Anti-Virus Software Sales Ruled as Goods, Not Subject to Service Tax; Tribunal Aligns with Precedent on VAT Exclusivity. The Tribunal set aside the impugned orders, allowing the appeals with consequential relief. It concluded that the sale of Anti-virus software and updates ...
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Anti-Virus Software Sales Ruled as Goods, Not Subject to Service Tax; Tribunal Aligns with Precedent on VAT Exclusivity.
The Tribunal set aside the impugned orders, allowing the appeals with consequential relief. It concluded that the sale of Anti-virus software and updates constituted a sale of goods, not subject to service tax under Information Technology Software Services. This decision followed the precedent established in a similar case involving Quick Heal Technologies Ltd., emphasizing the mutual exclusivity of VAT and service tax. The decision was pronounced in open court on 06.02.2020.
Issues Involved: - Whether the appellant is liable to pay service tax for the Anti-virus software provided in a CD or through direct downloads.
Analysis: The case involved appellants engaged in software development and supporting services, specifically Anti-virus software. The Service Tax Commissionerate initiated an investigation suspecting non-payment of service tax on the software provided by the appellants. The department alleged that the appellants were not just selling software but allowing temporary use without paying central excise duty or service tax. Show Cause Notices were issued for the periods May 2008 to June 2009, July 2009 to March 2010, and April 2010 to March 2011. The original authority confirmed the demand along with interest and imposed penalties, leading the appellants to appeal before the Tribunal.
During the proceedings, the appellants argued that they replicated the software in CD form through replicators enjoying central excise exemption and sold it through retail outlets or online. They provided a product key for downloading and updates, charging on an annual basis and renewal fee. The appellants contended that the product key was to prevent unauthorized use and ensure continuous software supply, not falling under Information Technology Software Services. They highlighted that they had paid VAT on the charges received, which was not disputed by the department. The department, however, argued that providing the license key for software installation constituted Information Technology Software Services.
After hearing both sides, the Tribunal analyzed a similar case involving Quick Heal Technologies Ltd. The Tribunal in that case had held that the sale of Anti-virus software or updates constituted a sale of goods, not attracting service tax under Information Technology Software Services. The Tribunal noted the mutual exclusivity of VAT and service tax, and following the Quick Heal case, concluded that the demand for service tax could not be sustained. Therefore, the impugned orders were set aside, and the appeals were allowed with consequential relief. The decision was pronounced in open court on 06.02.2020 by the Tribunal.
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