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2015 (5) TMI 884 - AT - Service TaxExtended period of limitation - Maintenance or repair of computer software service - Period of levy of tax - held that - Service Tax is not payable by the appellant for the period 9.7.2004 to 6.11.2005 under the category of Maintenance or Repair service. - whereas the Board clarified vide its Circular on 17.10.2005 that software is goods , the show-cause notice in the present case was issued only on 2.1.2007 i.e. beyond the normal period of one year. In view of frequent changes in Circulars and legal provisions, appellant cannot be faulted for not paying Service Tax. The Commissioner also, in his order, did not impose the mandatory penalty under Section 78 which involves invocation of the extended period. Therefore, we find that the demand is also hit by limitation. - Decision in the case of Kasturi & Sons Ltd. Vs. UOI 2011 (2) TMI 76 - HIGH COURT OF MADRAS followed. - Decided in favour of assessee.
Issues Involved:
- Appeal against demand of Service Tax for maintenance or repair of computer software service. - Applicability of Service Tax on maintenance and repair of computer software. - Interpretation of relevant circulars and amendments to the definition of services. - Consideration of judicial precedents and legislative provisions. - Assessment of liability for payment of service tax. - Application of penalties under Sections 76, 77, and 78 of the Finance Act, 1994. - Issue of limitation in the demand for Service Tax. Detailed Analysis: Issue 1: Appeal against demand of Service Tax for maintenance or repair of computer software service The appellant appealed against the order by the Commissioner of Service Tax confirming a demand for Service Tax amounting to Rs. 1,08,89,976 for the period from 9.7.2004 to 6.10.2005 related to maintenance or repair of computer software service. The penalties under Sections 76, 77, and 78 of the Finance Act, 1994 were not imposed by the Commissioner. Issue 2: Applicability of Service Tax on maintenance and repair of computer software The appellant contended that there were significant changes in the legal provisions and circulars regarding the taxation of maintenance or repair of software. The argument presented was based on various circulars issued by the Central Board of Excise and Customs (CBE&C) and subsequent amendments to the definition of services, specifically highlighting the judgment of the Hon'ble Madras High Court in a similar case. Issue 3: Interpretation of relevant circulars and amendments to the definition of services The contention revolved around the interpretation of circulars issued by the CBE&C regarding the classification of software as 'goods' and the subsequent imposition of Service Tax on maintenance and repair services related to computer software. The amendments to the definition of 'Business Auxiliary Service' and 'Maintenance or Repair Service' were crucial in determining the tax liability. Issue 4: Consideration of judicial precedents and legislative provisions The judgment referred to the decision of the Hon'ble Madras High Court and analyzed the implications of the Finance Acts from 2003 to 2007 concerning the taxation of information technology services, including maintenance of computer software. The significance of judicial precedents and statutory provisions in determining the liability for Service Tax was emphasized. Issue 5: Assessment of liability for payment of service tax The Tribunal analyzed the evolution of legal provisions and circulars to ascertain the liability for payment of Service Tax on maintenance and repair of computer software. The discussion included the amendments made to the definition of services and the impact of judicial interpretations on the taxability of software-related services. Issue 6: Application of penalties under Sections 76, 77, and 78 of the Finance Act, 1994 The argument regarding the imposition of penalties under the relevant sections of the Finance Act, 1994 was considered in light of the provisions of Section 80, which allows for the waiver of penalties if there is a reasonable cause for non-payment of tax. The Tribunal assessed the circumstances to determine the applicability of penalties in the present case. Issue 7: Issue of limitation in the demand for Service Tax The Tribunal also examined the issue of limitation in the demand for Service Tax, considering the timeline of events, circulars, and legal changes that might have impacted the taxpayer's compliance. The Tribunal concluded that the demand for Service Tax was hit by limitation due to the changes in circulars and legal provisions, thereby providing relief to the appellant. This detailed analysis of the judgment highlights the complex legal arguments, interpretations of statutes, and application of judicial precedents in resolving the issues related to the demand for Service Tax on maintenance or repair of computer software service.
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