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2024 (8) TMI 607 - AT - Service TaxLiability of service tax - service of software product updates provided by the appellants to its customers - invoices issued prior to 16.05.2008 - payments received prior to 16.05.2008 but were valid for a calendar year where the period involved was beyond 16.05.2008 - Time Limitation. Liability of service tax - HELD THAT -The definition of taxable service speaks about services provided or to be provided but as rightly argued by the appellant to be provided cannot be extended to the period when the service tax itself was not liable to be paid. Since the software updates and right to use the software was prior to 16.05.2008 and also the payments were prior to 16.05.2008, the question of levying of service tax on these updates only because their validity periods extend beyond 16.05.2008 cannot be the criteria for levy of service tax. Nowhere the provisions of service tax call for such levy. In the case of CARRIER POINT VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR 2018 (3) TMI 1288 - RAJASTHAN HIGH COURT , the Hon ble High Court of Rajasthan, was dealing with the question whether service tax can be levied on the amount received prior to the date of levy when registration and invoice could not be raised to collect indirect tax and provisions of Provisional Collection Act were not applicable and Section 66 of the Act, impose the levy with effect from 01.07.2003. Their Lordships have held that 'any payment of contract which are entered after 1-7-2003 will invite Service Tax and any contract which is concluded prior to 1-7-2003 will not invite imposition of Service Tax.' In the present case, admittedly all the invoices and payments were made prior to 16.05.2008 when service tax was levied on software services under ITSS. Therefore, in view of the above decision, the question of levying Service Tax on the invoices and payments prior to 16.05.2008 when the service itself was not leviable to tax, cannot be sustained. Clause (5) of Notification No.7/2005 relied upon by the Revenue supports the case of the appellant as the entire consideration for services was received prior to 16.05.2008 and no service tax shall be payable for the part or whole of the value of the services which is attributed to services provided during the period when such services were not taxable and therefore, the question of bifurcating the value on pro-rata basis is not in accordance with law. The reliance placed by the learned counsel on the Circular No.B.11/1/2002 dated 01.08.2002 issued with regard to Health Club Services where the Board clarified that no Service Tax will be payable on membership fee already collected prior to the date on which the new Service Tax has come into force, is admittedly applicable in the present case, since admittedly the invoices and payments have been made prior to introduction of Service Tax on ITSS on 16.05.2008. Time Limitation - HELD THAT - In the present case, the DGCEI issued notice only after refund claim was filed by the appellant and the notice does not reveal any facts that were suppressed or mis-declared. The Revenue cannot expect the appellant to declare those invoices and payments paid prior to the levy of tax on ITSS to be declared in their returns. Moreover, when the same transactions were considered as Business Auxiliary Service, the question of suppression does not arise. Hence limitation fails. The impugned order is set aside - Appeal allowed.
Issues Involved:
1. Liability of Service Tax on software updates provided under contracts signed before 16.05.2008 but valid beyond this date. 2. Applicability of pro-rata basis for Service Tax calculation. 3. Allegation of suppression of facts and invocation of extended period for demand. 4. Rejection of refund claim on the amount paid under protest. Detailed Analysis: 1. Liability of Service Tax on Software Updates: The appellant, M/s. Oracle India Pvt. Ltd. (OIPL), entered into contracts for software updates before 16.05.2008, with payments and invoices issued prior to this date. The Department contended that Service Tax was due on the portion of services provided post-16.05.2008, as the Information Technology Software Service (ITSS) became taxable from this date. The appellant argued that the taxable event occurred when the contract was signed and payments were made, which was before the tax was introduced. The Tribunal agreed with the appellant, citing precedents like Bajaj Alliance General Insurance Company Ltd. and Reliance Industries Ltd., which established that Service Tax is applicable based on the date of the agreement and payment, not on the service period. 2. Applicability of Pro-rata Basis for Service Tax Calculation: The Department's method of calculating Service Tax on a pro-rata basis for services extending beyond 16.05.2008 was challenged. The Tribunal found no statutory provision supporting this approach. The appellant cited Circular No.B.11/1/2002, which clarified that no Service Tax is payable on membership fees collected before the tax's introduction, supporting their argument against the pro-rata division. 3. Allegation of Suppression of Facts and Invocation of Extended Period: The Department invoked the extended period under Section 73(1) of the Finance Act, 1994, alleging suppression of facts by the appellant. The Tribunal found that the appellant had disclosed all relevant information during the audit in 2008 and that the show-cause notice was issued only after the appellant filed for a refund. The Tribunal concluded that there was no suppression or mis-declaration, and thus, the extended period could not be invoked. 4. Rejection of Refund Claim: The appellant's refund claim for the amount paid under protest was initially rejected on the grounds that the issue was still under investigation. Since the Tribunal decided in favor of the appellant regarding the main issue of Service Tax liability, the refund claim was remanded to the original authority for reconsideration, ensuring the appellant is given an opportunity to be heard. Conclusion: The Tribunal set aside the impugned orders, allowing Appeal No.ST/3061/2011 and remanding Appeal No.ST/717/2012 for fresh consideration of the refund claim. The decision emphasized that Service Tax could not be levied on contracts signed and payments made before the tax's introduction, rejecting the pro-rata basis for calculation and the invocation of the extended period for demand.
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