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TMI Blog2023 (11) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... Management Repair and Maintenance Services but had observed that the circular issued giving retrospective effect to the amendments made by Finance Act, 2007, cannot be upheld and the same should have no application while deciding the cases for the past period. Thus it is observed that on the issue of the taxation under category of Management Maintenance and Repair Services various benches of tribunal has consistently taken the view that the software maintenance services which are akin to the services provided by the appellant in present case are only taxable from 01.06.2007. Nothing contrary is available on records. Appellant has been paying service tax in respect of these services as submitted by the counsel for appellant with effect from 01.06.2007 - there are no merits in the impugned order. Levy of penalties under Section 76, 77 and 78 of the Finance Act, 1994 - It is contended in the appeal that separate penalties should have been imposed under each section - HELD THAT:- As it is held that the demand is not maintainable in the present case, the issue of imposition of any penalty on the appellant cannot survive. Accordingly, this appeal filed by the revenue asking for impositi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 65 (105) (zzg) of the Finance Act, 1994. 2.3 A show cause notice dated was issued to appellant asking tehm to show cause as to why: (i) Service tax amounting to Rs 2,33,54,306/- (Rupees two crore thirty three lacs fifty four thousand three hundred and six only) should not be demanded and recovered from them under the proviso to Section 73 (1) of Finance Act, 1994 as amended. (ii) Interest as leviable on the above amount should not be recovered from them under Section 75 of Finance Act, 1994 as amended. (iii) Penalty should not be imposed on them under Section 76, 77 and 78 of Finance Act, 1994 for contravention of the provisions of Rule 4, 5. 6. And 7 of the Service Tax Rules, 1994 as amended. 2.4 The show cause notice has been adjudicated as per the impugned order referred in para 1 above. Aggrieved appellants have filed this appeal. 3.1 We have heard Shri Atul Gupta and Shri Prakhar Shukla, Advocates for the appellant and Shri Sarweshwar T Khairnar Authorized Representative for the revenue. 3.2 Arguing for the appellant learned counsel submits: Issue is no longer res-integra and has been decided in the favour of the appellant by the following decisions: IBM I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioning or restoration, or servicing of any goods, excluding a motor vehicle. Explanation - For removal of doubts, it is hereby declared that for the purpose of this clause,- (a) "good" includes computer software; (b) "properties" includes Information technology software. Thus it is seen from the definition that "maintenance and repair service" includes reconditioning or restoration, or servicing of any goods or equipments. In the case of "Software maintenances" actually the services offered in most of the cases is "software up-gradation and its smooth functioning. The party in their defence reply dated 15.09.2008 have themselves admitted that they provide services for (1) Installation or implementation of customized software; (2) Customization of software to be installed; (3) Development of patches or intermediary software which enable the main software to run smoothly onto the operating system environment of the client; (4) Up-gradation of installed software with newer versions, and (5) Enhancement or modification of software by either opening or closing some of the inbuilt features or reports of the software. Therefore I find that by their own admission the services being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r use. Supreme Court has held that software in a media is goods. 4. Any service provided to a customer by any person in relation to maintenance or repair is leviable to service tax under section 65(105) (zzg) of the Finance act , 1994. "Maintenance or repair" is defined under section 65(64) of the said Act. Accordingly, "maintenance or repair" means any service provided in relation to maintenance or repair or servicing of any goods or equipment. 5 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) read with section 65 (64) of the Finance Act, 1994." Actually vide Finance Act, 2007, the government inserted an explanation in the definition of maintenance and repair service stating that "for removal of doubts it has been clarified that for the purpose of this clause goods includes software also. In fact circular No 81/2/2005-ST dated 07.10.2005 was issued in supersession of all earlier circulars therefore party's reliance on circular No 70/19/2003-ST dated 17.12.2003 is not based on legal footings. In view of above, I am of the view that maintenance a& repa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be liable to service tax inasmuch as the same does not amount to maintenance or repair of tangible goods. The Notification dated 21-8-2003 was withdrawn by a Notification dated 9-7-2004 and thereafter, the liability to pay service tax to services relatable to maintenance and repair of computer software were made effective from 1-6-2007. Thereafter, a show cause notice dated 22-9-2009 was issued to the respondent by which service tax to the tune of Rs. 3,41,63,132/- for a period from 9-7-2004 to 6-10-2005 was demanded. The respondent submitted a reply to the aforesaid notice. However, vide order dated 25-8-2009, the adjudicating authority held the respondent liable payment of service tax to the tune of Rs. 3,41,63,132/- for a period from 9-7-2004 to 6-10-2005 along with interest and penalty to the extent of 100% in terms of Section 78 of the Finance Act. The respondent challenged the validity of the aforesaid order in an appeal before the Tribunal. The Tribunal vide order dated 23-7-2015 by placing reliance on decision of the Madras High Court held that software maintenance is exigible for levy of service tax only with effect from 1-6-2007 whereas, the period in question is from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 2007, as stated above. Therefore, the liability for payment of service charge from 2007 which has been imposed by way of statutory incorporation is not in dispute. But the question for consideration is, till passing of the Finance Act, 2007 in the light of specific exemption of information technology from the purview of "business auxiliary service" under the respective Finance Acts. Whether the impugned circular issued by the second respondent can have the effect of imposing the liability of service tax or otherwise and whether the circular issued by the second respondent can be read in super cession of the statutory provisions of the Finance Act in the respective financial years. 8. Therefore, on fact, it is clear that till the advent of the Finance Act, 2007, the information technology which included maintenance of computer software, had been outside the purview of 'business auxiliary service', especially under Section 65 and the term, 'goods' in the Finance Act, 2007 has included 'computer software' under Section 65(105)(zzg). However, under the impugned circular the second respondent placed reliance on the judgment of the Supreme Court in Tata Consultancy Service v. State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of 2007 in the Finance Act, 1994 under Section 65(105)(zzg) also was not given retrospective effect and hence, it cannot be said that the impugned circular attempts to give effect of the provisions or explains the changes proposed in the Finance Act, 2005. 7. Thus, admittedly as per the stand taken by the respondent themselves before the High Court of Madras, it is evident that activity of maintenance of computer software was exempt from the provisions of the Act prior to 2006. We are in agreement with the view taken by the High Court of Madras. It is pertinent to mention here, that in the show cause notice itself no allegations of fraud collusion, misstatement or suppression of facts have been stated against the respondent, therefore, the demand is barred by limitation under Section 73 of the Finance Act, 1994 as well. For the aforementioned reasons, the substantial questions of law are answered in against the appellant and favour of the respondent." As the decision of the Kasturi & Sons have been reproduced in this decision we are taking for our consideration both the decisions simultaneously. The decision of the Hon'ble High Court of Karnataka is based mainly on the concess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the known principles of law as the same would really amount to giving power to a delegated authority to even amend the provision of law enacted by Parliament. Such a contention cannot seriously be even raised." 15. The impugned circular has been issued by virtue of the powers conferred under Section 37B of the Central Excise Act, 1944 which is as follows : 37-B. Instructions to Central Excise Officers. - The Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963), may, if it considers it necessary or expedient so to do for the purpose of uniformity in the classification of excisable goods or with respect to levy of duties of excise on such goods, issue such orders, instructions and directions to the Central Excise Officers as it may deem fit, and such officers and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the said Board : Provided that no such orders, instructions or directions shall be issued- (a) so as to require any Central Excise Officer to make a particular assessment or to dispose of a particular case in a particular manner; or ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the term, 'goods' in the amendment of 2007 in the Finance Act, 1994 under section 65(105)(zzg) also was not given retrospective effect and hence, it cannot be said that the impugned circular attempts to give effect to the provisions or explains the changes proposed in the Finance Act, 2005. 18. The judgment in Collector of Central Excise, Vadodra v. Dhiren Chemical Industries [(2002) 2 SCC 127 = 2002 (139) E.L.T. 3 (S.C.)] on which reliance was placed by the learned counsel for the respondents, wherein it was held that the circular issued by the Central Board of Excise and Customs giving different interpretation for some of the words, would bind the revenue has no application to the facts of the present case. Here, it is not a case of different interpretation of the circular, but it is a case where the circular sought to explain the statutory provisions. 19. Again, in State of Kerala v. Kurian Abraham (P) Ltd. and another [(2008) 3 SCC 582 = 2009 (16) S.T.R. 210 (S.C.) = 2008 (224) E.L.T. 354 (S.C.), the Supreme Court, in the light of the Central Excise Act, 1944 and the Kerala General Sales Tax Act, 1963 and the Central Sales-tax Act, 1956, considered the nature of commod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice tax on software relating to maintenance, repairing and servicing under the Finance Act, 1994 before the period of Finance Act, 2006. No costs. Connected miscellaneous petition is closed." 4.5 However we find that tribunal has dealt with the issue of taxability of this service under the category of "Management Maintenance and Repair Services" and has held as follows: Phoenix IT Solutions Ltd. [2011 (22) S.T.R. 400 (Tri. - Bang.)] 13. The next service under dispute is software maintenance. The learned Commissioner in impugned order has held that e-Care maintenance, website maintenance and data base maintenance are all maintenance contracts for the software used in their website etc. Software are goods and repair of the same are chargeable to Service Tax under the category of management or repair service w.e.f. 9-7-04, the date on which earlier Notification was rescinded by Notification No. 7/04-S.T., dt. 9-7-04. The learned Advocate submitted that it became taxable only w.e.f. 1-6-07 as per the amendment of Finance Act, 1994 and explained in the Circular No. 334/1/2007, dt. 28-2-07. He submitted that this has been totally ignored to demand tax. He relied upon the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion, should not be construed to have a retrospective operation on the premise that it is clarificatory or declaratory in nature. There is no doubt this clarification widen the scope of taxation of service." In any case, the appellants themselves have submitted that the liability can arise after 1-6-07. Therefore, in view of the ratio of the decision in the case of Martin Lottery Agencies Ltd., we consider that it would not be appropriate to apply the explanation retrospectively and levy Service Tax w.e.f. 9-7-04. In any case, the very fact that explanation has been added to clarify doubts, would show that suppression of facts. SAP India Pvt. Ltd. [2011 (21) S.T.R. 303 (Tri. - Bang.)] 5.1 The question now arises as to whether maintenance or repair service as it was introduced on 1-7-2003 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 (supra) and Infosys Technologies (supra), the view taken was that software in any media would also be "goods". The question whether maintenance or repair of software was a taxable service within the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 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. 16-5-2008 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. 1-6-2007 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. 16-5-2008 as follows :- "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear legislative intent in not taxing services unless and until their incorporation in Section 65(105) of Finance Act, 1994. From the incorporation of Section 65(105)(zzzze) effective from 16th May, 2008, it is clear that 'information technology software' or anything related to it was not intended to be taxed prior to that date. That all activities related to that were also not taxable from an earlier date under any other entry is also clear from the amendment to the Explanation in Section 65(64) noted supra from that very date. That the amended Explanation equated 'computer software' with 'goods', the maintenance or repair of which was taxable from an earlier date and equated 'information technology software' with 'property' only when 'information technology software' was made taxable prompted this Tribunal to draw a distinction between the two and hold that the activities of M/s. SAP India Pvt. Ltd., which is distinguishable from the activities of the appellant before us only by the clients being overseas, was liable to tax from 16th May, 2008. 10. We are, therefore, required to arbitrate on the rival contentions that the appellant maintains 'information technology software' or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnologies Ltd.[2018 (8) G.S.T.L. 446 (Tri. - Mumbai)] 4. We have carefully considered the submissions made by the learned AR and perused the records. We find that the period involved in this case is 9-7-2004 to 31-3-2006. During the said period as per the definition of maintenance and repair service, those services which were related to management of properties, maintenance and repair of properties and maintenance and repairs of any goods were covered. In the said definition an explanation was added with effect from 1-6-2007 which reads as follows : "For the removal of doubts, it is hereby declared that for the purposes of this clause, "goods" includes "computer software"." Accordingly, before 1-6-2007, in the definition of maintenance and repairs, the goods did not include the software. Accordingly, the maintenance and repair of software was not considered as taxable before 1-6-2007. The Commissioner (Appeals) placed reliance on the CESTAT decision in the case of SAP India Pvt. Ltd. (supra), wherein the Tribunal has taken the same view and find that maintenance and repair services of the software is not taxable before 1-6-2007. 4.6 Thus we observe that on the issue of the t ..... 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