2009 (11) TMI 336 - AT - Service Tax

Consulting Engineer service-Software testing- - In the stay application, Revenue has requested for stay the operation of Commissioner (Appeals) order wherein she has held that services of testing software or auditing software provided by the respondents is not liable to Service tax. In the light of Notification 04/00-ST. dated 28-2-1999 till 10-9-2004. There after, till 1-6-2007, software testing and testing and auditing software, excluded from the taxable service as per the definition of taxable service provided under Section 65(l05)(g) of the Act which read as to a client, by a consulting engineer in relation to advice, held that- reject the stay petition and take up the appeal itself for consideration. On the basis of findings of Commissioner (Appeals), reject the appeal filed by the revenue.

Summary

Issues:
1. Whether the services of testing software or auditing software provided by the respondents are liable to service tax.
2. Whether the imposition of penalties on respondents for short payment/delayed payment/non-payment of service tax is justified.

Analysis:
1. The Revenue filed a stay application requesting to stay the operation of the Commissioner (Appeals) order, which held that the services of testing software or auditing software provided by the respondents are not liable to service tax. The Commissioner (Appeals) observed that these services cannot be categorized under Consulting Engineering Services. The matter before the Commissioner (Appeals) was regarding the imposition of penalties under Section 76 and 77. The Commissioner held that when services are not taxable, no penalty is imposable. The Appellate Tribunal agreed with the findings and discussions of the Commissioner's order, stating that the services provided by the respondents were exempted under Notification 04/00-ST. The Tribunal rejected the stay petition and the appeal filed by the revenue based on the Commissioner's findings.

2. The Tribunal found that no further hearing was required to conclude that the services provided by the respondents were not liable to service tax. Therefore, the Tribunal rejected the stay petition and proceeded to consider the appeal itself. Based on the observations made by the Tribunal in line with the Commissioner's findings, the appeal filed by the revenue was rejected. The Tribunal upheld the decision that the services of testing software or auditing software provided by the respondents were not subject to service tax, leading to the rejection of the appeal against the imposition of penalties on the respondents.