AI Drafter 
TaxTMI 
TaxTMI 
2016 (11) TMI 1446
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....isation, implementation, integration and ongoing support and maintenance to their customers. In respect of customers situated abroad, they develop and export the software as per the requirements of the customers. However, for customising the software as well as to continued support to the software by way of maintenance, the assessee has set up subsidiaries in several countries. Wherever customers were situated in countries other than those where subsidiaries were set up, they engage foreign service providers for the purposes of supporting the customers. 3. Revenue carried out investigations against the assessee to look into the allegations that service tax was not being paid by the assessee on Management, Maintenance or Repair service, Business Auxiliary Service (BAS) as well as Information Technology Services (ITS). On completion of investigation, a show cause notice dated 10-9-2009 was issued demanding service tax to the extent of Rs. 14,45,68,036/- along with interest as well as imposition of penalties under Sections 76, 77 and 78 of the Finance Act, 1994. The show cause notice was finalised by the Commissioner with the issue of the impugned order. 3. The Revenue....
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....er Section 66A of the Finance Act, 1994. Their submission is that the activities undertaken by the assessee through the subsidiaries/sub-contractors are customisation and implementation of software as well as involved maintenance of software in good condition. Their submission is that these activities cannot simply be described as repair and maintenance but are in the nature of providing ITS service. Such services were introduced as taxable under Section 65(105)(zzze) of the Act, with effect from 16-5-2008. From the date of such introduction, the assessee has been discharging the service tax liability under ITS service. The same service cannot be charged to service tax for the period prior to this introduction. (iii) For the period after 16-5-2008, the assessee has converted these subsidiary companies into branches, which cannot be considered as providing service to its head office. 5. Heard Shri Pakshirajan, ld. Departmental Representative for Revenue and Shri G. Shivadass, ld. Advocate for the assessee. 6. At the outset, we will deal with the appeal filed by Revenue. (i) Revenue has also appealed against the dropping....
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....e of the software whose ownership continues to vest with the assessee. Such services are specifically included under ITSS, which has been introduced with effect from 16-5-2008. There can be no justification for demand of service tax on this activity for the period prior to 16-5-2008 as per the settled law on this subject. The findings of the ld. Commissioner (Appeals) on this subject deserve to be upheld. 7. Now, we turn to the points argued by the assessee in their appeal :- (i) The first challenge is to levy of service tax on 'Management, Maintenance or Repair (MMR) Service'. The demand covers the period October, 2005 to May, 2008. After the supply of the software developed by the assessee, they also undertake maintenance, modification, etc., of the software subsequent to the date of delivering. The service tax has been demanded on such activity under the category of 'Management, Maintenance or Repair Service'. The C.B.E. & C., vide their circular dated 17-12-2003 clarified that maintenance of software is not chargeable to service tax. The position subsequently underwent a change, consequent upon the decision of the Hon'ble Supreme Court i....
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....te of Andhra Pradesh. In the light of the decision of the Apex Court, C.B.E. & C. has clarified in 2005 that repair and maintenance of computer service will be covered under Section 65(64) of the Act. However, the Hon'ble Madras High Court in the case of Kasturi & Sons Ltd. v. Union of India [2011 (22) S.T.R. 129 (Mad.)] has held after analyzing the various points with reference to software maintenance, that with effect from 1-6-2007, term "goods" has been expressly made to include computer software and hence maintenance of computer software will be leviable to service tax. The assessee's submission is that the original circular of 2003 stands withdrawn only with effect from 2007. In the light of the fact that the present issue is a debatable one and differing view-points have been expressed in the decisions of the Tribunal as well as various higher judiciary, we are of the view that the demand under this category should only be confirmed within the normal period of limitation. In the impugned order, ld. Commissioner has confirmed the demand for the period April, 2005 to May, 2008. Show cause notice stands issued on 10-5-2009. We direct the original authority to limit the demand....
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....mport criteria is based on the location of recipient of service. When we look at the list of the services under Categories A, B and C, we find that the BAS falling under Section 65(105)(zzb) of the Act falls under the Category C. In the instant case, the recipient (assessee) of service (BAS) is in India. The service have been provided by the subsidiaries/sub-contractors, who stand paid by the assessee. The instant case is, therefore covered for demand of service tax under BAS on reverse charge basis under Section 66A of the Act read with the said Rules. However, when we look at the nature of the service rendered abroad, we find that it is in the nature of Information Technology Service (ITS). There was an exclusion for ITS from the definition of BAS which was deleted only with effect from 16-5-2008 when the service of ITSS was introduced in the statute. Consequently, there can be no demand for service tax under BAS up to 15-5-2008. Consequently, demand is upheld under BAS only from 16-5-2008 and the matter is remanded to original authority for requantification of demand. 10. The assessee has also placed argument about revenue neutrality. Their submission is that any serv....