2016 (3) TMI 402 - AT - Service Tax

Taxability of maintenance and repair services relating to information technology software till December 2007 - Held that - The articulation of legislative intent sought to be derived from this decision by the Central Board of Excise & Customs may not be tenable to the extent that it exceeds the compass of the cited decision. Therefore, the cited circular, relying as it does on the cited decision, does not permit for taxability of any software other than canned software and reliance on that circular cannot appreciably sustain the findings in the impugned order. Goods are, therefore, and more particularly in the context of the new taxable entry of 2008, restricted to computer software, which appears to be interchangeable with proprietary software, whose maintenance alone is liable to be taxed prior to 16 th May 2008 under section 65(105)(zzg). Software, other than canned would not be amenable to description as computer software which is essential to start up and run the core programs of a system. Information technology software is essential for smooth running of the business activities of the user. Thus the clients of the appellant in this case would be users of information technology software and hence any maintenance of that software would be taxable only after 16 th May 2008 as decided by this Tribunal in re SAP India Pvt. Ltd. The demand under maintenance or repair services in the impugned order does not survive. - Demand set aside - Decided in favor of assessee.

Issues:
1. Tax demand for maintenance and repair services and support services of business or commerce.
2. Applicability of tax on maintenance of software.
3. Interpretation of legislative intent regarding taxation of information technology software.
4. Distinction between computer software and information technology software for tax purposes.
5. Taxability of maintenance or repair services under specific provisions.
6. Consideration of appellant's status under the Software Technology Park Scheme and Export of Services Rules.
7. Imposition of penalties under section 77 and 78 of Finance Act, 1994.

Analysis:

1. The appellant contested the demand of tax and interest, appropriation of amounts paid before the show cause notice, and penalties imposed under the Finance Act, 1994. The dispute focused on the tax demand for maintenance and repair services and support services of business or commerce.

2. The appellant argued that tax was not leviable on software for the period in question, citing legislative provisions and a Tribunal decision. The Tribunal examined the amendments related to information technology software and distinguished it from computer software, concluding that the activities in question were taxable from a specific date.

3. The Tribunal analyzed the legislative intent behind the taxation of information technology software, emphasizing the distinction made in the law between computer software and information technology software. The decision highlighted the clarity in the tax provisions and the chronological application of taxability to specific services.

4. The judgment delved into the distinction between computer software and information technology software for tax purposes, noting that maintenance or repair of computer software was taxable before a certain date, while maintenance of information technology software became taxable later. This distinction was crucial in determining the tax liability of the appellant.

5. Specific provisions regarding the taxability of maintenance or repair services were scrutinized, considering the evolution of the law and the widening of the tax net over the years. The analysis focused on the interpretation of relevant sections and explanations to determine the scope of taxable services.

6. The appellant's status under the Software Technology Park Scheme and Export of Services Rules was considered to assess the applicability of tax on the services provided. The Tribunal examined the nature of services rendered, the location of operations, and the benefit of exemption as an exporter of services.

7. Regarding penalties imposed under the Finance Act, 1994, the Tribunal found the non-disputed demand to be minor and considered the prompt payment of tax by the appellant. Consequently, the penalties were not upheld based on the provisions of the Act.

This detailed analysis of the judgment provides insights into the legal reasoning, interpretations of tax provisions, and considerations of the appellant's circumstances under the relevant laws.

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