Taxable sale of software requires proof of actual transfer; invoice raised for finance alone cannot sustain turnover or penalty.

Tax on an alleged first sale of software could not be sustained where the invoice was raised only to secure finance and no transfer of property in goods to the finance company was proved. The record showed the software remained installed and used by the assessee, so the essential ingredients of a taxable sale were not established. In fiscal matters, liability must rest on definite material proving an actual sale, and suspicion or appearance cannot replace legal proof. The estimated turnover was therefore unsustainable, and the consequential penalty also could not survive.

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Issues: Whether the estimated first sale of software could be treated as a taxable sale and justify levy of tax and penalty under the sales tax law.

Analysis: The material on record showed that the software invoice was raised only to secure finance and that the software remained installed and used by the assessee. The transaction did not disclose a real transfer of property in goods to the finance company. In fiscal matters, tax can be levied only on actual sales proved by definite material, and suspicion or form alone cannot substitute legal proof. As the essential ingredients of sale were not established, the estimated turnover could not be sustained and the consequential penalty also could not survive.

Conclusion: The issue was decided in favour of the assessee. The estimate of first sale of software and the consequential penalty were not sustainable.

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