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of <h1>Tribunal upholds decision on service tax for software maintenance.</h1> <h3>The Commissioner of G.S.T. & Central Excise, Chennai South Commissionerate [Formerly: ‘The Deputy Commr. of Service Tax, Service Tax-II] Versus M/s. Cherrytec Intelisolve Ltd.</h3> The Commissioner of G.S.T. & Central Excise, Chennai South Commissionerate [Formerly: ‘The Deputy Commr. of Service Tax, Service Tax-II] Versus M/s. ... Issues:Department's appeal against setting aside of demand, interest, and penalties for service tax on maintenance and repair of computer software.Analysis:The appeal concerned a dispute regarding the levy of service tax on maintenance and repair of computer software by a company providing software development services. The Department contended that post rescission of Notification No. 20/2003-ST by Notification No. 07/2004-ST, maintenance and repair of computer software became taxable. A Show Cause Notice was issued, leading to a demand of &8377; 37,84,409/- along with interest and penalties, which was set aside by the Commissioner (Appeals), prompting the Department's appeal before the Tribunal.The Department argued that Circulars issued post the rescission clarified that services related to software maintenance are taxable. The respondent had not paid service tax for the disputed period, and the Commissioner's decision was influenced by the Board Circulars, which, according to the Department, should not have been the case. The Department sought to establish that the demand should have been upheld by the Commissioner.Upon review, the Tribunal noted the evolution of notifications and Circulars governing the taxation of software maintenance services. While Circular No. 81/2/2005-ST clarified the taxability of software maintenance services, the High Court had later quashed this Circular in a separate case, rendering it inapplicable for the levy of service tax. The respondent had started paying service tax from 2006 onwards, following a clarifying Circular issued by the Board in 2006.The Tribunal acknowledged the confusion surrounding the taxability of maintenance and repair of computer software during the disputed period. Considering the legal precedents and the quashing of the relevant Circular by the High Court, the Commissioner's decision to set aside the demand, interest, and penalties was deemed appropriate. The appeal by the Department was dismissed, affirming the Commissioner's order.
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