Custom, Excise & Service Tax Tribunal
Tfl Quinn India Pvt Ltd vs Hyderabad-Iv on 7 August, 2018
(1)
Appeal No: ST/816/2010
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Division Bench
Court - I
Appeal No.ST/816/2010
(Arising out of Order-in-Original No.03/2009-Commr-ST dated 11.12.2009 passed by CCCE,
Hyderabad -IV)
TFL Quinn India Pvt Ltd ..... Appellant(s)
Vs.
CCCE & ST, Hyderabad - IV ..... Respondent(s)
Appearance Shri K. Vijaya Kumar, Advocate for the Appellant.
Shri Dass Thavanam, Superintendent/AR for the Respondent. Coram:
HON'BLE Mr. M.V.Ravindran, MEMBER (JUDICIAL) HON'BLE Mr. P. Venkata Subba Rao, MEMBER (TECHNICAL) Date of Hearing: 07.08.2018 Date of Decision: 07.08.2018 FINAL ORDER No. A/30892/2018 [Order per: M.V.Ravindran.]
1. This appeal is directed against Order-in-Original No.03/2009-Commr-
ST dated 11.12.2009.
2. The relevant facts that arise for consideration, after filtering out unnecessary details are, during the period 01.01.2005 to 31.05.2007 it was noticed that the appellant has paid an amount to their holding company for maintenance of SAP computer software system. The revenue authorities were of the view that the amounts paid by the appellant under this contract to the holding company are liable for service tax under reverse charge mechanism under the category of maintenance or repair services. Appellant contested the show cause notice before the adjudicating authority stating (2) Appeal No: ST/816/2010 that for the period 01.01.2005 to 18.04.2006, the law is settled as to reverse charge mechanism cannot be applied as provisions of Sec.66A of the Finance Act, 1994 came into statute from 18.04.2006; for the period 19.04.2006 to 31.05.2007, the demand is not sustainable as the software which were maintained by the head office were not goods till explanation to word "goods" includes computer software, was inserted into the definition of 'management, maintenance and repair services' which was with effect from 01.06.2007. The adjudicating authority after following due process of law, confirmed the demands raised along with interest and imposed penalties.
3. Learned Counsel submits that prior to 18.04.2006 demand is unsustainable in view of the law being settled by the Apex Court by upholding the decision of Bombay High Court in the case of Indian National Ship Owners Association [2009-TIOL-129-SC-ST] as regards the period pertaining to 19.04.2006 to 31.05.2007, it is his submission that software were not considered as goods for the period in question and had a similar issue, as to whether the said activity of maintenance fall under category of 'management, maintenance and repair services' was concluded by the Tribunal in the case of Larsen and Tubro Infratech Ltd [2017-TIOL-1396- CESTAT-MUM] draws our attention to Para 6.
4. Learned Departmental Representative submits that the adjudicating authority in the impugned order has categorically addressed to the decision of Indian National Ship Owners Association [2008-TIOL-633-HC-MUM-ST] and has stated that Service Tax Rules which were introduced from 16.08.2002 and amended from 01.01.2005 would apply and the tax liability to period prior to 18.04.2006 is also taxable. He would submit that post (3) Appeal No: ST/816/2010 18.04.2006, the service tax liability is correctly demanded as the Apex Court in the case of Tata Consultancy Services [2004 (178) ELT 22 (SC)] have held that the computer software either canned or in other form are goods and are liable to Sales Tax. He would counter the arguments of the learned counsel that Board's clarification issued on 20.02.2007 by TRU Circular No.334/1/2007-TRU is only clarifying issue of development of computer software will not fall under maintenance or repairs of computer software.
5. On careful consideration of submissions made on both sides and perusal of records, we find that the period of tax liability arisen in this case is correctly stated as 01.01.2005 to 31.05.2007. The demand is based on reverse charge mechanism for the amounts paid by the appellant to their holding company.
6. As regards the submissions made by the learned counsel that for the period 01.01.2005 to 18.04.2006, the demand on the Service Tax liability under reverse charge mechanism is not sustainable, has got strong force. Provisions of Sec.66A of the Finance Act, 1994 was brought into statute with effect from 18.04.2006, which enabled the Government to tax the amounts under reverse charge mechanism holding service recipient as service provider. This law is now settled by the Apex Court in the case of Indian National Ship Owners Association by holding decision of the Hon'ble High Court of Bombay in the same case (supra) wherein the Lordships have categorically held that before enactment of Sec.66A, there was no authority vested with the Government to levy service tax on the amounts paid for services received from outside India. Respectfully, following the same, we (4) Appeal No: ST/816/2010 hold that for the period from 01.01.2005 to 18.04.2006, service tax liability would not arise on appellant under reverse charge mechanism.
7. Post 18.04.2006, the period involved in this case is, according to the revenue, liable for tax under reverse charge mechanism. Provisions of Sec.66A of the Finance Act, 1994 are applicable from 18.04.2006 and would apply in full force to all the remittances made by assessee for receiving services in India is the law which has been settled. In the case in hand, for the period in question, i.e., 19.04.2006 to 31.05.2007, the demand has been raised under maintenance or repair services. the reasoning given by adjudicating authority is that software maintenance is also a maintenance of goods. For this purposes, he relied upon the decisions of the Apex Court in the case of Tata Consultancy Services (supra). We would find from the records that the appellant has been citing the TRU Circular No.334/1/2007- TRU dated 20.02.2007 which specifically states as under:
"Management, Maintenance or Repair Service:
Section 65(64) amended to clarify that "goods" for the purpose of this service includes computer software. Consequently, maintenance or repair of computer software will be leviable to Service Tax under this category. It may be noted that development of computer software is distinct from maintenance or repair of computer software and development of computer software continues to be not leviable to service tax being an "information technology service."
8. This was also considered by the learned Commissioner in the impugned order but misconstrued the clarification. On plain reading of the above clarification given by Board, it would mean that amendment to word that "goods" would also include software and will be leviable under management, maintenance or repair service with effect from 01.06.2007 when the said explanation was brought in to the definition of management, maintenance or repair service. We find that learned counsel was correct in pointing out that similar issue came up before the Tribunal in the case of (5) Appeal No: ST/816/2010 Larsen and Tubro Infratech Ltd (supra) (one of us, M.V.Ravindran was a member in that order) the Bench was considering the taxability of the contract entered by the appellant therein with various purchasers for maintenance of IT infrastructure. The Bench after considering the decision of SAP India Pvt Ltd and various other decisions in Para 6 held as under:
"6. There is no doubt that the definition of maintenance or repair of software relates to properties, whether movable or immovable and it has been held that software is goods. Consequent upon this, the explanation was inserted in section 65(105)(zzg) and as pointed out supra, this Tribunal has considered in Phoenix IT solutions whether the insertion of the explanation could further the case of Revenue for demand tax from the date that the service was made taxable. Taking all factors into consideration, the Tribunal has held that there is no retrospective application by insertion of the explanation. The period under dispute in the present case is from 9th July, 2004 to 6th October, 2005."
9. It can be seen from the above reproduced relevant Para, the explanation which was added to bring into tax net, the computer software as goods was held to be effective from 01.06.2007 only. In the case in hand, it is submitted and not disputed by the revenue that from 01.06.2007 appellant has started discharging appropriate Service Tax liability on the payments made by them under reverse charge mechanism.
10. In view of the foregoing, we hold that period post 19.04.2006 to 31.05.2007; the demands confirmed by the adjudicating authority are unsustainable and liable to be set aside. The impugned order is set aside as indicated herein above and the appeal is allowed.
(Dictated and pronounced in the open Court)
(P.VENKATA SUBBA RAO) (M.V. RAVINDRAN)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
Veda