TaxTMI 
TaxTMI 
2011 (2) TMI 76
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.... Indian Rupees 1.66 crores (approximately). (a) The second respondent issued a circular on 17.12.2003 to the effect that the software service would be outside the purview of service tax and it is also stipulated in section 65(19) of the Finance Act, 1994 that it does not include Information Technology Services and as per the explanation to that Section, the maintenance of computer software is included in information technology service. (b) After the judgment was rendered by the Supreme Court in Tata Consultancy Service v. State of Andhra Pradesh [(2005) 1 SCC 308], wherein it was held that canned software amounts to tangible property and when the same is sold it would be liable for sales tax, the second respondent issued the impugned circular dated 7.10.2005 to the effect that software amounts to 'goods' and therefore, the maintenance of software will attract maintenance charges liable for service tax. (c) Based on the impugned circular of the second respondent, the third respondent is insisting for payment of service tax on maintenance charges payable to the company in Denmark and therefore, the impugned circular is challenged on various grounds including that the....
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....r earlier circulars and communications other than the orders issued under section 37B of the Central Excise Act, 1944 was due to the decision of the Government to give a comprehensive review of all clarifications issued since the introduction of service tax in the year 1994 and the circular only reflects the interpretation of law and the current practice followed in the department and it does not override the legal provisions. (d) As per the circular, the petitioner is liable to pay service tax on the maintenance contract for the service received by it from the foreign service provider and therefore, the contention that the circular is ultra vires the provisions of the Finance Act or the Central excise Act, 1944 and also the Constitution of India is unfounded. (e) It is stated that the impugned circular does not impose any tax liability but only explains the scope of changes made by virtue of the amendments in the Finance Act, 2004 and therefore, the question that it is violative of Article 265 of the Constitution of India does not arise. It is also stated that alternative remedy is available to the petitioner and without availing the same, the present writ petition has been ....
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....ter software, or computerised data processing or system networking, or any other service primarily in relation to operation of co9mputer systems." 7. That was also followed in the Finance Act, 2004, with effect from 10.9.2004 and that status has been followed till the Finance Act, 2007, as stated above. Therefore, the liability for payment of service charge from 2007 which has been imposed by way of statutory incorporation is not in dispute. But the question for consideration is, till passing of the Finance Act, 2007 in the light of specific exemption of information technology from the purview of 'business auxiliary service' under the respective Finance Acts, whether the impugned circular issued by the second respondent can have the effect of imposing the liability of service tax or otherwise and whether the circular issued by the second respondent can be read in supercession of the statutory provisions of the Finance Acts in the respective financial years. 8. Therefore, on fact, it is clear that till the advent of the Finance Act, 2007, the information technology which included maintenance of computer software, had been outside the purview of 'business auxiliary ....
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....context of the said Act under Entry 54, List-II of VII Schedule to the Constitution cannot be cited for a clarification in respect of the Finance Act, 1994 which is a Parliamentary enactment. 10. The Supreme Court held in Kerala Finance Corporation v. Commissioner of Income-tax [(1994) 4 SCC 375] in the context of section 119 of the Income-tax Act that the circulars issued cannot override the provisions of the Act and the relevant portion of the judgment is as follows: " 14. The fact that the circular to which Shri Salve has referred is one which had been issued in exercise of powers conferred by Section 119 of the Act has no significance insofar as the point under consideration, namely, whether the circular can override or detract from the provisions of the Act, is concerned, inasmuch as what Section 119 has empowered is to issue orders, instructions or directions for the 'proper administration' of the Act or for such other purposes specified in sub-section (2) of the section. Such an order, instruction or direction cannot override the provisions of the Act; that would be destructive of all the known principles of law as the same would really amount to giving power t....
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....mpose duty in a particular manner. I am clearly of the opinion that could not have been the intention of the legislature. The quasi-judicial authorities are certainly supposed to apply the charging provisions to the facts of a case and find out whether the goods are assesssable and if so what would be the assessable value. Certainly Section 37(B) does not enable the second respondent to give a direction that in respect of advances/deposits, notional interest is definitely chargeable and includible in the assessable value in all cases, notwithstanding the fact whether the same had an effect on the price, directly or indirectly or did not have such an effect. ....." 17. While it is admitted by the respondents in the counter affidavit that there has been exemption in respect of maintenance of computer software prior to 2006, it is not even their case that in 2007, when the amendment was brought in the Finance Act, it was given retrospective effect and even the altered definition of the term, 'goods' in the amendment of 2007 in the Finance Act, 1994 under section 65(105)(zzg) also was not given retrospective effect and hence, it cannot be said that the impugned circular atte....