TaxTMI 
TaxTMI 
2015 (10) TMI 2413
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....f input service tax credit under Rule 5 of the Cenvat Credit Rules for the period July, 2005 to Sept. 2005 and for the period October, 2005 to December, 2005. Later, the appellants revised the amount of refund claim and reduced the claims to Rs. 2,47,27,422/- and Rs. 32,34,635/- respectively as they realized that the refund of CENVAT Credit attributable to inputs used in the non-taxable output services namely, software development and software consultancy is not admissible. The adjudicating authority rejected the refund claims on the ground that all the output services are exempted from Service Tax. He came to this conclusion holding that the services provided by the appellant are classifiable under Business Auxiliary Services and Consulting Engineers Service. And, both these services as defined in Sections 65(19) and 65(105)(g) respectively of the Finance Act, 1994 categorically excluded software development and Computer software engineering from their coverage during the period in dispute. Hence, being non-taxable, CENVAT Credit is not available on the input services as per Rule 3 which allows credit only to provider of taxable services and as per Rule 6(1) of Cenvat Credit Rules....
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.... Ltd. - 2013 (32) STR 356 (Tri-Mum), wherein under the same set of facts it was held that 100% EOU-STP unit were entitled to refund of unutilized credit. He also relied on the Hon'ble Karnataka High Court's decision in the case of mPortal India Wireless Solutions Pvt. Ltd. vs. Commissioner of Service Tax - 2012 (27) STR 134 (Kar), wherein it was held that on export of software service, asessees were entitled to refund even when the service exported is not taxable. 4. The learned Addl. Commissioner (AR) reiterates the findings of the Commissioner (Appeals). 5. We have carefully considered the submissions made by both sides. 5.1 The appellants contend that the software exported by them is classifiable under the Maintenance or Repair Service covered under Section 65(105(zzg), whereas the Commissioner classified the service provided as Consulting Engineers Service falling under Section 65(105)(g) as it, stood during the period in dispute i.e. July - December, 2005. These two services are defined as under:- "(g) to a client, by a consulting engineer in relation to advice, consultancy or technical assistance in any manner in one or more disciplines of engineerin....
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....ftware maintenance' which, according to the technical literature submitted by them is described hereunder:- "Software maintenance may be defined by describing four activities that are undertaken after a program is released for use viz., corrective maintenance, adoptive maintenance, perfective, maintenance or enhancement and preventive maintenance or re-engineering. Corrective maintenance has to do with the removal of residual errors that are present in the product when it is delivered, as well as errors introduced into the software during its maintenance. Adoptive maintenance, involves adjusting the application to changes in the environment (e.g., a new release of the hardware or the operating system or a new database system). Finally, perfective maintenance, involves changing the software to improve some of its qualities. Hence, changes are due to the need to modify the functions offered by the application, add new functions, improve the performance of the application, make it easier to use, etc. The requests to perform perfective maintenance may come directly from the software engineer, in order to improve the status of the product on the market, or they may come fro....
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....e tax on output service, And where for any reason such adjustment is not possible, the manufacturer shall be allowed refund of such amount subject to such safeguards, conditions and limitation, as may be specified, by the Central Government, by notification." It is clear from the above Rules that credit on input services was allowed only to provider of taxable service. Further, the refund under Rule 5 was allowed to manufacturers only. For service provider, there was a system of rebate of duty paid on excisable inputs or input services under Notification No. 12/2005-ST dated 19.4.2005. It was only in 2006, vide Notification No. 4/2006 dated 14.3.2006 that Rule 5 was amended to allow refund to providers of output services. Therefore, during the period of dispute i.e. April, 05 to Dec., 05, refund was permissible only to manufacturers and service providers could take the route of Notification No. 12/2005, which provided for rebate. The case of KPIT Cummins Info System (supra) does not support the appellant because this judgment related to the period April, 2007 to March, 2008 after the amendment under Rule 5. The Commissioner (Appeals) in his order has examined the issue ....
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....on of Maintenance or Repair service did not specifically refer to "goods" including computer software or "properties" including Information Technology software. The Explanation in the above definition did not exist in 2005. The Information Technology Software service itself was introduced under Section 65(105)(zzzze) only with effect from 16.5.2008. Therefore, prior to the above amendment in the definition of 'Management, Maintenance or Repair Service' and introduction of 'Information Technology Software' service, we have to respect the law and circulars prevalent during the material time. Board's Circular No. 81/2/2005-ST (supra) clarified that Software incorporated in a Media for use is to be treated as goods. It did not distinguish between Computer Software and Information Technology Software. In view of the Board's Circular, it would be justifiable to consider the software in question in this case as Computer Software. 5.8 Having said so, the next question which arises is whether the software in question was taxable or not. To decide this, the issue to be determined is whether the software exported by the appellant would fall under the category of Mai....
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....ir of goods was taxable during the period in dispute for which the appellant is claiming refund. The subsequent clarifications by CBE&C Circular No. 81/2/2005-ST dated 7.10.2005 and Ministry of Finance, Department of Revenue's dated 7.3.2006 have been issued in pursuance to the judgment of the Apex Court in the TCS case (supra). Thus, the software is required to be treated as goods through out for the purpose of levy of tax w.e.f. 05.11.2004, when the law was so declared by the Supreme Court. Accordingly, there is no element of doubt as to taxable nature of the services in question particularly with respect to management, maintenance and repair of software is concerned, under Section 65(64) read with Section 65(105)(zzg) and 65 (105)(r). 9. Further, I also agree with the ruling of the Hon'ble Karnataka High Court in the case of mPortal India Wireless Solutions Pvt. Ltd. (supra), wherein the Hon'ble High Court has held that in the case of export of software, the non-taxable item, Service Tax paid on input service which remains unutilized, the exporter is entitled to refund of such unutilized credit on furnishing of the particulars of tax paid by them. Such refund cann....
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....er Section 65(105)(r), (iv) consultation and management in respect of ERP software implementation, and accordingly entitled to refund, as claimed, the services being admittedly exported. And As the appellant have rendered taxable services under Section 65(105)(zzg), the appellant have rightly availed CENVAT Credit under Rule 5 of Cenvat Credit Rules, 2004 as held by Member (Judicial). Or 1) Whether refund of Cenvat Credit under Rule 5 of the Cenvat Credit Rules is available when Rule 3 permitted credit on input services only to provider of taxable services. 2) Whether output services provided by the appellant are covered under the taxable service of "Maintenance or Repair" when the activity involved development and designing also of the software. 3) When the Commissioner (Appeals) did not examine all the contracts in order to decide whether the activity is of 'maintenance or repair' only, should not the case be remanded back to him to enable him to examine all the contracts before arriving at a decision on the issue at 2 above. (Pronounced in Court on 5.6.2015) ST/126/08 M/4702/15/STB Date of Hearing: 9.9.2015 For the Appellant : Shri N Anand, ....
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....vs. CST reported in 2015 (39) STR 170 (Tri.-Mum.); x) WNS Global Services (P) Ltd. vs. CCE reported in 2008 (10) STR 273 (Tri. - Mum.) affirmed by Hon'ble Bombay High Court reported in 2011 (22) STR 609 (Bom.); xi) Caliber Point Business Solutions Ltd. vs. CCE reported in 2008 (11) STR 15 (Tri.-Mum.) ; xii) CCE vs. Deloitte Tax Services India Pvt. Ltd. reported in 2008 (11) STR 266 (Tri. - Bang.) affirmed by Hon'ble Andhra Pradesh High Court reported in 2014 (33) STR 129 (AP); xiii) Warburg Pincus India Pvt. Ltd. vs. CCE reported in - 2015-TIOL-1288-CESTAT-MUM. 14.1 The learned counsel also submitted that this Tribunal in the case of Choudhary International Pvt. Ltd. vs. CST reported in 2015 (39) STR 170 (Tri.-Mum.), where I was one of the members has already held that maintenance of software is a taxable service under the category of 'management, maintenance or repair service' under Section 65 (64) and in view of the said decision, issue is already settled. 14.2 Learned counsel further submitted the issue that at the relevant time they as service provider were not eligible to claim refund under Rule 5 has not been raised by....
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....been upheld by the Hon'ble Supreme Court, even the service relating to the ERP implementation cannot be considered as management consultancy service so as to become taxable. 15.4 The learned AR further submitted the following case laws in support of his various contentions, - i) SAP India Pvt. Ltd. vs. CCE, Bangalore-III reported in 2011 (21) STR 303 (Tri.-Bang.); ii) Phoenix IT Solutions Ltd. vs. CCE, Visakhapatnam reported in 2011 (22) STR 400 (Tri.-Bang.); iii) Nokia (I) Pvt. Ltd. vs. CC, Delhi reported in 2006 (1) STR 233 (Tri. - Del.); iv) IBM India Pvt. Ltd. vs. CST, Bangalore reported in 2010 (17) STR 317 (Tri.-Bang.) 15.5 Learned AR submitted that issue before Hon'ble Karnataka High Court in the case of mPortal India Wireless Solutions P. Ltd. was only relevant to registration as is clear from para 7 and 8 of the said judgment, which is not an issue in the present case. 16. I have gone through the judgment recorded by Member (Technical) and Member (Judicial) as also the various submissions made by both the sides. I find that there is no dispute whatsoever that the computer software recorded on a media are goods as held by....
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....ntenance of software and not of designing or developing software. By referring to one contract the appellants cannot make it universally applicable to other contracts especially in view of their non-rebuttal ol lower authority's observation that contracts as mentioned above do reveal consulting aspect." It would indicate that in some cases, it is obvious that the appellant was not providing any service relating to management, maintenance or repair of computer software but were relating to development of software or consultancy service. Since invoice wise/agreement wise facts are not clear, I entirely agree with Member (Technical) on point No. 3 that the Commissioner (Appeals) did not examine all the contracts in order to decide whether the activity is of "maintenance or repair" only and therefore the case should be remanded back to him to enable him to examine all the contracts before arriving at a decision that whether or not the appellant was providing taxable service of maintenance or repair or was providing services relating to development and designing also of the software. Commissioner (Appeals) has to quantify separately the amount involved relating to maintenance and....