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TMI Blog2015 (6) TMI 741X X X X Extracts X X X X X X X X Extracts X X X X ..... tware implementation, and accordingly entitled to refund, as claimed, the services being admittedly exported. And As the appellant have rendered taxable services under Section 65(105)(zzg), the appellant have rightly availed CENVAT Credit under Rule 5 of Cenvat Credit Rules, 2004 as held by Member (Judicial). Or 1) Whether refund of Cenvat Credit under Rule 5 of the Cenvat Credit Rules is available when Rule 3 permitted credit on input services only to provider of taxable services. 2) Whether output services provided by the appellant are covered under the taxable service of "Maintenance or Repair" when the activity involved development and designing also of the software. 3) When the Commissioner (Appeals) did not examine all the contracts in order to decide whether the activity is of 'maintenance or repair' only, should not the case be remanded back to him to enable him to examine all the contracts before arriving at a decision on the issue at 2 above. - Appeal No. ST/126/08 - - - Dated:- 5-6-2015 - Anil Choudhary, Member (J) And P S Pruthi, Member (T),JJ. For the Appellant : Shri A Anand, Adv. For the Respondent : Shri D Nagvenkar, Addl Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant explained that at the initial stage itself they had deleted the amount of refund attributable to CENVAT Credit on input services used in the export of the exempted services, namely, software development and software consultancy. According to him, the appellant had actually provided and exported the Maintenance and Repair Services under Section 65(105)(zzg) and Management Consultancy Services in relation to ERP implementation under Section 65(105) (r) of the Finance Act, 1994, both taxable services. He drew attention to a series of notifications and the Board's Circular on the issue of Maintenance and Repair of software. Initially the maintenance and repair of computers, computer systems or computer peripherals was exempted under Notification No.20/2003-ST dated 21/8/2003. This notification was rescinded vie Notification No. 7/2004-ST dated 9.7.2004. Further, in the light of the Hon'ble Supreme Court's judgment in the case of TCS vs. State of Andhra Pradesh - 2004 (175) ELT 22 (SC), Board clarified vide Circular No. 81/2/2005-ST dated 7.10.2005 that branded/un-branded/canned/customized software incorporated in a media for use is to be treated as goods . In this v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s concluded that CENVAT Credit on input services is not admissible under Rule 3 and Rule 6 and therefore, refund of accumulated CENVAT Credit under Rule 5 of Cenvat Credit Rules, 2004 is consequently not admissible. 5.2 For determining the classification of the output services in question and their taxability, we note that the classification of ERP Software system under Section 65(105)(r) cannot be doubted because Notification No. 16/2004 which exempted such software itself classified the services as provided by Management Consultant in connection with the management of any organization. Therefore, such service is taxable. It is a different matter that the service is exempted. 5.3 As regards the service, namely, Software Development and Software Consultancy, the appellant is not claiming refund on the input service credit in respect of these output services, which are non-taxable as they are excluded from the definition of Consulting Engineers Service, as discussed above. 5.4 As regards the remaining software service, which appellant have termed as 'management, maintenance or repair of software service, we find merit in appellant's contention that no satisfactory r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question could be categorized under the Maintenance or Repair service. The software relating to software development and software consultancy was, in any case, deleted from the refund claim by the appellant. 5.5 Before analyzing the issue further, we may refer to the relevant provisions of law as they stood during the material time. The period of dispute in this case is July 05 to Dec. 05, CENVAT Credit is allowed under Rule 3 of the Cenvat Credit Rules, 2004. During the material time, Rule 3 stated that - A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of . paid on (i) . (ii) any input service received by the manufacturer of final product or by the provider of output services on or after the 10th day of September, 2004. Rule 2(l) defined 'input service' as As per Rule 2(1) of Cenvat Credit Rules, 2004 'input service' means any service; i) used by a provider of taxable service for providing on output service; or ii) ..................... The appellant sought refund under Rule 5 of Cenvat Credit Rules, 2004. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Karnataka High Court in the case of mPortal India Wireless Solutions Pvt. Ltd. (supra) does not support appellant's case because the Hon'ble High Court did not have the occasion to consider the definition of Rule 3 during the material time. The Hon'ble Karnataka High Court only held that refund of input service credit may be allowed, even though the export of software is not a taxable service. With due respect to the Hon'ble High Court, the point to be considered here is whether the input service credit itself was admissible before the refund can be considered. As shown above, Rule 3 permitted input service credit only if used for providing taxable service. Thus, it would be important to consider whether the services exported were taxable services. 5.7 We note that the Maintenance or Repair Service under Section 65(64), under which the appellant classified their output service to avail CENVAT Credit, includes both Computer Software and Information Technology Software, with effect from 16.5.2008 as below:- management, maintenance or repair means any service provided by- (i) any person under a contract or an agreement; or (ii) a manufacturer or any pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintenance which includes corrective maintenance, adoptive maintenance and perfective maintenance, or enhancement and preventive maintenance or re-engineering cannot be categorized under software maintenance and repair service. He has not distinguished between the software development service in respect of which no refund has been claimed and the services under which refund has been claimed and the services under which refund has been claimed. Even if the analysis needs to be done in respect of a very large number of contracts involved, the same must be done for each contract in the interest of justice. 6. In view of our observations and findings in foregoing paragraphs, the mater is remanded back to the Commissioner (Appeals), who should re-examine the nature of service provided keeping in view the evidence presented by the appellant. He should also consider the provisions of Service Tax law as they stood during the material time to arrive at an appropriate decision. The impugned order is set aside and appeal is allowed by way of remand. (Pronounced in Court on .....................) Per: Shri Anil Choudhary: 7. I have gone through the order recorded by my learned br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, maintenance or repair service' under Section 65(64) of the Finance Act, 1994 w.e.f. 16.5.2008 is clarificatory and/or explanatory in nature, in view of the ruling of the Apex Court in the TCS case (supra). Thus, the amendment being clarificatory in nature, will be applicable with retrospective effect i.e. from the date when the Section was brought on statute. Accordingly, I hold that the appellant have rightly taken CENVAT Credit and is entitled to refund. Thus, the appeal is allowed with consequential benefit in accordance with law. The refund shall be worked out by the adjudicating authority expeditiously preferably within a period of two months, from receipt of a copy of this order and the same shall be granted forthwith, alongwith interest, as per Rules. DIFFERENCE OF OPINION 11. In view of the difference of opinion between the two Members, the matter is placed before the Hon'ble President for reference to the Third Member on the following points:- (i) Whether under the facts and circumstances, software will be treated as 'goods' w.e.f. 9.7.2004 in view of clarification vide Ministry of Finance, Department of Revenue's letter F.No. 256/1/2006-CX ..... X X X X Extracts X X X X X X X X Extracts X X X X
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