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TMI Blog2016 (11) TMI 1446X X X X Extracts X X X X X X X X Extracts X X X X ..... law from the perspective of whether assessee is liable to pay service tax under BAS on reverse charge basis, in terms of Section 66A of the Act, read with Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 - In the instant case, the recipient (assessee) of service (BAS) is in India. The service have been provided by the subsidiaries/sub-contractors, who stand paid by the assessee. The instant case is, therefore covered for demand of service tax under BAS on reverse charge basis under Section 66A of the Act read with the said Rules - However, when we look at the nature of the service rendered abroad, we find that it is in the nature of Information Technology Service (ITS). There was an exclusion for ITS from the definition of BAS which was deleted only with effect from 16-5-2008 when the service of ITSS was introduced in the statute. Consequently, there can be no demand for service tax under BAS up to 15-5-2008. Consequently, demand is upheld under BAS only from 16-5-2008 and the matter is remanded to original authority for requantification of demand.. Whether in the present case, if the assessee pays the service tax demanded, the same will be av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On completion of investigation, a show cause notice dated 10-9-2009 was issued demanding service tax to the extent of ₹ 14,45,68,036/- along with interest as well as imposition of penalties under Sections 76, 77 and 78 of the Finance Act, 1994. The show cause notice was finalised by the Commissioner with the issue of the impugned order. 3. The Revenue s appeal challenges the dropping of service tax demand on the following counts : (i) Demand amounting to ₹ 9,30,090/- has been dropped taking the view that the same is not covered under Information Technology Software Service (ITSS) inasmuch as it was a customised software. Revenue s contention is that customised software supplied in any form stands included in the ITSS. (ii) Demand amounting to ₹ 56,74,716/- has been dropped by taking the view that the demand is not sustainable under Intellectual Property Service (IPS) . Revenue is aggrieved with this and they have argued that transferring the right to use the software would amount to IPS. 4. In the appeal filed by the assessee they have challenged the demand for service tax on Management, Maintenance or Repair Service as well as under Bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Pakshirajan, ld. Departmental Representative for Revenue and Shri G. Shivadass, ld. Advocate for the assessee. 6. At the outset, we will deal with the appeal filed by Revenue. (i) Revenue has also appealed against the dropping of demand to the extent of ₹ 9,30,090/- on the supply of software to M/s. TATA Consultancy Services (TCS), Chennai for ultimate use by the customer in Nepal. The demand was dropped by the ld. Commissioner by taking their view that it was software supplied in media and not electronically and hence does not amount to the service of development of software. It was a customized software developed by the assessee for the use of its Nepal buyers through TCS, Chennai. The plea of the assessee is that it was supplied in media and was not supplied electronically and hence does not fall within the definition of ITSS. ITSS includes various types of software services such as conducting feasibility status, providing specifications, providing advice on software, acquiring right to use the software, etc. However, mass produced software products which are sold off the shelf are treated as goods and charged to excise duty and hence not covered under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circular dated 17-12-2003 clarified that maintenance of software is not chargeable to service tax. The position subsequently underwent a change, consequent upon the decision of the Hon ble Supreme Court in the case of TATA Consultancy Services v. State of Andhra Pradesh (supra). The Apex Court observed that branded software also known as canned software sold off the shelf, falls within the definition of goods and hence chargeable to sales tax. On this basis, C.B.E. C. clarified that software being goods, any service in relation to maintenance or repair service in a software is leviable to service tax under Section 65(64) of the Act. Based on such a decision of the Apex Court as well as C.B.E. C. circular, the assessee started discharging service tax on support charges from 2005 under the category of MMR service. However, in the present proceedings, demand stands made for payment of service tax on the various charges recovered by the assessee. The main activities undertaken under support charges are assistance related to operational usage of the software, to identify and verifying the defects in the software, advice on works around identified defects, offering upgraded versio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the impugned order, ld. Commissioner has confirmed the demand for the period April, 2005 to May, 2008. Show cause notice stands issued on 10-5-2009. We direct the original authority to limit the demand to the normal time limit. For this limited purpose, the matter is remanded to the original adjudicating authority. 8. Now, we turn to the demand made under the category of Business Auxiliary Service (BAS). After the supply of the software to the foreign customers and transfer of the licence, the assessee undertakes customization and implementation of the software on their clients premises. Such activity is carried out through subsidiaries of the assessee set up in different parts of the world. Wherever such subsidiaries are not set up, they outsource such work to other independent service providers. In both cases, the assessee pays to the subsidiaries/sub-contractors, the relevant charges. Demand stands raised for service tax under BAS on reverse charge basis for the amounts paid to both categories of service providers. From May, 2008, the assessee set up branch offices (in place of subsidiaries) through which the said activities were carried out. 9. From the facts, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity for requantification of demand. 10. The assessee has also placed argument about revenue neutrality. Their submission is that any service tax paid by them will be eligible as Cenvat credit under Rule 9(l)(e) of the Cenvat Credit Rules, 2004. The claim of the assessee is that since they will be entitled to take the credit of the service tax as soon as paid by them, the entire service tax demand became revenue neutral. They have also relied upon the decision of the Larger Bench of the Tribunal in the case of Jai Yuhshin Ltd. v. CCE, New Delhi [2000 (119) E.L.T. 718 (Tri.-LB)], in which Larger Bench has held as follows :- 13. In the light of the above discussion, we answer the reference as under : (a) Revenue neutrality being a question of fact, the same is to be established in the facts of each case and not merely by showing the availability of an alternate scheme; (b) Where the scheme opted for by the assessee is found to have been misused (in contradistinction to mere deviation or failure to observe all the conditions) the existence of an alternate scheme would not be an acceptable defence; (c) With particular reference to Modvat scheme (which has occ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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