TaxTMI 
TaxTMI 
2021 (3) TMI 186
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....ion Technology Products (ITP) but had failed to pay tax on such sale. Relevant portion of the statement recorded from the petitioner on 29.11.2013 reads as under: "Delivery of software licences are liable to tax under commodity code 2068 i.e., Information Technology Products Part B of First Schedule. We have been charging VAT on software licenses for the period upto 31st July 2009. During the course of VAT audit, it was pointed out by the audit that VAT has been omitted to be paid for the period from 1st August 2009 to 31st March 2014. We have explained to audit that in the Finance Bill, 2009 an amendment was made to Section 65(53a) of Finance Act, 2003 in the definition of Information Technology software the word "acquirer" was replaced by the word "provider" with effect from 16th May 2008. After the substitution the provider of information technology software service (ITSS) was brought under service tax purview as against the acquirer of such IT software for the purpose of commercial exploitation including the right to reproduce, distribute and sell. With the introduction of service tax on ITSS, charging of VAT on ITSS has been discontinued by us from 1....
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....TNVAT Act, 2006. 6. The said officer by a letter dated 16.10.2009 bearing reference C.No.IV/16/11/09 STC (Tech.) informed the petitioner that the sale of software license by the petitioner would amount to " Information Technology Service" as per Section 65(105)(zzzze) of the Finance Act, 1994. 7. Thereafter, by another communication dated 22.10.2009 bearing reference C.No.IV/16/210/2009 SF0203, the petitioner was also informed that the sale of software license by the petitioner will attract service tax with effect from 16.05.2008 to 30.09.2009. The petitioner also informed about the same to the 2nd respondent herein by its communication dated 25.11.2009. It is the contention of the petitioner that it not liable to pay tax. 8. Mr.R.L.Ramani, the learned Senior counsel drew attention to the fact that the said letter was delivered and duly acknowledged by the Office of the 2nd respondent. The learned Senior counsel also submitted that Service Tax Registration was obtained and the petitioner paid service tax on the transaction. 9. He further submits that in FORM ST-2, the petitioner has clearly declared the service as taxable service as "Information Technology Software Serv....
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.... which would amount to only service. To bring the deemed sale under Article 366(29A)(d) of the Constitution of India, there must be a transfer of right to use any goods and when the goods as such is not transferred, the question of deeming sale of goods does not arise and in that sense, the transaction would be only a service and not a sale." 16. The learned senior counsel also drew attention to the decision of the Karnataka High Court in Sasken Communication Technologies Ltd., vs. Joint Commissioner of Commercial Taxes (Appeals)-3, Bangalore, 55 VST 89 (Kar), wherein the Karnataka High Court held as under: " 50. In the light of the aforesaid discussion, the finding recorded by the assessing authority that the contract in question involves a sale of software development by the assesses cannot be sustained. It is contrary to the material on record, the constitutional provisions and the law declared by the Apex Court. Accordingly it is hereby set aside. 51. It was contended that against the order passed by the assessing authority, a statutory first appeal and against that appeal, a statutory second appeal is provided and therefore the learned Single Judge was jus....
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.... be refunded to the assessee as it is declared that the assessee is not liable to pay any sales tax at all on the consideration received under the contract. (e) The amount shall be refunded with interest @ 6% within four months from the date of receipt of this order. If the amount is not refunded within four months, the said amount shall carry interest @ 12%. (f) No costs." 17. The learned senior counsel also drew attention to the counter filed by the 4th respondent Commissioner of Service Tax. He submits that the Service Tax Commissioner has reiterated that the transaction was liable to service tax and therefore the petitioner had rightly discharged the service tax liability under Section 65 B of the Finance Act, 1994. 18.The learned Senior counsel also reference to another decision in The State of Karnataka vs. IBM India Private Limited, (2015) 52 GST 1239 (Karnataka) wherein the said Court held that "in tax matters, when there are two Division Bench judgment of other High Courts on a similar provision, which it found to be the correct legal position and the said judgments having attained finality, it was held that there was no valid and justifiable reason....
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....ivate Limited and Ors. vs. State of Tamil Nadu and Ors. 2014(305)ELT 255 (Mad.) xxi) The State of Karnataka vs. IBM India Private Limited, (2015) 52 GST 1230 ( Karnataka) xxii) JKM Graphics Solutions Private Limited vs. The Commercial Tax Officer, Vepery Assessment Circle, (2017) 99 VST 343 (Mad) xxiii) M/s.C.A.Motors vs. The Commercial Tax Officer, Tiruvarur, 2019- VIL-448-Mad 20. Mr. Mohammed Shafique, learned Additional Government Pleader (Taxes) submits that these writ petitions were premature and were liable to be dismissed. He submits that the challenge in the present cases were to the impugned notices issued under Section 27 of the Tamil Nadu VAT Act, 2006 and therefore the authorities concerned should be given an opportunity to examine the facts as to whether the petitioner has made out a case for confirming and/or dropping of the proposal under section 27 of the aforesaid Act. 21. He submits that the petitioner cannot scuttle the reassessment proceeding initiated by exhorting this Court to quash the impugned notices in a summary manner. 22. He submits that the decision of this court in AGS Entertainment Private Limited Versus Union of In....
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....e submits that as per the decision of the Hon'ble Supreme Court in TELCO v. CCT, (1970) 1 SCC 622 an Assistant Commissioner was expected to look into each transaction in order to find out whether a completed contract of sale had taken place which could be brought to tax. He submits that even an assessing officer was bound to examine each, and every transaction independently and then decide whether it constituted a sale liable to tax under the provisions of the Act or not. He therefore prayed for dismissal of the present writ petitions. 28. I have considered the arguments advanced by the learned Standing Counsel for the petitioner Mr.R.L.Ramani and by the learned Special Government Pleader for the respondents ( taxes). 29. It will be useful to refer to the decision of the Honourable Supreme Court in Tata Consultancy Services Versus State of Andhra Pradesh(2005) 1 SCC 308;137 STC 260 before proceeding to merits and demerits of the contentions of the respective counsel. 30. Tata Consultancy Services had provided consultancy services including computer consultancy services. Asa part of their business, they prepared and loaded on customers' computers custom-made software wh....
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....ectual property has been incorporated on a media for purposes of transfer. Sale is not just of the media which by itself has very little value. The software and the media cannot be split up.What the buyer purchases and pays for is not the disc or the CD. As in the case of paintings or books or music or films the buyer is purchasing the intellectual property and not the media i.e. the paper or cassette or disc or CD. Thus a transaction/sale of computer software is clearly a sale of "goods" within the meaning of the term as defined in the said Act. The term "all materials, articles and commodities" includes both tangible and intangible/incorporeal property which is capable of abstraction, consumption and use and which can be transmitted, transferred, delivered, stored, possessed, etc. The software programs have all these attributes."35. The Court also left the issue open regarding sale unbranded CD with following observation:- "29. Mr Sorabjee submitted that the High Court correctly held that unbranded software was "undoubtedly intellectual property". Mr Sorabjee submitted that the High Court fell in error in making a distinction between branded and unbranded software and er....
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....ervice provider as an input service does not automatically make the output service and input service. 39. It further opined that individual service was to be examined with reference to the explanation provided to the definition of "business auxiliary service" and only such output services which qualify to be IT services in terms of the said explanation shall remain excluded from taxable service under the heading Business Auxiliary Service. 40. "Information Technology Software Service" was brought within the purview of taxable service with effect from Finance Act No.2 of 2009 with the introduction of Section 65(53a) and Section 65(105)(zzzze) in the Finance Act, 1994. 41. In 2009 vide Finance (No.2) Act 2009, the definition of taxable service of "Information Technology Service" in Section 65(105)(zzzze) of the Finance Act, 1994 was tweaked and amended with effect from 16.05.2008. With effect from 16.05.2008, the definition of "Information Technology Software Service" in Section 65(53a) and the definition of taxable service in relation to"Information Technology Software" read as under:- Section 65(53a) of Finance Act, 1994. Section 65(105)(zzzze) of the Finance Act,....
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.... (c) other software. (i) on floppy disc or cartridge tape. (ii) on disc or on CD ROM. (iii) on other media. (d) Recorded and pre-recorded DVDs and CDs. 44. Thus, "Information Technology Product" was attracted to "IT software of any media"on :- (i) floppy disc or cartridge tape;or (ii) disc or on CD ROM;or (iii) other media. 45. IT software of any media" as enumerated above were liable to tax under the provisions of the Tamil Nadu Value Added Tax, 2006 under entry 68, Part B of the First Schedule of the Act read with G.O. Ms. 3 CT& R (B1) dated 1.1.2007 with effect from 1.1.2007. Earlier, under Entry 18, Part B to Schedule I of the Tami Nadu General Sales Tax Act, 1959 "Software including IT Software" were liable to tax with effect from 27.03.2002. 46. When a software is copied on a CD or magnetic disk or other forms of transmission, a "goods" come into existence in such media. The sale of such CD or magnetic disk or in other forms of transmission of the software may license the user to use the software therein. However, there is goods which has come into existence and prima facie it appears the petitioner....
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....ified period of time and sale of software licenses attracts VAT under the provisions of the Tamil Nadu Value Added Tax Act, 2006. 52. The petitioner ought to have been aware of the decision of the Hon'ble Supreme Court in Tata Consultancy Case referred to supra wherein it was categorically concluded that even "uncanned software" was goods. Since the issue was left open, as the occasion did not arise before it, the petitioner could have approached the officers of the Commercial Tax Department by explaining the views it entertained. 53. The Asst Commissioner of Central Excise has not compared the taxing entries under the provisions of the Tamil Nadu Value Added Tax Act, 2006 and the provisions of the Finance Act, 1994 as amended with effect from 16.5.2008 while giving his opinion. Therefore, such an opinion of the obtained by the petitioner was not binding on the Commercial Tax Department 54. Further, neither the Asst Commissioner of Central Excise who was functioning as the Asst Commissioner of Service Tax nor the fourth respondent who has been impleaded had any authority to clarify whether the petitioner was liable to pay tax under the provisions of the Tamil Nadu V....
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....he decision of the Division Bench of this Court in Infotech Software Dealer Association versus Union of India [2010] 34 VST 133 which was relied upon by the learned senior counsel for the petitioner in my view is not relevant. The Division Bench there dealt with constitutional validity of the amendment to Section 65 (105) (zzzze) of the Finance Act, 1994 with effect from 16.05.2008. 62. There the challenge was made to the amendment to the above definition of taxable service in section 65(105)(zzzze) of the Finance Act, 1994 as amended by Finance No 2 Act, 2009 which amended sub-clause (v) and (vi) by substituting the word "acquiring" with "providing". 63. The specific prayer of the petitioner therein was to declare Section 65(105)(zzzze) of the Finance Act, 1994 as null and void, ultra virus and unconstitutional and contrary to Section 265, entry 92 C and 97 one of List I, entry 54 of List II of the Schedule VII and contrary to the provisions of Article 19 (1) (g), 265 and 268 A of the Constitution of India in so far as the petitioner were concerned therein 64. The Division Bench has merely upheld the constitutional validity of the aforesaid provision. The passing referenc....