2008 (7) TMI 148 - AT - Service Tax

Appellant points out the judgment of this Bench rendered in Stag Software Pvt. Ltd. v. CST and submits that the facts are identical and this Bench has held that software testing is not liable to service tax - Prima facie, the facts are identical and the activity carried out by the appellants does not fall within the category of Technical Inspection and Certification Service . The subsequent amendment brought in the Finance Act is prospective effect. Hence the stay application is allowed

Summary

Issues:
1. Whether the appellant is liable to pre-deposit duty and penalty under specific sections of the Act.
2. Whether the activity of software testing conducted by the appellant falls under "Technical Inspection and Certification Service" for service tax purposes.
3. Application of the judgment in the case of Stag Software Pvt. Ltd. to the present case.
4. Interpretation of the subsequent amendment in the Finance Act regarding the taxability of software testing.

Analysis:
1. The appellant was required to pre-deposit a substantial duty amount and penalty under various sections of the Act. An interim stay was granted based on the argument that the activity conducted by the appellant did not fall under "Technical Inspection and Certification Services."

2. The appellant argued that software testing, being an integral part of software development, should not be subject to service tax as it does not fit within the definition of "Technical Inspection and Certification Service." Reference was made to a previous judgment involving similar facts, where it was held that software testing is not taxable. The Tribunal found the facts to be identical and concluded that the appellant's activity did not fall under the taxable category.

3. The Revenue, however, contended that the facts of the case were distinguishable from the precedent cited by the appellant. They argued for the imposition of terms on the appellant due to the significant revenue implications involved. The Tribunal, after considering both arguments, found that the judgment in the Stag Software Pvt. Ltd. case was applicable to the present case, and the subsequent amendment in the Finance Act had prospective effect.

4. Consequently, the Tribunal granted a waiver of the pre-deposit amount and stayed its recovery until the appeal's disposal. It was decided that there would be no recovery even after 180 days from the order issuance. The case was scheduled for final hearing due to the substantial revenue implications involved.