Antivirus software not taxable as service, deemed sale of goods. Appeal allowed.

The Tribunal held that the Antivirus Software provided by the Appellant does not qualify as 'information technology software' service but constitutes a deemed sale of goods. Therefore, the transaction is not liable to Service Tax. The Tribunal set aside the impugned order and allowed the Appeal.

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Issues Involved:
1. Whether the Antivirus Software provided by the Appellant is a provision of service under “information technology software” and hence leviable to Service Tax prior to 1 July, 2012 as also after 1 July, 2012.
2. Whether the transaction of supplying Antivirus Software in CD form constitutes a “deemed sale” and is thus not liable to Service Tax.
3. Whether the extended period of limitation under the proviso to section 73 of the Finance Act, 1994 could be invoked.

Detailed Analysis:

Issue 1: Provision of Service under "Information Technology Software"
The Appellant argued that the Antivirus Software supplied in CD form is not covered under “information technology software” service either prior to 1 July, 2012 under section 65(53a) of the Finance Act, 1994 or after 1 July, 2012 under section 65B (28) of the Act. The definition of 'information technology software' under section 65(53a) and section 65B (28) includes any representation of instructions, data, sound, or image, recorded in a machine-readable form, and capable of being manipulated or providing interactivity to a user.

The Appellant contended that their software does not involve user interactivity as it automatically detects and removes viruses without requiring user commands. The Tribunal agreed, stating that the software is complete in itself and does not require user interaction, thus not meeting the criteria for 'information technology software' as defined.

Issue 2: Deemed Sale and Taxability
The Tribunal examined whether the transaction of supplying Antivirus Software in CD form constitutes a “deemed sale” under Article 366(29A) of the Constitution. The Appellant argued that the software, being a Canned Software, qualifies as 'goods' and is subject to VAT, not Service Tax. The Tribunal referred to the Supreme Court's decision in Tata Consultancy Services v. State of Andhra Pradesh, which held that software put on a media and marketed becomes 'goods' susceptible to sales tax.

The Tribunal also considered the CBEC Education Guide for Service Tax, which states that pre-packaged or Canned Software sold on a media is in the nature of goods and not liable to Service Tax. The Tribunal found that the conditions in the End User License Agreement (EULA) did not interfere with the free enjoyment of the software by the licensee, thus constituting a transfer of the right to use the software, which is a deemed sale.

Issue 3: Extended Period of Limitation
The Appellant contended that the extended period of limitation under section 73 of the Finance Act, 1994 could not be invoked as there was no suppression of facts with intent to avoid tax. The Tribunal did not specifically address this issue in detail, but the overall conclusion was in favor of the Appellant, indicating that the extended period of limitation was not applicable.

Conclusion:
The Tribunal concluded that the Antivirus Software provided by the Appellant does not qualify as 'information technology software' service and is instead a deemed sale of goods. Consequently, the transaction is not liable to Service Tax. The impugned order was set aside, and the Appeal was allowed.

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