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TMI Blog2023 (12) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... ut, the dispute arose only after introduction of the service tax on Information Technology Software Service w.e.f. 16/05/2008. It is to be noted that even after introduction of the service tax on the Information Technology software Service more or less on similar line of definition of Information Technology software already present under supplementary note of Chapter 85 of CETA, 1985 and the classification of the said software under Chapter Heading 8523 of CETA, 1985 continued in the Central Excise Tariff Act without any amendment or alteration to the same. In other words, the intention of the Legislature was continuation of levy of excise duty on the activity of manufacture and sale of Information Technology software and also levy service tax for providing Information Technology Software service. Whether the same activity of supply/sale of customized software by the Appellant could be chargeable to Excise duty and/or also service tax post 16.5.2008 as admittedly there is no change in the facts and circumstances of the case? - HELD THAT:- It is found that more or less similar question has come up before the Hon ble Supreme Court in the case of BHARAT SANCHAR NIGAM LT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the appellant. In the present case, the Purchase Orders placed by the customers on the appellant reveal that the transaction between the appellant and their customers are not for supply of software as that of a service , but it is sale of the customized software on a CD as part of the DCS; accordingly, the same should be considered as excisable goods and not as service , precisely, ITSS. The impugned orders are set aside - Appeal allowed. - HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL) AND HON'BLE MRS. R. BHAGYA DEVI, MEMBER (TECHNICAL) APPEARANCE: For the Appellant : Mr. K. Parameswaran, Advocate. Mrs. D.S. Sangeetha, Addl. Commissioner (AR), Mr. P. Saravana Perumal, Addl. Commissioner (AR), Mr. K.A. Jathin, Deputy Commissioner (AR) and For the Respondent : Mr. H. Jayathirtha, Supdtt. (AR). PER: D. M. MISRA These six appeals are filed against the respective Orders-in-Original passed by the Commissioner of Central Excise, Bangalore. The details of appeals are tabulated as under:- Sl.No. Appeal No. Impugned order No. Date Period Service Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Stations (FCS) and Operator Stations and (ii) Software comprising of operating software, system software and application software. The customers of the appellant place purchase orders for supply of entire DCS; the software component is supplied for enabling application and processes to be carried out using the customer specific hardware supplied thereof. The basic software modules are imported in recorded media from their parent company viz. Yokogawa Electric Corporation, Japan and other group companies in Singapore and on which applicable CVD was paid at the time of import as a packaged/canned software. The software modules imported which are specific and unique for each of the hardware is further developed and customized by the appellant depending on the requirement of individual customers. The appellants are also registered for providing various taxable services viz. Maintenance or Repair Services, Management Consultancy Service, Material Handling Service, Online information and database retrieval service, Commercial training and coaching service, Erection, Commissioning and Installation Service, Business Auxiliary Service, Intellectual Property Right Services and Transport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplied and for which a separate price has been agreed upon and thus, prima facie, even if any such process of development, modifications etc. is undertaken by the appellant on the software imported, it would at best be in the nature of only self-service thereof. It is his contention that the activities such as development, modifications etc. of software, the same cannot be construed as rendered to any other person/client, hence not a taxable service. In support, he has referred to the judgment of this Tribunal in the case of CMS (I) Operations Maintenance Co. P. Ltd. Vs. CCE [2007(7) STR 369] which has been later upheld by the Hon ble Supreme Court reported in 2017(4) GSTL J75. 6. Further, he has submitted that in the appellant s own case reported in 2005(187) ELT 50, it has been held by the Tribunal that software is a distinct commercial commodity and since the said order of the Tribunal was not challenged, it attained finality. In support, he has also referred to the decision of Tribunal in the case of CCE Vs. ABB Ltd. [2005(190) ELT 455]. He has further vehemently argued that when software is sold/cleared only in a recorded media like CDs, it would beco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same position continued to be covered under the scope of negative list specified in Section 66D(f) of the Finance Act, 1994 w.e.f. 01/07/2012. Thus, any activity that amounts to manufacture or production of goods, which automatically get excluded from the scope of levy of service tax, since even as per Section 66B, w.e.f. 01/07/2012, service tax can be levied only on such services other than those specified in the negative list. 9. Further, the ld. Senior counsel has submitted that for the period up to 30.6.2012 what is excluded specifically under one category of service namely, Business Auxiliary Service cannot be subjected to service tax under any other category of service, including under the Information Technology Software Services. In support they placed reliance in the case of Dr. Lal Path Lab Vs. CCE - 2006 (4) STR 527 followed in the case of Federal Bank Ltd. Vs. CCE - 2008 (10) STR 320 and upheld by Kerla High Court. He has further submitted that the Department cannot approbate and reprobate simultaneously on the same issue and cannot also demand duty/tax indirectly when the same cannot be demanded directly. In support he referred to the judgement of Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case, particularly since the decision in the case of BSNL s case rendered by a Bench comprising of three judges of the Hon ble Supreme Court. 12. It is submitted that the decision of the Hon ble Madras High Court in Infotech Software Dealers Association relied upon by the Department also not applicable to the facts of the present case as in paragraph 22 of the said judgement it is held that if customised software sold through a medium of Internet, the same could not fit into ambit of IT software of any media and thus does not satisfy the requirements of being goods. It is further submitted that the said judgement upholds the levy of service tax, but does not lay down any proposition to the effect that the customised software will have to treated as only service for the purpose of levy of service tax, particularly after introduction of the said ITSS thereof. 13. Further it is submitted that the judgement of Infosys Ltd cited by the revenue is clearly distinguishable, since the assessee in the said case considered Finnacle Software w.e.f 16.5.2008 as a service and the contention was that the said software cannot be charged to Excise duty as packaged or canned software. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation software by taking into account various engineering inputs provided by customers and process consultants, based on the imported DCS software modules, which are specific to each other and sub-modules of which are configured on job work basis to meet each of the customer s requirements would amount to customization of software. He has contended that certain standard software packages are brought, modified or upgraded to suit the requirement of the customers. The modification may be to adapt to the need of the customers or upgradation or enhancement or implementation of the software. Packaged or canned software intended for multiple uses, though considered as excisable goods, the sale/supply of which will also be considered as service being rendered and the consideration paid or payable for transfer of the right to use such packaged or canned software is subjected to service tax. In support, the Ld. AR has referred to the judgment of the Hon ble Supreme Court in the case of CC, CE ST Vs. Suzlon Energy Limited (Judgement dt. 10/04/2023), Yokogawa India Ltd. Vs. CC, Bangalore [2008(226) ELT 474 (Tri. Bang.)], Infotech Software Dealers Association Vs. UOI Others [2010(8) TMI 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge devices u 16% 8523 52 Smart cards; 8523 52 20 Memory cards u 12% 8523 52 90 Other u 12% 8523 59 Other; 8523 59 10 Proximity cards and tags u 12% 8523 59 90 Other u 12% 8523 80 Other: 8523 80 10 Gramophone records u 16% 8523 80 20 Information technology software u 8% 8523 80 30 Audio-visual news or audio visual views u 16% 8523 80 40 Children s video films u 16% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment. Section 65(105)(zzzze): Taxable service means any service provided or to be provided, to any person, by any other person in relation to information technology software including (i) development of information technology software, (ii) study, analysis, design and programming of information technology software, (iii) adaptation, upgradation, enhancement, implementation and other similar services related to information technology software, (iv) providing advice, consultancy and assistance on matters related to information 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 database, advice on proprietary information technology software, (v) providing the right to use information technology software for commercial exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Information Technology Software Service w.e.f. 16/05/2008. 22. The claim of the Revenue is that after introduction of the levy of service tax on Information Technology Software service w.e.f 16.5.2008, the imported software, customized and supplied with DCS by the appellant is a service as defined under Section 65(53a) read with taxable category of Section 65(105)(zzzze) of the Finance Act, 1994, and accordingly leviable to service tax. 23. It is to be noted that even after introduction of the service tax on the Information Technology software Service more or less on similar line of definition of Information Technology software already present under supplementary note of Chapter 85 of CETA, 1985 and the classification of the said software under Chapter Heading 8523 of CETA, 1985 continued in the Central Excise Tariff Act without any amendment or alteration to the same. In other words, the intention of the Legislature was continuation of levy of excise duty on the activity of manufacture and sale of Information Technology software and also levy service tax for providing Information Technology Software service. Thus, the precise question is, whether the same activi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to sales tax. In our opinion the High Court ought not to have finally determined the issue. In any event, the High Court erred in including the cost of the service in the value of the SIM card by relying on the aspects doctrine. That doctrine merely deals with legislative competence. As has been succinctly stated in Federation of Hotel Restaurant Association of India v. Union of India (1989) 3 SCC 634 - subjects which in one aspect and for one purpose fall within the power of a particular legislature may in another aspect and for another purpose fall within another legislative power. They might be overlapping; but the overlapping must be in law. The same transaction may involve two or more taxable events in its different aspects. But the fact that there is overlapping does not detract from the distinctiveness of the aspects . No one denies the legislative competence of States to levy sales tax on sales provided that the necessary concomitants of a sale are present in the transaction and the sale is distinctly discernible in the transaction. Thus, their Lordships after laying down the guiding principle in deciding the transaction whether results into sale of sim cards or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicability of that provision would depend upon the individual transactions which could be established before the authorities as and when the demand is made. 26. Therefore, in view of above laid down principles, what is necessary in a given case is to examine the true nature of transaction between the parties to the contract to ascertain whether the transaction is a sale or service. The learned senior counsel for the appellant argued by referring to various Purchase Orders enclosed with the appeal paper book that the intention of the parties to the transaction is that of a sale of the software as goods before and after 16.5.2008. The appellant has not retained any title to the software after it is customized and sold by putting the same in the form of CD along with DCS. 27. The Purchase Order placed on the Appellant referred above is for design, engineering, manufacture, procurement, painting, supply, testing at work, inspection, transportation and delivery at site of the entire DCS for the Illmenite Beneficiation Plant. The scope of work also mentions the supply which includes design, engineering, manufacture, procurement, painting, supply, testing at work, inspection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules which are specific to each other and the subject modules of which are configured on job work basis to meet each of the customers requirements, would amount to customization of software. The modifications may be adopted to the need of the customer or upgradation or enhancement or implementation of the software. Thus, the activity of customizing the software would fall within the meaning of Information Technology Software Service and gets classified under taxable category of Information Technology Software Service. 29. We are of the view that the learned Commissioner has misdirected himself in understanding the scope of the applicability of excise duty on manufacture of Information Technology Software and levy of service tax on Information Technology software service introduced w.e.f 16.5.2008 and applying the same to the facts of the present case. No doubt excise duty or service tax is leviable on the Information Technology software if sold/supplied after 16.5.2008 as an excisable goods or as a service, as the case may be, but the said levies cannot be imposed simultaneously on the same activity/transaction. In a given case it needs to be examined whether excise duty is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CTA, 1975 and claimed NIL rate of customs duty under Notification No. 21/2002 for BCD and Notification No. 20/2006 for CVD. During the course of audit, it was objected that the drawing and designs are chargeable to service tax under the category of Design Services for the period June 2007 to September 2010. It is argued before the Supreme Court that once the Drawing and Designs are considered as goods by Customs authorities, it cannot be considered for levy of service tax. The Hon ble Supreme Court has rejected the argument. Their Lordships observed that merely because the Customs Notification considered the same as goods , hence, the said activity cannot be considered for tax as service is not the correct proposition as the levy is on different aspects. Reversing the judgment of the Tribunal which held on the said premise that the design and drawings are goods but not service, their Lordships remanded the matter to the CESTAT to examine the issue. In delivering the said judgment, their Lordships referred to its earlier judgment in BSNL s case. In other words, without scrutiny of the intention of parties, merely because the relevant customs Notification refers to drawing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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