2010 (9) TMI 289 - AT - Service Tax

Software Maintenance and Repair Effective date of levy Section 65(64) - maintenance or repair of information technology software is specifically covered under sub-clause (b) whereas maintenance or repair of computer software is specifically covered under sub-clause (c). It is obvious that the legislature has understood information technology software to be distinct and different from computer software. - activities of the kind undertaken by the appellant very much within the coverage of sub-clause (zzzze)(iii) of Clause 105 of Section 65 of the Finance Act, 1994. Any incidental advice, consultancy or assistance given by the service provider will be squarely covered by sub-clause (zzzze)(iv). It is pertinent to note that adaptation, upgradation, enhancement, implementation, etc. of information technology software are expressly covered by the definition of information technology software service and that these very operations have also been specified as different categories on software maintenance in the literature supplied to us. - Thus there is almost total convergence between the technical literature on software and the definition of information technology software service given under Section 65(1 05) (zzzze) of the Finance Act, 1994. It is settled law today that a new taxable service covered by specific entry under Section 65 of the Finance Act, 1994 will not attract levy of Service Tax under any pre-existing entry. - In this connection, the Karnataka High Court s judgment in Commissioner Vs. Turbotech Precision Engineering Pvt. Ltd. (2010 -TMI - 77320 - KARNATAKA HIGH COURT) is relevant. The Hon ble High Court has held that the case of the assessee fell under the definition of works contract and hence it could not be classified as consulting engineer s service .

Issues Involved:
1. Levy of Service Tax on "maintenance or repair" services.
2. Interpretation of "maintenance or repair" of computer software.
3. Applicability of Business Auxiliary Service (BAS) exclusion.
4. Validity of Circulars and Notifications.
5. Extended period of limitation for Service Tax demand.
6. Classification of services under "management consultant's service" vs. "maintenance or repair service".
7. Introduction of Information Technology Software service.

Detailed Analysis:

1. Levy of Service Tax on "maintenance or repair" services:
The appeal contested the Commissioner's order confirming Service Tax demands of Rs. 20,89,72,647/- for the period from July 2004 to January 2006. The assessee was accused of rendering "maintenance or repair" services without registration, filing returns, or paying Service Tax, invoking the extended period of limitation under Section 73(1) of the Finance Act, 1994.

2. Interpretation of "maintenance or repair" of computer software:
The definition of "maintenance or repair" under Section 65(64) of the Finance Act was examined. Prior to 16.06.2005, it included services related to the maintenance or repair of goods or equipment, excluding motor vehicles. Post-amendment, it included reconditioning, restoration, or servicing of any goods or equipment and management of immovable property.

3. Applicability of Business Auxiliary Service (BAS) exclusion:
The appellant argued that maintenance of information technology software was excluded from BAS, thus not chargeable to Service Tax. They relied on Circular No. 70/19/2003-ST, which was later superseded by Circular No. 81/2/2005-ST, making maintenance or repair of software taxable.

4. Validity of Circulars and Notifications:
The appellant referred to the Supreme Court's decision in Tata Consultancy Service Vs. State of Andhra Pradesh, which classified software as "goods". The Revenue countered with Notifications No. 20/2003-ST and No. 7/2004-ST, the latter making maintenance or repair of computers and systems, including software, taxable from 09.07.2004.

5. Extended period of limitation for Service Tax demand:
The appellant argued against the extended period of limitation, citing ongoing proceedings and show-cause notices for overlapping periods under different service categories. They pointed out that the Department's inconsistent stance indicated no intent to evade tax.

6. Classification of services under "management consultant's service" vs. "maintenance or repair service":
The appellant highlighted multiple show-cause notices demanding Service Tax under "management consultant's service" for similar activities. The Tribunal noted that the Department's inconsistent classification attempts undermined the invocation of the extended period of limitation.

7. Introduction of Information Technology Software service:
The Tribunal examined the introduction of "Information Technology Software" service under Section 65(105)(zzzze) w.e.f. 16.05.2008, which included adaptation, upgradation, enhancement, and implementation of software. They concluded that maintenance of computer software fell under this category and was not taxable under the pre-existing "maintenance or repair service".

Conclusion:
The Tribunal held that the services rendered by the appellant were in the nature of Information Technology Software service, taxable only from 16.05.2008. Thus, the demand for Service Tax and penalties for the period from 09.07.2004 to 31.01.2006 was set aside. The appeal was allowed, and the impugned order was annulled.

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