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TMI Blog2015 (10) TMI 2413X X X X Extracts X X X X X X X X Extracts X X X X ..... to decide whether the activity is of "maintenance or repair" and has to quantify separately the amount involved relating to maintenance and repair service as also other service - It is necessary to examine whether appellant is eligible for availing the credit under Rule 3 before granting of refund under Rule 5 - Matter remanded back to Commissioner. - Appeal No. ST/126/08 - - - Dated:- 29-9-2015 - Anil Choudhary, Member (J), P S Pruthi, Member (T) And Third Member on Reference: P K Jain, Member (T) For the Petitioner : Shri A Anand, Advocate For the Respondent : Shri D Nagvenkar, Addl. Commissioner (AR) ORDER Per P S Pruthi The appellant is in appeal against the impugned order of Commissioner (Appeals),who had upheld the order of the adjudicating authority in rejecting the refund claims submitted by the appellant under Rule 5 of the Cenvat Credit Rules, 2004. 2. The brief facts of the case are that appellant is a 100% EOU-STP unit engaged in exporting services, namely, Software Consultancy, Development of software, Maintenance or Repair of Software (MRS) and Management Consultant in relation to ERP software implementation service. Due to export of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar 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 This notification was rescinded vie Notification No. 7/2004-ST dated 9.7.2004.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 view of the matter, it was also clarified by Board that software being goods, any service in relation to maintenance or repair or servicing of software is leviable to Service Tax under Section 65(105)(zzg). The learned Counsel also stated that ERP software system provided by a management consultant in connection with themanagement of any organization is exempted under Notification No.16/04-ST dated 10.9.2004 and therefore is clearly a taxable service. Therefore, refund of input credit accumulated due to export of Maintenance and Repair Service, ERP Consultancy Service is admiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 reasoning has been given by the adjudicating authority or the Commissioner (Appeals) as to why the services should not be considered as maintenance or repair service. In fact, the appellant submitted technical literature to the appellate authority as admitted in the impugned order in para 7. The appellant also pleaded that there are hundred of contracts involved and the contracts need to be examined properly instead of stating that the contracts were highly technical. We also note that the appellant was registered with Service Tax Department under the category of 'Main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der 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. Rule 5 as it stood during the material time stated that - where any input or input service is used in the manufacture of final product which is cleared for export under bond or letter of undertaking, as the case may be, or used in the intermediate product cleared for export, or used in providing output service which is exported, the CENVAT credit in respect of the input or input services so used shall be allowed to be utilized by the manufacturer or provider of output service towards payment of, (i) duty of excise on any final product clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible 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 person authorised by him, in relation to,- (a) management of properties, whether immovable or not; (b) maintenance or repair of properties, whether immovable or not; or (c) maintenance or repair including reconditioning or restoration, or servicing of any goods, excluding a motor vehicle;] [Explanation.- For the removal of doubts, it is hereby declared that for the purposes of this clause,- (a) goods includes computer software; (b) properties includes information technology software;] Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umber 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 matter 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: Anil Choudhary: 7. I have gone through the order recorded by my learned brother Shri P.S. Pruthi, Hon'ble Member (Technical), as I do not fully agree with the order, I am recording my separate order. 8. So far the issue of software maintenance and repair is concerned Hon'ble Supreme Court in the case of TCS Vs. State of Andhra Pradesh (supra), judgment dated 5.11.2004 have held that software is goods. Further, the judgment of the Hon'ble Supreme Court is binding on all the Court below including the Revenue authorities under Article 141 of the Constitution of India. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it 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.4 dated 7.3.2006 read with Circular No. 81/2/2005-Service Tax, which provides that service tax is applicable on 'maintenance or repair of software service' under Section 65(105)(zzg) and also in view of ruling of the Hon'ble Supreme Court in the case of TCS (supra), wherein it was held that software is goods, the appellant have provided taxable services under Section 65(105) (zzg) read with Section 65(64) i.e. 'management, maintenance or repair', being services (i) maintenance of software, (ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Consultancy Services vs. State of Andhra Pradesh reported in 2004 (178) ELT 22 (SC) and in view of the said position, the management, maintenance and repair of the computer software were taxable service during the relevant period and therefore they are entitled to the refund of the service tax paid on the input services. He further submitted the following case laws in support of his contention that the refund claim should be paid to them:- i) KPIT Cummins Infosystems Ltd. vs. CCE reported 2013 (32) STR 356 (Tri. - Mum.); ii) mPortal India Wireless Solutions P. Ltd. vs. CST reported in 2012 (27) STR 134 (Kar) iii) Quintiles Technologies (India) Pvt. Ltd. vs. CST reported in 2014 (34) STR 753 (T-Ahmd.); iv) Apotex Research Pvt. Ltd. vs. CC Ors. Reported in - 2014-TIOL-1836-CESTAT-BANG.; v) Repro India Ltd. vs. UOI reported in 2009 (235) ELT 614 (Bom.); vi) Zenta Pvt. Ltd. vs. CCE reported in 2012 (284) ELT 45 (Tri. -Mum.); vii) Dell International Services Pvt. Ltd. vs. CCE reported in 2010 (17) STR 540 (Tri. - Bang.); viii) Tata Consultancy Services vs. State of Andhra Pradesh reported in 2004 (178) ELT 22 (SC) ; ix) Choudhary In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich have been produced and discussed in the order of the original authority as also of the first appellate authority would indicate that out of five agreements, four did not have anything to do with the maintenance of the software but were relating to either consultancy work or purely software development work. Obviously these cannot be covered under the category of management, maintenance or repair service. In view of the said position, it is important to go through each invoice and corresponding agreement and determine the correct category of service at the relevant time. 15.3 The learned AR further submitted that even in the case of ERP implementation service, this Tribunal in the case of IBM India Pvt. Ltd. vs. CST, Bangalore reported in 2010 (17) STR 317 (Tri.-Bang.) has taken the view that the ERP implementation service is not a taxable service before 16.5.2008 and the said service is specifically covered under the category of 'information technology service'. It was also submitted that an appeal against the said decision of the Tribunal has been dismissed by the Hon'ble Supreme Court as reported in 2010 (18) STR J 137 (SC). In view of the fact that the said d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the literature submitted by the appellants support this view. But what needs to be ascertained is whether contracts and agreements reveal that they are essentially regarding maintenance and repair of software even if involving design and development also. The lower authority has examined some of the contracts and I find sufficient force in his findings that the wordings and expressions used in these contracts are good enough to show that consultancy and technical assistance were involved. He has observed that title of some of the contracts read as production support, development and consulting development. The contract of American express is for development and consulting. The Master agreement No. PHX-9-30-02JW-001 dated 1.1.05 mentions the appellant's name as consultant and further it states Master agreement for Consulting Engineer. Contract with BT Global service mentions the scope of work as high level Design Support, Low Level Design, Development, UAT support. The appellants have not refuted these observations of the lower authority. They have only referred to one contract namely M/s. Anthem Health Plans of Virginia Inc to claim that they were rendering services of maintena ..... X X X X Extracts X X X X X X X X Extracts X X X X
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