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2. Business Support Services International Outbound 2007-09 4,30,258/-

Roaming Services

3. Development and Supply Development of games 2008-09 5,09,483/-

     of Value-Added Services


                             TOTAL                                   16,04,982/-

3.3.1 It is submitted by the Ld. Advocate that the demand of service tax on online maintenance of software under the category of 'Management, Maintenance or Repair' is not tenable. The service tax has been demanded on the activity of online maintenance and repair of software received from service providers situated outside India. During the relevant period i.e., from 2006-07, the definition of Management, Maintenance or Repair Services as under Section 65(64) of the Act was amended vide the Finance Act, 2007 with effect from 01.06.2007 wherein an explanation was inserted declaring "goods" to include computer software also. The Department is raising the demand alleging that the activity of online maintenance and repair services of software would be in the nature of "goods" and therefore, the appellant is liable to pay service tax under reverse charge mechanism. In fact, the said amendment takes effect only from 01.06.2007. The impugned period being prior to this, the demand cannot sustain.

3.6 She therefore prayed that the appeal may be allowed.

4.1 Ld. AR Ms. T. Usha Devi appearing on behalf of the respondent supported the findings in the impugned order. She submitted that the first issue is with regard to the demand of service tax under Management, Maintenance or Repair Services. The Board vide its Circular dated 07.10.2005 has clarified that computer software is leviable to service tax with effect from 09.07.2004 i.e., the day the exemption granted to services in relation to maintenance and repair of computers, computer software and computer peripherals by Notification No. 20/2003-ST was rescinded vide Notification No. 07/2004-ST. The definition of Management, Maintenance or Repair Services contains an Explanation which clarifies that "goods" includes computer software. The appellants are therefore liable to pay service tax on the online maintenance and repair services of software received by them from the service providers situated outside India.

6.2 On perusal of the records as well as various Circulars placed before us, we find that the definition of 'Management, Maintenance and Repair Services' was amended by adding an Explanation only with effect from 01.06.2007. The Explanation stated that "goods" includes computer software. The Department has relied upon the Circular dated 07.10.2005 to hold that the maintenance or repair of computer software is leviable to service tax with effect from 09.07.2004 itself. This is because it is argued by them that there was an exemption granted in the case of computer software under Notification No. 20/2003-ST and the said Notification was rescinded with effect from 09.07.2004.

6.3 The Hon'ble High Court of Madras in the case of M/s. Kasturi & Sons Ltd. (supra) has declared the Circular dated 07.10.2005 to be ultra vires and the same has been quashed. When the definition has been amended by including computer software in the category of "goods" with effect from 01.06.2007, Management, Maintenance or Repair Services of computer software can be leviable to service tax only with effect from 01.06.2007. This decision of the Tribunal in the case of M/s. Phoenix IT Solutions Ltd. - 2017 (52) S.T.R. 182 (supra) has discussed the very same issue and held as under :