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In W.P.No.13474 of 2008, the petitioner challenged the final assessment order dated 12.05.2008 for the assessment period 2007-08 under the Central Sales Tax Act, 1956 (CST Act). Similarly, in W.P.No.13482 of 2008, the challenge was to the final assessment order dated 12.05.2008 for the assessment period 2006-07 under the CST Act. Both orders were passed by the Commercial Tax Officer, Punjagutta Circle, Hyderabad.
The petitioner, a dealer in domestic and export sales of software, claimed exemption on domestic sales, arguing that the sale of software represented software services. The Commercial Tax Officer, however, took the view that the sale of customized IT software was liable to tax at the rate of 10% under Entry 39(14) of Schedule IV of the VAT Act read with the CST Act. Despite the petitioner's contention that the software solutions were tailored to customer needs and thus not taxable as goods, the Commercial Tax Officer, relying on the Supreme Court's decision in Tata Consultancy Services v. State of Andhra Pradesh (2005) 1 SCC 308, held that both canned and uncanned software are goods and liable to tax.
Upon review, the High Court found that the Commercial Tax Officer's view was consistent with the Supreme Court's decision, which held that the term "goods" includes all types of movable properties, whether tangible or intangible, and that software, whether canned or uncanned, meets this definition. The High Court thus upheld the assessment orders, finding no merit in the petitioner's challenge.
2. Constitutionality of Entry 39(14) of Schedule IV of the VAT Act:The petitioner sought a declaration that Entry 39(14) of Schedule IV of the Andhra Pradesh Value Added Tax Act, 2005, which provided for levying sales tax on customized IT software, was ultra vires and unconstitutional. However, the High Court did not find it necessary to address this issue in detail within the scope of the present proceedings, given the findings on the primary issue regarding the classification and taxation of software under the CST Act.
3. Constitutionality of Section 65(53)(a) read with Section 65(105)(zzzze) of the Finance Act, 1994:The petitioner also challenged the constitutionality of Section 65(53)(a) read with Section 65(105)(zzzze) of the Finance Act, 1994. Similar to the previous constitutional challenge, the High Court chose not to delve into this issue within the current proceedings, focusing instead on the primary matter of taxability under the CST Act.
Conclusion:The High Court dismissed both writ petitions, upholding the impugned assessment orders dated 12.05.2008, and did not find it necessary to address the additional constitutional challenges raised by the petitioner. The court emphasized that the decision of the Supreme Court in Tata Consultancy Services (supra) supported the view that the development of software solutions by the petitioner constituted a sale of goods, thereby making it exigible to sales tax under the VAT Act read with the CST Act.
Consequently, both writ petitions were dismissed, and all miscellaneous applications pending were closed, with no order as to costs.
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