2008 (11) TMI 237 - HC - Service Tax

Appeal to High Court New Plea - company is engaged in software development and other software services, more importantly, testing of software during its development. Further, it is not in dispute that it also imparts training in software to its various customers - According to the department, testing of software is liable to Service Tax under the category of Technical Inspection and Certification services as defined in 65(108) of the Finance Act of 1994 held that - at this stage, we cannot permit the learned counsel for the appellant to raise an issue, which was not specifically argued before the Tribunal. That being the position, the appeal being devoid of any merit is hereby dismissed.

Summary

Issues:
1. Appeal under Section 35G of the Central Excise Act against the order of the Customs, Excise and Service Tax Appellate Tribunal.
2. Classification of software testing for Service Tax under "Technical Inspection and Certification" services.
3. Classification of software training for Service Tax under Commercial Training and Coaching Services.
4. Imposition of penalties under various sections of the Finance Act, 1994.
5. Exemption of software engineering from Service Tax.
6. Applicability of Supreme Court judgment on software testing.
7. Exemption and taxation of computer training services.
8. Consideration of subsequent notification modifying the exemption.

Analysis:
1. The case involved an appeal under Section 35G of the Central Excise Act against the order of the Customs, Excise and Service Tax Appellate Tribunal. The appellant contended that software testing should be classified under "Technical Inspection and Certification" services for Service Tax, while software training should be classified under Commercial Training and Coaching Services.

2. The Commissioner had confirmed Service Tax against the respondent for the period from July 2003 to September 2005, imposing various penalties under the Finance Act, 1994. The respondent appealed against this order, leading to the Tribunal's consideration of the matter.

3. The Tribunal concluded that software engineering is exempt from Service Tax, leading to the decision that software testing, being an integral part of development, cannot be taxed as "Technical Inspection and Certification Service." The Tribunal distinguished a Supreme Court judgment on 'canned' software, emphasizing that testing goods during development differ from ready-to-sell software.

4. Regarding computer training, the Tribunal found that commercial coaching between specific dates was exempted, becoming taxable only after a certain amendment. The appellant raised concerns about subsequent modifications to the notification, but the Tribunal dismissed the appeal as the issue was not raised during the initial proceedings.

5. Ultimately, the appeal was dismissed as lacking merit due to the Tribunal's findings on the taxation of software testing, software engineering exemption, and the specific timeline for taxing computer training services. The subsequent notification modification was not considered due to procedural reasons, leading to the dismissal of the appeal.