Court upholds service tax on Anti Virus Software, dismisses Writ Petitions.

The court dismissed the Writ Petitions, upholding the demand for service tax on Anti Virus Software. It held that the petitioner failed to prove that Anti Virus Software does not qualify as 'Information Technology Software'. Consequently, the court found no issue with the Department imposing interest and penalty for non-payment of service tax. The judgment reaffirmed the classification of Anti Virus Software as a service subject to service tax, based on the definition of 'Information Technology Software'.

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Issues:
Challenge to demand of service tax for Anti Virus Software under Section 73(1) of the Finance Act, 1994. Interpretation of whether Anti Virus Software falls within the definition of 'Information Technology Software' under Section 65 (53a) of the Finance Act, 1994.

Analysis:

Issue 1: Challenge to demand of service tax

The petitioner, engaged in software development, challenged the demand of service tax for Anti Virus Software under Section 73(1) of the Finance Act, 1994. The petitioner argued that they do not provide taxable service as defined under Section 65 (105) (zzzze) of the Act, hence not required to register with the Service Tax Department. The petitioner contended that Anti Virus Software does not fall under taxable service and has discharged VAT on its sale, emphasizing it as a sale of goods. The respondent, citing a previous Madras High Court decision, argued that Anti Virus Software qualifies as 'Information Technology Software' and thus is a service subject to service tax.

Issue 2: Interpretation of 'Information Technology Software'

The primary issue was whether Anti Virus Software falls within the definition of 'Information Technology Software' under Section 65 (53a) of the Finance Act, 1994. The Hon'ble Division Bench in a previous case held that when a developer retains copyright and transfers the right to use software, it constitutes a service, not a sale. The court analyzed the definition of 'Information Technology Software' and found that Anti Virus Software meets the essential features of this definition. The court rejected the petitioner's argument that Anti Virus Software is not covered under 'Information Technology Software', citing lack of 'Intelligible Differentia'.

Conclusion:

The court dismissed the Writ Petitions, upholding the demand for service tax on Anti Virus Software. It held that the petitioner failed to prove that Anti Virus Software does not qualify as 'Information Technology Software'. Consequently, the court found no issue with the Department imposing interest and penalty for non-payment of service tax. The judgment reaffirmed the classification of Anti Virus Software as a service subject to service tax, based on the definition of 'Information Technology Software'.

This detailed analysis of the judgment provides a comprehensive understanding of the legal issues involved and the court's reasoning behind the decision.

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