitted that the demand is not sustainable as they are selling goods to their customer at 25% to 30% margin; that the goods in question are packaged software and is liable to VAT, hence not liable for service tax. Reliance is placed on the apex court decision in case of Tata Consultancy Services Vs. State of Andhra Pradesh - 2004-TIOL-87-SC-CT-LB in support. It is further pleaded that since there is no suppression, being an audit objection, therefore, extended period cannot be invoked.

After considering the submissions, the Bench observed –

++ We find that the Appellant themselves have informed the department that they are charging 25 to 30% over the software value towards octroi, Courier and for extending necessary after sales technical support service at their end viz. customer training, screen development and online support.

++ It is not the issue that the revenue is demanding service tax on sale of software. The demand is on services rendered by the Appellant post sales and the demand on the same under the category of "Information Technology Software Services" has been correctly made.

++ We find from the facts that there was no attempt on the part of the Appellant to suppress the facts of services in question. We therefore hold that the demand raised by invoking extended period is not sustainable. The penalties imposed upon the Appellant are not sustainable, for the same reason in terms of Section 80 of the FA 1994.

Concluding that the demand can be confirmed only for the normal period of limitation along with interest, the appeal was partly allowed.

(See 2018-TIOL-1123-CESTAT-MUM)


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