Custom, Excise & Service Tax Tribunal
Infosys Ltd vs Bangalore Service Tax- I on 24 September, 2025
Service Tax Appeal No. ST/3176/2011
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 2
Service Tax Appeal No. 3176 of 2011
(Arising out of Order-in-Original No. 22/2011 dated 27.10.11 passed
by the Commissioner of Central Excise, Bangalore II
Commissionerate, Bangalore.)
M/s. Infosys Limited
No. 100, Hosur Road,
Electronics City,Bangalore . ........Appellant(s)
VERSUS
The Commissioner of Central Excise,
Bangalore - II Commissionerate,
Central Revenue Building,
Bangalore - 560 001. ......Respondent(s)
APPEARANCE:
Mr. N. Anand, Advocate for the Appellant Mr. Neeraj Kumar, Superintendent (AR) for the Respondent CORAM:
HON'BLE MR. P.A. AUGUSTIAN, MEMBER (JUDICIAL) HON'BLE SMT. R. BHAGYA DEVI, MEMBER (TECHNICAL) Final Order No. 21547 /2025 Date of Hearing: 30.04.2025 Date of Decision: 24.09.2025 Per: P.A. Augustian The issue in the present appeal is regarding service tax liability on the Appellant for providing maintenance and repair services for the period from 09.07.2004 to 30.11.2005. Appellant is primarily engaged in development of software and Page 1 of 6 Service Tax Appeal No. ST/3176/2011 also undertake maintenance and repair of different softwares. Alleging that the activity as classifiable under the category of repair and maintenance, proceeding was initiated and the Adjudicating authority as per the impugned order confirmed the demand and also imposed penalty under various provisions of law. Aggrieved by said order, present appeal is filed.
2. When the appeal came up for hearing, the Learned Counsel for the Appellant submits that the Appellant is a public limited company and is the owner of and/or has acquired rights to certain proprietary software known as "Finacle Core Banking Software" and related document. Appellant has granted license to install and use the said "Finacle Software" to its customers in terms of Software License and Services Agreement is entered with them. In terms of said Software License and Services Agreement, the Appellant also provides maintenance or repair/upgrades of software (including Third Party Software, if agreed) for which separate consideration is charged. The lis in this appeal pertains to taxability of maintenance of its banking software "Finacle" licensed to various banking customers during the period of dispute. It is the submission of the Appellant that insofar as any taxable services in relation to "computer software"
it was always excluded/exempted from the levy of service tax during the entire period of dispute.
3. When the appeal came up for hearing, the Learned Counsel for the Appellant draw our attention to large number of communications made by the Appellant with Respondent regarding taxability of the activity from 21.12.2005 to 21.04.2006. The Learned Counsel further submits that the activities of the Appellant were subject to scrutiny by the audit and also draw our attention to various audit enquiries dated 25.09.2009, 31.08.2009 were different issues are raised and when Appellant furnished satisfactory reply, such objections were dropped. In respect of maintenance or repair of software Page 2 of 6 Service Tax Appeal No. ST/3176/2011 provided by the Appellant, the Appellant did not pay any service tax since they believed in bona fide that services in relation of maintenance of software or any information technology software services were not taxable or exempted from payment of service tax. However, pursuant to issue of Board Circular No.81/2/2005- ST dtd. 07.10.2005, the Appellant promptly obtained ST registration under the category of "management, maintenance or repair service" and started paying service tax from 07.10.2005 onwards (though there was no liability to service tax even from 07.10.2005 till 01.06.2007). Total service tax paid from 07.10.2005 till 18.04.2006 was Rs.1,44,14,546/-. The correspondence(s) with the Service Tax department on the subject matter involved in this appeal was between 21.12.2005 to 21.04.2006. The Learned Counsel also draws our attention to the Circular dated 07.10.2005 and submits that the issue was considered by the Hon'ble High Court of Madras in the matter of M/s Kasturi & Sons Ltd Vs. Union of India (2011 (22) STR 129 (Mad.) where it is held that:-
"4. Under the impugned circular issued, the second respondent relied upon the judgment of the Supreme Court in M/s. Tata Consultancy Services v. State of Andhra Pradesh ((2004) 178 ELT 22 (S.C.) (2005) 1 SCC 308] and observed that software being 'goods', any service in relation to maintenance or repairing or servicing of software is liable for service tax under Section 65(105)(zzg) read with Section 65(19) of the Finance Act, 1994 and hence, the circular is in supersession of earlier circulars.
4. The Learned Counsel also relied on the judgment of the Hon'ble High Court of Karnataka in the matter of Principal Commissioner of Service Tax, Bangalore Vs. M/s. IBM India Pvt. Ltd. (2021 (47) GSTL 7 (Kar) where it is held that:-
"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 Page 3 of 6 Service Tax Appeal No. ST/3176/2011 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 favor of the respondent".
5. The Learned Counsel also relied on the following decisions in this regard.
i. Pr. CST Vs. IBM India P. Ltd, 2021 (47) GSTL 7 (Kar.) ii. Kasturi & Sons Ltd Vs. UOI, 2011 (22) STR 129 (Mad.) iii. CCE Vs. Staarship Technologies Ltd, 2018 (8) GSTL 446 (Tri.-Mumbai) iv. SAP India P. Ltd Vs. CCE, 2011 (21) STR 303 (Tri.-Bang.) v. Phoenix IT Solutions Ltd Vs. CCE, C & ST, 2017 (52) STR 182 2 (Tri.-Hyd.) vi. Oracle Financial Services Software Ltd Vs. CST, 2015 (40) STR 316 (Tri.-Mumbai) vii. EBZ Online P. Ltd Vs. CCE, 2011 (22) STR 185 (Tri.-Mumbai) viii. Continental Foundation Jt. Venture Vs. CCE, 2007 (216) ELT 177 (SC) ix. Jaiprakash Industries Ltd Vs. CCE, 2002 (146) ELT 481 (SC)
6. As regarding confirming the demand by invoking the extended period of limitation, Learned Counsel submits that the revenue has invoked extended period of limitation in both the appeals and has also imposed equivalent penalty u/s 78 of the Act as also other penalties u/ss 76 & 77. It is well settled that invocation of extended period of limitation cannot be justified in cases where -
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(a) There has been prolonged correspondence on the issue/activity concerned between the assessee and the department. All the facts primary and interpretational were well within the knowledge of the department.
(b) there has been decisions of the Courts or Tribunal on an issue in favor of the assessee;
(c) Assessee entertained bona fide doubt because of judicial decisions or Board circulars:
(d) Issue entirely relates to statutory interpretation;
(e) Mere non-payment of tax or mere suppression of fact would not suffice, but there must be willful suppression of facts with intent to evade tax.
Hence, the demands confirmed in the impugned order invoking extended period of limitation is not sustainable. In support of the above plea, the Appellant places reliance on the following judicial decisions, -
(a) Continental Foundation Joint Venture Vs. CCE, 2007 (216) ELT 177 (SC).
(b) Jaiprakash Industries Ltd v. CCE, 2002 (146) ELT 481 (SC).
7. Learned Counsel also submits that the demand of interest and imposition of various penalty cannot be sustained since the issue related to statutory interpretation and there has been surfeit of judicial decisions which have held in favor of the assessee. It is also submitted that no penalty(s) is imposable in the light of section 80 of the Act.
8. The Learned Authorized Representative (AR) for the Revenue reiterated the finding in the impugned order and submits that the decision relied by the Appellant is unsustainable, since the issue before the Hon'ble High Court was whether it was for business auxiliary service. But in the present Page 5 of 6 Service Tax Appeal No. ST/3176/2011 case, the demand is confirmed under the category of maintenance and repair services.
9. Heard both sides and perused the records.
10. Since the issue is squarely covered by decisions of the Tribunal which was upheld by Hon'ble High Court of Madras in the matter of Kasturi & Sons Ltd., 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). Maintenance of computer software prior to 2006, it is not even their case that in 2007, when the amendment was brought in the Finance Act, it was given retrospective effect and even the altered definition 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 . And considering the judgment of Hon'ble High Court of Karnataka in the matter of IBM India P. Ltd. (supra), the impugned order confirming the demand is set aside with consequential relief if any in accordance with law.
(Order was pronounced in Open Court on 24.09.2025) (P.A. AUGUSTIAN) MEMBER (JUDICIAL) (R. BHAGYA DEVI) MEMBER (TECHNICAL) hr/Sasi Page 6 of 6