2023 (12) TMI 311 - AT - Service Tax

Non-payment of service tax - Information Technology Software Service - appellant pointed out that the Software sold by the appellant is goods and therefore not liable to Service Tax - HELD THAT - The software has been supplied on a medium on payment of VAT/Sales tax. It has been pointed out that the medium is in the nature of USB Stick/DVD/Hard Drive. Reliance has been placed on the decision of the Hon ble Apex Court in the case of COMMISSIONER OF SERVICE TAX DELHI VERSUS QUICK HEAL TECHNOLOGIES LIMITED 2022 (8) TMI 283 - SUPREME COURT . It is notice that the Hon ble Apex Court in the case of Quick Heal Technologies Ltd. has clearly held that software loaded on a medium like USB/CD/Hard Drive etc. is goods and not services. From the above case, it is apparent that with software is supplied loaded on a medium then the same is to be treated as sale and not a service. In the instant case, it is not in doubt that software has been supplied loaded as a medium. Therefore it attains character of goods. Consequently, the demand in the instant case cannot be sustained. The impugned order is set aside - appeal is allowed.

Summary

Issues Involved:
The appeal against demand of Service Tax for non-payment under "Information Technology Software Service."

Judgment Details:

Issue 1: Classification of Software as Goods for Service Tax Liability

The appellant contended that the software sold is goods and not liable to Service Tax, citing the agreement with M/s. HCL Info systems Limited for permanent transfer of intellectual property right. Reference was made to the decision in Quick Heal Technologies Ltd. case, emphasizing that software loaded on a medium like USB/CD/Hard Drive is considered goods. The MOU between the parties indicated a sale of software and transfer of Intellectual Property Right. The appellant paid CST@2% against C Form for this sale. The Tribunal noted that software supplied on a medium is to be treated as a sale, not a service, as per the Quick Heal case, and thus, the demand for Service Tax was not sustainable.

Issue 2: Application of Extended Period of Limitation

The appellant argued that even the extended period of limitation cannot be invoked to recover tax, relying on legal precedents. The Tribunal, however, focused on the nature of the transaction involving the sale of software on a medium, which was deemed a sale of goods. Consequently, the demand for Service Tax was deemed unsustainable, leading to the setting aside of the impugned order and allowing the appeal.

*(Pronounced in the open Court on 06.12.2023)*