TaxTMI 
TaxTMI 
2023 (12) TMI 175
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....lty under 76 2 ST/2559/2011 Sl. No. 52/2011-ST (Commr.) dated 30/05/2011 01.09.2009 to 31.03.2010 56,87,299- Not Quantified Penalty u/s 76 & u/s 77 Rs. 5000/- of Finance Act. 3 ST/2560/2011 Sl. No. 53/2011-ST (Commr.) dated 26/05/2011 01.04.2010 to 30.12.2011 1,67,46,060/- Not Quantified Penalty u/s 76 & U/s 77 Rs. 5000/- of Finance Act. 4 ST/26441/2013 Sl. No. 38/2013-ST (Commr.) dated 28/02/2013 01.01.2011 to 30.11.2011 1,29,14,592/- Not Quantified Penalty u/s 76 & 77 Rs. 10000/- Finance Act 5 ST/21868/2013 Sl. No. 217/2013-ST (Commr.) dated 05/12/2013 01.12.2011 to 30.10.2012 2,56,95,835/- Not Quantified Penalty u/s 76 & 77 of Finance Act 6 ST/20119/2017 Order in Original No. BLRLTUNT000-Com20-2016 dated 28/10/2016 01.11.2012 to 30.12.2014 2,68,71,175/- Not Quantified Penalty u/s 76 & 77 of Finance Act, 1994. 2. Briefly stated facts of the case are that the appellants are engaged in the manufacture of "Distributed Control Systems" (DCS, for short) falling under Chapter sub heading 90328990 of CETA, 1985. It comprises of both hardware and....
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....ies thereafter. The said demand Notices were later adjudicated and confirmed with interest and penalties under Section 76 and 77 of the Finance Act, 1994. Aggrieved by the said Orders, the present appeals are filed. 4. At the outset, the learned senior counsel for the appellant submitted that there cannot be any doubt or dispute that the customized software for DCS have been sold by the appellant in a recorded media and under the cover of Central Excise invoices by claiming applicable exemption notification to the said software during the relevant time. It is his contention that when the customized software for DCS cleared by classifying the same under Chapter sub-heading 8523 of CETA, 1985, in a recorded media, then it cannot be considered as rendering taxable services also under the category of ITSS brought into effect from 16/05/2008. It is his contention that the said action of the Department would amount to approbating and reprobating simultaneously and apparently would amount to double taxation, which is not permissible in law. 5. Further emphasizing the procedure followed in supplying the said software, the learned senior counsel has submitted that in the respective pu....
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....applicable only within the respective parameters/enactments thereof. Same principle has also been laid down in the case of Sobha Developers Ltd. Vs. CCE [2010(19) STR 75], which has been upheld by the Supreme Court as reported at 2017(49) STR J26 (SC)]. Further, he has argued that since the said software in recorded media has been cleared on payment of applicable rate of excise duty ('nil' rate of duty being exempted) as well as Sales Tax/VAT, no service tax could be demanded unless it is established that there has been any rendition of service separately, other than supply of developed/manufactured/customized software in recorded media to the clients. It is his contention that no such evidence has been brought on record by the Department nor discussed in the impugned orders passed by the Commissioner. Instead, entire sales value of the software has been considered as value of the taxable service provided, in computing the service tax demand under the category of ITSS, when the said software cleared in a recorded media like CDs and held to be excisable goods. 8. Referring to the service tax entry viz. Business Auxiliary Service (BAS) for the period up to 30/06/2012, the learned ....
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....ayable on reverse charge basis on the engineering, design and drawing services received from associated enterprises abroad; also in the invoice raised for import, it was considered as "paper", accordingly customs duty payable was declared to be "nil". Further, it is observed that since the Customs Authority considered the same as 'goods' therefore the view taken by the Tribunal that the same cannot be taxed as goods and services is erroneous, since the same activity can be taxed as both goods and services, provided the contract is indivisible; it is held that on the aspect of service, there may be levy of service tax and that the said aspect has not been considered by the Tribunal, not withstanding the findings recorded by the Commissioner in the order. It has been held that there is a distinction between sale of goods and contract of service, what is relevant is the intention of contracting parties. Thus, by applying the aspect theory it has been held that design services could be subject to service tax and remanded the matter to the Tribunal as the grounds raised by the respondent not considered. It is his contention that on the other hand the principle laid down in the case of I....
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....w.e.f. 16/05/2008, the Information Technology Software Service is to be considered as "properties". The activity of designing, developing or any other service primarily in relation to operation of computer system, i.e. information technology software only, when transferred to a media would fall within the meaning of manufacture under Section 2(f) of the Central Excise Act, 1944 and classifiable as excisable goods under Chapter 8523 of CETA, 1985 depending on the nature of the media such as discs, tapes, solid state non-volatile storage devices etc. He has submitted that in the present case, the activity of developing, adaptation, upgradation, enhancement, implementation, design & programming etc. of the customized software undertaken by the appellants fall within the meaning of the Information Technology Services as defined in Explanation (b) of the definition of BAS which is distinct from the activity that amount to manufacture under Section 2(f) of Central Excise Act. He has submitted that an activity amounting to manufacture of excisable goods would also to be liable to service tax when the same gets classified within any of the taxable services less than BAS unless and otherwis....
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....e reproduced as below:- Note 10 of CH 85 "10. For the purposes of heading 8523 "recording" of sound or other phenomena shall amount to manufacture." Supplementary Note "For the purposes of heading 8523, "Information Technology Software" means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of an automatic data processing machine." Tariff item Description of goods Unit Rate of duty 8523 - DISCS, TAPES, SOLID-STATE NON-VOLATILE STORAGE DEVICES, "SMART CARDS" AND OTHER MEDIA FOR THE RECORDING OF SOUND OR OF OTHER PHENOMENA, WHETHER OR NOT RECORDED, INCLUDING MATRICES AND MASTERS FOR THE PRODUCTION OF DISCS, BUT EXCLUDING PRODUCTS OF CHAPTER 37 - Magnetic media Kg. 16% .... .... .... .... .... .... 8523 40 90 Other u 16% - Semi-conductor media: 8523 51 00 Solid-state non-volatile storage devices u 16% 8523 52 Smart cards; ....
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....viding interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment. Section 65(105)(zzzze): Taxable service means any service provided or to be provided, to any person, by any other person in relation to information technology software including (i) development of information technology software, (ii) study, analysis, design and programming of information technology software, (iii) adaptation, upgradation, enhancement, implementation and other similar services related to information technology software, (iv) providing advice, consultancy and assistance on matters related to information technology software, including conducting feasibility studies on implementation of a system, specifications for a database design, guidance and assistance during the startup phase of a new system, specifications to secure a database, advice on proprietary information technology software, (v) providing the right to use information technology software for commercial exploitation including right to reproduce, distribute and sell information technology software and right to use software comp....
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....ervice tax on 'Information Technology Software service' w.e.f 16.5.2008, the imported software, customized and supplied with DCS by the appellant is a 'service' as defined under Section 65(53a) read with taxable category of Section 65(105)(zzzze) of the Finance Act, 1994, and accordingly leviable to service tax. 23. It is to be noted that even after introduction of the service tax on the 'Information Technology software Service' more or less on similar line of definition of 'Information Technology software' already present under supplementary note of Chapter 85 of CETA, 1985 and the classification of the said software under Chapter Heading 8523 of CETA, 1985 continued in the Central Excise Tariff Act without any amendment or alteration to the same. In other words, the intention of the Legislature was continuation of levy of excise duty on the activity of manufacture and sale of Information Technology software and also levy service tax for providing Information Technology Software service. Thus, the precise question is, whether the same activity of supply/sale of customized software by the Appellant could be chargeable to Excise duty and/or also service tax post 16.5.2008 as admi....
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.... including the cost of the service in the value of the SIM card by relying on the aspects doctrine. That doctrine merely deals with legislative competence. As has been succinctly stated in Federation of Hotel & Restaurant Association of India v. Union of India (1989) 3 SCC 634 - "subjects which in one aspect and for one purpose fall within the power of a particular legislature may in another aspect and for another purpose fall within another legislative power. They might be overlapping; but the overlapping must be in law. The same transaction may involve two or more taxable events in its different aspects. But the fact that there is overlapping does not detract from the distinctiveness of the aspects". No one denies the legislative competence of States to levy sales tax on sales provided that the necessary concomitants of a sale are present in the transaction and the sale is distinctly discernible in the transaction." Thus, their Lordships after laying down the guiding principle in deciding the transaction whether results into sale of sim cards or rendition of taxable service, left the question open in the said case, to ascertain the same from the terms of the contract and inten....
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.... as and when the demand is made." 26. Therefore, in view of above laid down principles, what is necessary in a given case is to examine the true nature of transaction between the parties to the contract to ascertain whether the transaction is a sale or service. The learned senior counsel for the appellant argued by referring to various Purchase Orders enclosed with the appeal paper book that the intention of the parties to the transaction is that of a 'sale' of the software as 'goods' before and after 16.5.2008. The appellant has not retained any title to the software after it is customized and sold by putting the same in the form of CD along with DCS. 27. The Purchase Order placed on the Appellant referred above is for design, engineering, manufacture, procurement, painting, supply, testing at work, inspection, transportation and delivery at site of the entire DCS for the Illmenite Beneficiation Plant. The scope of work also mentions the supply which includes design, engineering, manufacture, procurement, painting, supply, testing at work, inspection, transportation and delivery at site, the entire DCS including cables of erection hardware, one way plant communication, train....
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....tomers' requirements, would amount to customization of software. The modifications may be adopted to the need of the customer or upgradation or enhancement or implementation of the software. Thus, the activity of customizing the software would fall within the meaning of Information Technology Software Service and gets classified under taxable category of Information Technology Software Service. 29. We are of the view that the learned Commissioner has misdirected himself in understanding the scope of the applicability of excise duty on manufacture of 'Information Technology Software' and levy of service tax on 'Information Technology software service' introduced w.e.f 16.5.2008 and applying the same to the facts of the present case. No doubt excise duty or service tax is leviable on the Information Technology software if sold/supplied after 16.5.2008 as an excisable goods or as a service, as the case may be, but the said levies cannot be imposed simultaneously on the same activity/transaction. In a given case it needs to be examined whether excise duty is attracted or the activity is a pure service. It is also true that merely because either duty or tax discharged in a given case....
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....VD. During the course of audit, it was objected that the drawing and designs are chargeable to service tax under the category of Design Services for the period June 2007 to September 2010. It is argued before the Supreme Court that once the Drawing and Designs are considered as goods by Customs authorities, it cannot be considered for levy of service tax. The Hon'ble Supreme Court has rejected the argument. Their Lordships observed that merely because the Customs Notification considered the same as 'goods', hence, the said activity cannot be considered for tax as service is not the correct proposition as the levy is on different aspects. Reversing the judgment of the Tribunal which held on the said premise that the design and drawings are goods but not service, their Lordships remanded the matter to the CESTAT to examine the issue. In delivering the said judgment, their Lordships referred to its earlier judgment in BSNL's case. In other words, without scrutiny of the intention of parties, merely because the relevant customs Notification refers to drawing and designs as 'goods' and assessed so by the Customs Authorities, the levy of service tax on the same cannot outrightly be di....
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....ufacture, Procurement, Painting, supply, lesting at work, Inspection, transportation and delivery at site of the entire DCS Including cables of erection hard wares, one way plant communication, Training,Insurance, commissioning spares, two years operation & maintenance spares and consumables for one year as per the technical specification Contract price The total contract price for the entire scope of supply as outlined in the technical specification shall be Rs.13699204/- (One crore Thirty six Lakhs Ninety nine Thousand two hundred and four rupees only) including taxes and duties, The summary of the price schedule is given below. Supply of DCS and accessories as per Appendix-A Rs 8805000' Supply of cables of erection materials Rs 3775000 Excise duty Rs. 850592 Sales tax Total Rs. 268612 Rs13699204 The contract price is inclusive of packing and forwarding charges, freight Insurance and all applicable taxes and dutles. Detailed price split up is attached in Appendix-B The contract price or rates shall remain firm and binding during the tenure of the contract and shall not be subject to any escalation whatsoever. Ti....