CESTAT ruled that the appellant's software solution, customized...

CESTAT ruled that the appellant's software solution, customized to meet clients' specific business requirements with modifications to source code, constituted a sale of goods rather than a service. The transaction involved transferring full control and possession of the customized software to clients with exclusive usage rights, while intellectual property remained with the appellant. The license fee collected was correctly subjected to VAT by the appellant and cannot simultaneously be liable for service tax, as these taxes are mutually exclusive. Following Quick Heal Technologies v. CST, Delhi [2020], the Tribunal held that the transaction constituted a sale of goods rather than provision of services. The appeal was allowed, setting aside the service tax demand, interest, and penalties.

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