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TMI Blog2024 (8) TMI 607X X X X Extracts X X X X X X X X Extracts X X X X ..... ch levy. In the case of CARRIER POINT VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR [ 2018 (3) TMI 1288 - RAJASTHAN HIGH COURT] , the Hon ble High Court of Rajasthan, was dealing with the question whether service tax can be levied on the amount received prior to the date of levy when registration and invoice could not be raised to collect indirect tax and provisions of Provisional Collection Act were not applicable and Section 66 of the Act, impose the levy with effect from 01.07.2003. Their Lordships have held that 'any payment of contract which are entered after 1-7-2003 will invite Service Tax and any contract which is concluded prior to 1-7-2003 will not invite imposition of Service Tax.' In the present case, admittedly all the invoices and payments were made prior to 16.05.2008 when service tax was levied on software services under ITSS. Therefore, in view of the above decision, the question of levying Service Tax on the invoices and payments prior to 16.05.2008 when the service itself was not leviable to tax, cannot be sustained. Clause (5) of Notification No.7/2005 relied upon by the Revenue supports the case of the appellant as the entire consideration for services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese software updates are improved releases of the software program licenses updated and improved versions of base software programs which M/s. Oracle Systems Corporation, USA keeps developing on an ongoing basis through research and development. On all the software updates sold on or after 16.05.2008, Service Tax was paid since the Information Technology Software Service (ITSS) under Section 65(105)(zzzze) came into effect from 16.05.2008. For the software updates sold under the invoices issued prior to 16.05.2008 where services were continued to be provided even after 16.05.2008, that part of value of services which were provided or to be provided on or after 16.05.2008 are liable for payment of Service Tax on pro-rata basis is the contention of the Department. Accordingly, based on the definition of ITSS, the appellant was liable to pay duty for the software updates which were used in the course of business. Show-cause notice dated 26.08.2010 was issued for the period 2008-09 and 2009-2010, demanding duty of Rs.15,50,51,472/- which was confirmed vide the impugned Order-in-Original No.146/2011 dated 30.08.2011. The Commissioner invoking suppression on the part of the appellant, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Taxable event is their right to use information technology software, which is granted and extinguished on the date the agreement is entered into. There is no additional transaction between the Appellant and the customer. There is no allegation, let alone any findings that any updates have been provided post 16.05.2008 for contracts entered into prior to 16.05.2008. During the period in question, Rule 6 of the Service Tax Rules, provided for point of taxation. Rule 6 provides that the tax has to be paid when the payment for such service has been received. The payment has been received prior to 16.05.2008. Therefore, there can be no levy of Service Tax. Moreover, the artificial bifurcation of the value of the transaction of the single supply in two parts i.e. Prior to introduction of the levy and after the introduction of levy, is illegal and beyond the statutory provisions. Relying on the decision of the Tribunal in the case Bajaj Alliance General Insurance Company Ltd Vs CCE: 2009 (13) S.T.R 259 (Tri-Mumbai) which was upheld by the Hon ble Supreme Court as reported at 2022 (64) G.S.T.L 513 (S.C), the learned Counsel submits that no tax can be levied on the contracts issued and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not the rate of 8% consequently, We answer the question in the favor of Respondent and against the Appellant. 3.3 Reliance is also placed on the decision of the Tribunal in the case of Principal Commissioner of CGST and Central Excise, Bhopal vs. M/s.S.R.Traders: 2023-TIOL-558-CESTAT-DEL, which was upheld by the Hon ble Supreme Court as reported at 2023-VIL-80-SC-ST. The learned Counsel further submits that they are on a better footing as compared to the case of M/s.S.R Traders case (supra), as in that case though the agreements were entered into prior to 01.04.2016, the contention of the Department was that the payments were received after April, 2016, and hence, the appellant would be liable to pay service tax, in contrast in the present case all the events have taken place prior to 16.05.2008. 3.4 The learned Counsel relying on the decision of the Hon ble High Court of Uttarakhand in the case of Commissioner vs. Indian Institute of Petroleum as reported at 2008 (12) S.T.R 113 submitted that even though the validity of the software updates was beyond 16.05.2008 the question of collecting service tax from the clients did not arise either at the time of raising the invoice or at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire demand is subject to limitation. It has been submitted that the entire demand is time barred. The appellant submits that the department undertook audit in the September, 2008 and all the documents and records were provided to the Department at the time of investigation but the show-cause notice was issued in 2010. The show-cause notice was clearly an after thought as it was issued only after the Appellant filed an application for refund of the Service Tax and interest paid under protest during the Director General of Central Excise Intelligence (DGCEl) investigation. 4. The Authorised Representative on behalf of Revenue reiterating the findings of the impugned order submitted that though the payments are made prior to 16.5.2008, the services for the whole Calander Year which falls beyond 16.5.2008, the appellant is liable to pay Service Tax on the services rendered on or after 16.5.2008. It is also submitted that though the appellant was aware that ITSS services were liable to duty from 16.05.2008, they failed to disclose the same in their returns and hence, extended period is to be sustained. He also relied on the decision of United India Insurance Co. Ltd. vs. Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elhi, visited the premises on 11.11.2008 and during their investigations, it was noticed that specified contracts executed by the appellant prior to 16.05.2008 were valid for a period on or after 16.05.2008. Since the service ITSS was introduced from 16.05.2008 under clause (zzzze) of Section 65(105) of the Finance Act 1994, the appellant was liable to pay Service Tax on all software services. The appellant on 30.03.2009 deposited amount of Rs.15,33,00,824/- without admitting or accepting any liability towards the Service Tax. Since no action was taken after that, the appellant filed a refund claim dated 19.03.2010 which was acknowledged by the department on 22.03.2010. Thereafter, show-cause notice dated 28.06.2010 was issued to deny the refund claim on the ground that the enquiry proceedings were pending before that DGCEI and it had not attained finality and also on the ground of unjust enrichment. The same was adjudicated by the original authority and upheld by the Commissioner (Appeals) vide the impugned Order-in-Appeal No. 517/2011 dated 10.12.2011, the Original Authority rejected the refund on the ground that it is premature in nature and directed the appellants to keep the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows: Software duplication and distribution licence agreement: This agreement is effective as of the 1st day of June Two Thousand and Three by and between; Oracle Corporation, A corporation duly created, organised and existing under and by virtue of the laws of the United States of America, having its principal space of business at . and Oracle India Pvt. Ltd. a company duly incorporated and registered in India . Under definitions at para 1 of the Agreement updates shall mean improved releases of the programs which generally are made available to supported sub-licencees. Updates shall not include any options or future products which are licensed separately. Under consideration at para 5 of the Agreement, it is stated that in consideration of the rights and licenses granted under Clause (1) above. Licensee shall pay to the Licensor royalty / sub-license fee . as program(s) license, updates and product supply revenue. As seen from the above Agreement, it is undisputed fact that it was signed prior to 16.05.2008 and the invoices that surfaced during the investigation which forms part of the notice clearly shows payments were also received prior to 16.05.2008 and all the softwar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly because their validity periods extend beyond 16.05.2008 cannot be the criteria for levy of service tax. Nowhere the provisions of service tax call for such levy. 6. In the case of Carrier Point (supra), the Hon ble High Court of Rajasthan, was dealing with the question whether service tax can be levied on the amount received prior to the date of levy when registration and invoice could not be raised to collect indirect tax and provisions of Provisional Collection Act were not applicable and Section 66 of the Act, impose the levy with effect from 01.07.2003. Their Lordships have held that: 30 . The assessee herein has entered into a concluded Contract much prior to coming into force of Service Tax law and in view of the clarification which has been issued in 2005 which clearly made out the case for the appellant inasmuch as the legislation has now used the language after 2005 which clearly states as under; Taxable service means any service or to be provided to any person by a Commercial training or coaching classes in relation of the Coaching . 31 . In that view of the mater, it is very clear that prior thereto, there is authority interpretation of the provision as services which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s come to the conclusion that collection of advance for the value of said service shall not therefore be the taxable event unless the service is rendered. In other words, receipt of value of service is secondary to the rendering of service . Coming to such a conclusion, the adjudicating authority relies upon the clarification given in Circular No. 65/14/2003 dated 5-11-2003. 12 . The provisions of Finance Act, which covers the services rendered by the appellants are given under Section 65(49) general insurance business . In the said Section further definitions of insurance agent and insurance auxiliary service are also given, which are as under :- Insurance agent has the meaning assigned to it in clause (10) of section 2 of the Insurance Act, 1938. Insurance auxiliary service means any service provided by an actuary, an intermediary or insurance intermediary or an insurance agent in relation to general insurance business or life insurance business and includes risk assessment, claim settlement, survey and loss assessment. 13 . The taxable services, i.e., considered for discharge of service tax liability are enumerated in the sub-section 65(105). The taxable services in this case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2008 was raised and the license to use the software was granted only after this payment. Since, the occurrence of the event happened after 16.05.20008, the appellant was liable to pay service tax. It is categorically noted by the Tribunal the service has been supplied only after information technology software was brought under the tax net and hence subject to levy. Contrary to the above facts, in the present case, undisputedly the agreement has been signed on 1st June, 2003 and the all the invoices on software updates are admittedly issued and payments made prior to 16.05.2008. Therefore, only because the validity of the software update is for a Calander year and a part of the period falls after 16.05.2008, there cannot be a levy of service tax as per the provisions of law. 6.4 The reliance placed by the Revenue on the advances is not relevant to this case. As rightly pointed out by the learned counsel, Clause (5) of Notification No.7/2005 relied upon by the Revenue supports the case of the appellant as the entire consideration for services was received prior to 16.05.2008 and no service tax shall be payable for the part or whole of the value of the services which is attributed t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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