Computer system exemption applied to integrated MICR cheque processing setup; maintenance contract qualified for tax relief.

The MICR Cheque Processing Solution, made up of servers, software, document processor and stacker modules operating as an integrated data-processing setup, was treated as a computer system for exemption purposes. Maintenance or repair service relating to computers, computer systems or peripherals fell within the exemption, and the stacker was only one component of the document processor rather than a separate system. The unit could not be equated with an ATM, and the Board's clarification on ATMs did not justify denial of exemption for the entire integrated contract. The appellant was therefore entitled to the exemption for the relevant period.

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Issues: Whether the MICR Cheque Processing Solution, including the mainframe system, software, document processor and stacker modules, constituted a computer system so as to qualify for exemption under Notification No. 20/2003-S.T. dated 21-8-2003.

Analysis: The service tax exemption was available for maintenance or repair services rendered in relation to computers, computer systems or computer peripherals. The system in question comprised high-end servers, input and output devices, software and peripheral equipment functioning together as an integrated data-processing setup. The stacker was only a part of the document processor and not the whole system. The machine could not be equated with an ATM, and the Board's clarification on ATMs did not justify denial of exemption on the entire system. Even if some component were viewed separately, the demand could not extend to the full maintenance contract covering the integrated computer system.

Conclusion: The MICR Cheque Processing Solution was a computer system for the relevant period and the appellant was entitled to the exemption.

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