2023 (7) TMI 307 - AT - Service Tax

Levy of Service Tax - Business Auxiliary Service - activation charges for activating software which is inbuilt in the telecom system of EPABX, when the sales tax on the same activity was discharged - HELD THAT - The facts which is under dispute is that the appellant have collected activation charges in respect of telecom equipment EPABX system which was sold earlier. The case of the department is that since activation of software activity was carried out after the sale of equipment, the same is liable for service tax under Business Auxiliary Service - in identical issue, only for the different period, has been decided in BLACK BOX LIMITED (FORMERLY KNOWN AS AGC NETWORKS LIMITED.) VERSUS COMMISSIONER OF CENTRAL EXCISE ST, AHMEDABAD-III 2023 (1) TMI 188 - CESTAT AHMEDABAD where it was held that amount collected by the Appellant from their customers against as activation charges of equipment/ software features are covered under the activity of sales of goods and not covered under the provisions of Service as defined in the Act. It can be seen that the facts and legal issue are identical to the present case therefore, the ratio of the above decision is squarely applicable - Appeal allowed.

Summary

Issues involved:
The issue involved is whether activation charges for activating software in the EPABX telecom system are liable to service tax under Business Auxiliary Service when sales tax on the same activity was discharged.

Summary of Judgment:

Issue 1: Liability for service tax on activation charges
The appellant collected activation charges for telecom equipment EPABX system, and the department contended that since the activation of software occurred after the sale of equipment, it is liable for service tax under Business Auxiliary Service. However, the Tribunal found that the transaction was a sale of goods, not a service, as the appellant did not provide any service obligation but sold goods to customers. The invoices raised for activation of software indicated payment of VAT/sales tax, further supporting the conclusion that it was a sale of goods. The Tribunal relied on legal precedents to establish that software can be considered goods for taxation purposes. Therefore, the Tribunal set aside the impugned order and allowed the appeal.

Issue 2: Time-bar for demand
The appellant argued against the demand for a longer period, stating that they had paid Sales Tax/VAT and disclosed the transactions in their Balance Sheet, with no suppression or mis-declaration. The Tribunal agreed with the appellant, ruling that no suppression or mis-declaration could be attributed to the appellant, and the demand for a longer period was not sustainable on the ground of limitation. Consequently, the demand for a longer period was rejected.

In conclusion, the Tribunal set aside the impugned order, allowed the appeal, and provided consequential relief, if any, in accordance with the law.

This judgment clarifies the tax liability on activation charges for software in the EPABX system, emphasizing the distinction between a sale of goods and a provision of services for taxation purposes. The Tribunal's decision was based on legal interpretations and precedents regarding the definition of goods, supporting the appellant's position that the transaction was a sale of goods and not a taxable service.