2013 (10) TMI 1060 - AT - Service Tax

Right to use Software Extended Period of Limitation - Waiver of Pre-deposit Revenue was of the view that the appellant transferred the right to use the software for a limited period through internet and the same is activated through activation keys - Held that - The sample invoices provides which shows that the software was sold in the form of CD only and they were back-to-back orders and the software were purchased and the same was sold - Further VAT was also discharged on such transactions - the entire demand was barred by limitation since whole amount demanded was by invoking extended period only - Ongoing through the records, we find that the claims that was made what had taken place was the sale of software only and therefore the least that can be said was extended period could not have been invoked appeared to be correct - In view of these observations, we consider that appellant has made out a prima facie case for pre-deposit and stay - Accordingly, there shall be waiver of pre-deposit and stay against recovery during the pendency of appeal Stay granted.

Issues:
1. Demand of service tax on the transfer of right to use software.
2. Appellant's claim of already discharging service tax on transactions.
3. Bar on demand due to limitation.
4. Verification of tax payment required.
5. Appellant's prima facie case for waiver of pre-deposit and stay.

Analysis:

1. The issue in this case pertains to the demand of service tax on the transfer of the right to use software for a limited period through the internet, activated by activation keys. The appellant contests this demand, asserting that the software was sold in the form of CDs only, with VAT discharged on such transactions. The appellant argues that the entire demand is time-barred as it was raised invoking the extended period. The appellant also claims a strong prima facie case on merits.

2. Upon reviewing the records, it was found that the Commissioner's finding supported the demand for service tax based on the transfer of the right to use software through the internet. However, the appellant maintains that tax had already been paid on such transactions. The Tribunal acknowledges the need to verify this claim at the final hearing. The Tribunal also observes that the appellant's contention regarding the sale of software only, and not the transfer of the right to use, suggests that the extended period should not have been invoked. Consequently, the Tribunal agrees that the appellant has established a prima facie case for waiver of pre-deposit and stay against recovery during the appeal process.

3. The appellant's argument that the demand is time-barred due to the invocation of the extended period is crucial. The Tribunal's observation that the appellant's claim regarding the nature of the transactions may prevent the extended period from being invoked strengthens the appellant's case for a waiver of pre-deposit and stay.

4. The need for verification of the appellant's claim of having already paid tax on the transactions is highlighted as a crucial aspect that must be confirmed during the final hearing. This verification is essential to determine the validity of the appellant's arguments and their impact on the demand for service tax.

5. In conclusion, the Tribunal finds merit in the appellant's contentions regarding the nature of the transactions and the invocation of the extended period for the demand of service tax. As a result, the Tribunal grants a waiver of pre-deposit and stay against recovery during the pendency of the appeal, acknowledging the appellant's prima facie case and the need for further verification of the tax payments made on the transactions.

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