2015 (3) TMI 558 - AT - Service Tax

Information Technology, Software Services - whether non-payment of service tax on the importation of service which was later returned as defective to the foreign service provider is correct and permissible under the provisions of Finance Act, 1994 and Rules framed thereunder - Held that - Since the purchase and cancellation entries were made within the time limit for making payment, the asessee was not liable to make any payments against these defective softwares and the claim of the assessee in this regard is acceptable - demand of tax is not sustainable. Accordingly, we set aside the impugned order to the extent of demand of tax along with interest and penalty - Decided in favour of assessee.

Summary

Issues:
1. Early hearing of the appeal and waiver of predeposit of dues.
2. Taxability of service on stock transferring imported software and non-payment of service tax on defective software returned to the foreign service provider.

Analysis:
1. The applicant sought early hearing of the appeal and waiver of predeposit of dues. The Tribunal decided to hear the appeal at the stay petition hearing stage after dispensing with the requirement of predeposit, allowing the appeal to proceed for hearing.

2. The case involved two main issues regarding the taxability of services provided by the appellant. Firstly, it was questioned whether the activity of transferring imported software to their own use constituted a taxable service attracting service tax. Secondly, the issue of non-payment of service tax on defective software returned to the foreign service provider was examined. The Adjudicating Authority dropped proceedings on the first issue but confirmed the demand of service tax on the latter.

3. The Tribunal observed discrepancies in the appellant's statement regarding the returned material authorization invoice not being issued in all cases within the required timeframe for service tax liability. It was noted that the appellant, not being a proprietor or partnership firm, was liable to pay service tax as per the Rules within the stipulated time frame following the calendar month in which the service was deemed to be provided.

4. The appellant had imported software from a specific provider, some of which were found to be defective and returned without any actual payment but through book adjustments. The Tribunal directed the Revenue to verify if any payment was made by the appellant against the software in question during the period of dispute from April 2008 to December 2009.

5. The Assistant Commissioner's letter presented during the proceedings stated that the purchase cancellation entries were made within the payment time limit, and the appellant was not liable to make payments against defective software. Based on this letter, the Tribunal found the tax demand unsustainable, setting aside the order regarding tax demand, interest, and penalty. The appeal was allowed with consequential relief, if any, and the early hearing and stay applications were disposed of accordingly.