Software maintenance and data-processing classification followed tax-entry dates, defeating service tax demands for earlier periods.

Maintenance of computer software was not taxable as maintenance and repair service for the period before 1 June 2007 because the levy entered the tax net only from that amendment date. Digital scanning, data processing and data entry services rendered to the Income Tax Department were treated as Information Technology Service, not Business Auxiliary Service, and that service became taxable only from 10 May 2008. On both issues, the earlier demands could not be sustained for the prior periods, and the disputed service tax liability was set aside in favour of the assessee.

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Issues: (i) whether maintenance of computer software was taxable as maintenance and repair service for the period prior to 1.6.2007; (ii) whether digital scanning, data processing and data entry services rendered to the Income Tax Department were classifiable under Business Auxiliary Service or as Information Technology Service, and whether the demand could survive for the period prior to 10.5.2008.

Issue (i): whether maintenance of computer software was taxable as maintenance and repair service for the period prior to 1.6.2007.

Analysis: The demand on this count was examined in the light of prior Tribunal and High Court decisions holding that maintenance of computer software was brought within the tax net only with effect from 1.6.2007 by amendment under section 65 of the Finance Act. Since the period involved was before that date, the levy could not be sustained for the relevant period.

Conclusion: The demand on maintenance of computer software was not sustainable for the period prior to 1.6.2007 and was set aside in favour of the assessee.

Issue (ii): whether digital scanning, data processing and data entry services rendered to the Income Tax Department were classifiable under Business Auxiliary Service or as Information Technology Service, and whether the demand could survive for the period prior to 10.5.2008.

Analysis: The services were considered in the light of earlier Tribunal authority treating such activities as Information Technology Service and not as Business Auxiliary Service. As Information Technology Service became taxable only from 10.5.2008, the demand for the earlier period could not be sustained.

Conclusion: The services were not classifiable under Business Auxiliary Service for the relevant period and the demand was set aside in favour of the assessee.

Final Conclusion: The contested demands were held unsustainable, while the uncontested portion remained accepted, resulting in relief to the assessee on the disputed tax liability.

Ratio Decidendi: Where a service is brought within the taxable net only from a specified date, no service tax can be levied for an earlier period by classifying it under a different taxable head contrary to the settled classification.

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