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TMI Blog2010 (11) TMI 1042X X X X Extracts X X X X X X X X Extracts X X X X ..... . Harish, Advs. for the Appellant P.R.V. Ramanan, Special Consultant, for the Respondent ORDER P.G. Chacko, Judicial Member 1. This appeal filed by the assessee is directed against the Commissioner's order confirming demands of Service Tax of ₹ 20,89,72,647/- against them in adjudication of show-cause notice dated 26.10.2006 for the period from July, 2004 to January, 2006, appropriating earlier payment of ₹ 6,29,80,109/- of the assessee towards such demand, demanding interest on tax under Section 75 of the Finance Act, 1994 and imposing penalties on the assessee under Sections 76 to 78 of the Act. We have examined the records. In the aforesaid show-cause notice, it was alleged that the assessee had rendered maintenance or repair services, taxable under Section 65(105)(zzg) read with Section 65(64) of the Finance Act, 1994, to different clients under agreements during the aforesaid period. It was also alleged that the assessee had not cared to get registered with the Department in respect of the said service or to file Service Tax returns or to pay Service Tax, all with intent to evade payment of the tax. On this basis, it was further alleged that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the appellant has pointed out that Business Auxiliary Service (BAS for short) was also introduced as a taxable service on 01.07.2003 and, significantly, its definition under Section 65(19) of the Act excluded maintenance of information technology software. It has been argued that a service specifically excluded from the definition of a taxable service (BAS), should ipso facto remain outside the purview of levy of Service Tax. The learned Counsel means to say that, as long as information technology software maintenance stood excluded from the purview of BAS, it would not be chargeable to Service Tax. The learned Counsel has contextually relied on the Board's Circular No. 70/19/2003-ST dated 17.12.2003 wherein it was clarified that maintenance of Software is not chargeable to Service Tax . In this connection, it has been submitted by the learned Special consultant for the Revenue that the Circular dated 17.12.2003 was superseded by Circular No. 81/2/2005-S.T., dated 07.10.2005 wherein maintenance or repair or servicing of software was held to be exigible to Service Tax under Section 65(105) (zzg) read with Section 65(64) of the Finance Act, 1994. In this connection, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 (Tri.-Bang.) (upheld by the Kerala High Court vide (2010) 34 VST 27 (Ker). 3.2. The learned Counsel has further submitted that maintenance or repair of software became taxable only w.e.f. 16.05.2008 when Information Technology Software service was introduced under Section 65 of the Finance Act, 1994. It has been argued that, prior to the said date, such service was not taxable. In this connection, the learned Counsel has claimed support from IBM India Pvt. Ltd. vs. CST, Bangalore - 2010 (17) STR 317(Tri.-Bang.), wherein it was held that Enterprise Resource Planning (ERP), advice, implementation services were not subject to Service Tax under the head 'Management Consultant' service and the same were taxable under the new category of 'Information Technology Software' service, introduced w.e.f. 16.05.2008. 3.3 In the face of the above arguments of the counsel, the learned Special Consultant for the Revenue has referred to a technical literature on the subject. He has quoted from SOFTWARE ENGINEERING - A PRACTITIONER's APPROACH (Fourth Edition) by Roger S. Pressman. It has been submitted that maintenance of computer software can be categorized as correctiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Commissioner of Service Tax is yet to adjudicate the show-cause notice. (Demand raised on following revenue streams: Gr.III(A)/2923/07 dated 13 April 2007 1. Software Licensing 2. Software Maintenance 3. Software Consulting 4. Software Training) 4.1. The learned Counsel has also pointed out that, in respect of the same activities (software licensing, maintenance, consulting and training), the Department demanded Service Tax under the head management consultant's service for the period 01.04.2001 to 31.03.2004 by show-cause notice dated 06.05.2005, which was adjudicated upon against the assessee in order-in-original No. 58/2006 dated 26.09.2006. The order of adjudication was set aside by this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant Finance Manager of the appellant company) in this context. Shri Venkatesh Bhat, in his statements, had not referred to any of the show-cause notices issued prior to 26.10.2006 and also had not indicated that the company was not liable to pay Service Tax under the head maintenance or repair service in respect of the services rendered by them to various licensees to whom software packages were granted by the company. Shri Venkatesh Bhat also stated that they had estimated the amount of Service Tax payable under the head maintenance or repair service for the period from October, 2005. He also stated that the company had started paying Service Tax from October, 2005 and also that they had obtained registration in respect of the said service. In one of his statements, Shri Venkatesh Bhat had also agreed that, with the rescission of Notification No. 20/2003-ST, they were liable to pay Service Tax on maintenance or repair service in relation to computer software. According to the learned Consultant, where the liability was accepted atleast for the period from October, 2005, the appellant is not entitled to resist the demand of Service Tax on the ground of limitation. It is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are or enhance its efficiency so as to meet the requirements of the customer. Obviously, the evolving technological environment would require perfective measures to upgrade the software. As we understand, these measures are covered by the terms adaptive maintenance and perfective maintenance mentioned in the above literature. Corrective maintenance and preventive maintenance are two other categories of maintenance of software. It would appear from the literature that, in so far as computer software is concerned, maintenance is an expression of wider connotation unlike maintenance of tangible goods (for instance, maintenance of a vehicle), maintenance of a factual situation (for instance, maintenance of status quo ordered by a court) etc. The wider implications of software maintenance are easily decipherable from the literature supplied by the learned Special Consultant. 5.1. The question now arises as to whether maintenance or repair service as it was introduced on 01.07.2003 as a taxable service under section 65 (64) read with Section 65 (105) (zzg) can be held to have covered maintenance or repair of software. In the case of Tata Consultancy Services (supra), BSNL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technology software, including conducting feasibility studies on implementation of a system, specifications for a database design, guidance and assistance during the startup phase of a new system, specifications to secure a data base, advice on proprietary information technology software ; (v) ................... (vi) ................. (underlinings added). 5.4 The above new taxable service pertains to information technology software. The debate before us was, by and large, in relation to computer software. The Circulars and case-law cited before us were also in the context of discussion on computer software. The new levy w.e.f. 16.05.2008 is in relation to information technology software. The question is whether the computer software and information technology software were treated differently or as same by the legislature. At this juncture, our mind travels to an explanation added to Section 65(64) of the Finance Act, 1994. This explanation which was added w.e.f. 01.06.2007 reads as follows:- For the removal of doubts, it is hereby declared that, for the purposes of this clause. goods includes computer software . This explanation was amended w.e.f. 16.05.2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 05) (zzzze) of the Finance Act, 1994. 5.6 It is settled law today that a new taxable service covered by specific entry under Section 65 of the Finance Act, 1994 will not attract levy of Service Tax under any pre-existing entry. In this connection, the Karnataka High Court's judgment in Commissioner vs. Turbotech Precision Engineering Pvt. Ltd. (dated 15.04.2010) in CEA No. 4/2007 is relevant. The Hon'ble High Court has held that the case of the assessee fell under the definition of 'works contract' and hence it could not be classified as 'consulting engineer's service'. It may be noted that 'works contract' came to be introduced as a taxable service w.e.f. 01.06.2007 only. The service rendered by the above company was for a period prior to the said date. The Revenue wanted to levy Service Tax under the pre-existent head consulting engineer service , which was negatived by the Hon'ble High Court. 6. For the reasons already noted, we hold that the maintenance charges collected by the appellant from their customers during the period from 09.07.2004 to 31.01.2006 are not liable to be subjected to levy of Service Tax under the head 'm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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