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2013 (6) TMI 167 - AT - Service TaxService tax on Software related activities - Maintenance or repair - Held that - the issue whether maintenance of computer software could be subjected to service tax under the entry of Management, Maintenance or Repair services prior to 1.5.2006 was examined by the Hon ble Madras High Court in the case of Kasturi & Sons Ltd. (2011 (2) TMI 76 - HIGH COURT OF MADRAS) and ruled that such demand is not maintainable. The decision of the Apex Court in the case of Martin Lottery Agencies Ltd. (2009 (5) TMI 1 - SUPREME COURT OF INDIA), also is very emphatic to say that Explanation added under in taxation statutes causes adverse consequences to tax payers could have only prospective effect. - Decided against the revenue. ATM services - held that - a new service was introduced for ATM service covering various other activities in relation to ATM service cannot be interpreted to mean that prior to that date certification service was not taxable. - Their plea of bonafide belief regarding non-taxability of their activity is not based on any legal decision either. - demand confirmed invoking the extended period of limitation - Decided against the assessee. Penalties - held that - simultaneous penalties u/s 76 and 78 can not be levied - option given to pay 25% penalty.
Issues:
1. Whether the appellants are liable to pay service tax on maintenance of software and services related to ATMs. 2. Whether the maintenance of computer software could be subjected to service tax under the entry of Management, Maintenance, or Repair services prior to 1.5.2006. 3. Whether the certification of ATM services was taxable during the relevant time. 4. Analysis of penalties imposed under sections 77 and 78 of the Finance Act, 1994. Issue 1: The appellants were engaged in selling hardware, banking-related application software, and providing maintenance services for the software to various banks. The Revenue contended that service tax was payable on maintenance of software under Management Maintenance or Repair Service and services related to ATMs under Technical inspection and certification Services. The appellants disputed the interpretation, arguing that the software was not considered goods before 1-5-2006 and that the activities fell under Information Technology services. They referenced past tribunal decisions and circulars to support their stance. Issue 2: The Revenue demanded service tax for software maintenance under the category of Management, Maintenance, or Repair Service. The argument revolved around whether software could be considered goods under the relevant section of the Finance Act, 1994. The appellants relied on judicial decisions to support their claim that software maintenance should not be subjected to service tax before 1.5.2006. The Tribunal found in favor of the appellants, citing the Madras High Court's ruling and the principle that explanations in taxation statutes have prospective effects. Issue 3: Regarding the certification of ATM services, the Revenue argued that the activity was taxable under the existing definition during the relevant period. The appellants contended that the service was introduced for taxation only from 1.5.2006. The Tribunal disagreed with the appellants, stating that the certification service for ATM services was covered under the definition before the amendment in 2006. Issue 4: The judgment also addressed the penalties imposed under sections 77 and 78 of the Finance Act, 1994. The Tribunal upheld a penalty under section 77 but set aside the penalty under section 76. It noted the drastic reduction in the penalty amount and provided the appellants with an option to pay the tax upheld by the order, interest, and 25% of the tax amount as penalty within thirty days. In conclusion, the Tribunal partially allowed the appeal, providing detailed reasoning for each issue and the penalties imposed, emphasizing legal interpretations and past judicial decisions.
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