TaxTMI 
TaxTMI 
TaxTMI 
2015 (10) TMI 2413
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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, which bars availment of CENVAT Credit used ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 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 engineering including the discipline of computer hardware engineering bu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted 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 from the customer, to meet some new requirements." From this literature, it can be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 from the classification angle. He has not examined whether the refund was admissible to service provider under Rule 5, as it stood during the period in quest....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 Maintenance or Repair service or would be covered under the exclusion clause of Consulting Engineers Service falling under Section 65(105)(g). We note that the appellant submitted detailed literature in support of their cl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 cannot even be denied on the ground of limitation under Section 11B of the Central Excise Act. It was also held that the registration with the Service Tax Department is not a pre-requisite for claiming the credit and resultant refund. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s 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, Adv. For the Respondent : Shri D V Nagvenkar, Additional Commissioner (AR) 12. Brief facts of the case are already elaborated in the order of Member (Technical) and are not being repeated for sake of brevity. The points of difference of opinion are also wri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 the original authority as also the first appellate authority and has been raised in the order by Member (Technical) for the first time. It was also submitted that since this is not an issue in the difference of opinion, the matter should rest there. 15. Learned AR appearing on behalf of the Revenue submitted that during the relevant period, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 the Hon'ble Supreme Court in the case of Tata Consultancy Services (supra). In fact the said decision of the Hon'ble Supreme Court has already been noted while passing the order by the Commissioner (Appeals). As would be observed, by the order of the Commissioner (Appeals) as also the original authority, the appellant has not given the invoice-wise agreements and the classi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oviding 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 repair service as also other service. Further, it is absolutely necessary to examine whether the appellant is eligible for availing the credit of input services under Rule 3 before granting of refund of cenvat credit under Rule 5. Even in the present case I find that the appellant themselves have reduced the refund claim by excluding the services relating to computer software and computer ....