TaxTMI 
TaxTMI 
2025 (6) TMI 1090
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.... to 30th September 2013 which came to be decided. 2. Learned Counsel for the appellant submitted that confirmation of demand in the original notice, from which the impugned statement of demand leading to the impugned order emanated, in adjudicating proceedings, was set aside by the Tribunal in order [ final order no. 55487/2024 dated 8th April 2024 ] disposing off appeal [ service tax appeal no. 51776 of 2016 ] challenging order [ order-in-original no. 08/ST/2015-16 dated 03rd March 2016 ] of Additional Director General of Central Excise Intelligence, (Adjudication), New Delhi. 3. According to Learned Counsel, the appellant, a manufacturer of 'anti virus software' at Pune, had, in pursuance thereof, imported 'codes' and 'keys' for the network from M/s Kaspersky Lab, UK which would be utilized for converting the software into tangible form for distribution of, and for sale, in India. It was submitted that levy on the value of the 'codes' and 'keys' had been discharged, by inclusion in value on clearance thereupon, as duties under Central Excise Act, 1944. According to the Learned Counsel the dispute pertains to the distribution agreement, against which M/s Kaspersky Lab, UK delive....
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....ons contained in the End User License Agreement and would, therefore, not be treated as deemed sale under article 366(29A) of the Constitution. Thus, the supply of packed Antivirus Software to the end user by charging license fee would amount to a provision of service and would not be a sale. The show cause notice, therefore, required the appellant to show cause as to why service tax for supplying Quick Heal Antivirus license key / code with the Antivirus Software replicated CDs/DVDs in retail packs through dealers during the period 1 March, 2011 to 31 March 2014 should not be demanded with interest and penalty. The demand made in the show cause notice was confirmed by the adjudicated authority. The Tribunal set aside the order of the adjudicating authority and held : "24. The definition of "information technology software" is same under section 65 (53a) of the Act or under section 65B (28) of the Act. "Information technology software" has been defined to mean 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 a com....
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.... facility and receive rapid responses, which can be used to prepare the next inputs. In contract, in other softwares like ERP, EXCEL, MS Word, there is continuos interaction between the user and the computer system and these softwares perform only after receipt of input from the user. 30. Such being the position, no service tax was leviable under section 65(105)(zzzze) of the Act prior to 1 July, 2012. Even after 1 July, 2012 the definition of 'information technology software' under section 65B(28) remained the same and so also service tax was not leviable. 31. The matter can be examined from another angle. Section 65B (51) defines a 'taxable service' to mean any service on which service tax is leviable under section 66B. Section 66B provides that there shall be levied service tax on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed. Section 65B (44) define "service" to mean any activity carried out by a person for consideration, and includes a declared service, but shall not include, amongst others, an activity....
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....er of 'right to use' such software in the sense the phrase has been used in sub clause (d) of article 366(29A) of the Constitution. The guidelines also provide that in case a license to use pre-packaged software imposes restrictions on the usage of such licenses, which restriction interfere with the free enjoyment of the software, then such a license would not result in transfer of 'right to use' the software within the meaning of Clause 29(A) of article 366 of the Constitution. However, every condition imposed would not make it leviable to service tax. The condition should be such so as to restrain the right to free enjoyment on the same lines as a person who has otherwise purchased goods is able to have. ( emphasis supplied ) 14. The Division Bench of the Tribunal then examined the End-User Agreement and held as follows : " 45. The agreement provides that the licensee shall have right to use software subject to terms and the conditions mentioned in the agreement. The licensee is entitled to use the software/RDM services from the date of license activation until the expiry date of the license. The licensee is also entitled for the updates and technical support. The conditio....
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....anned software' is one prepared for a particular purchaser's requirements by tweaking the original software to adapt to the specific requirements of a particular entity. While a 'canned software' could be sold over the shelf, an 'uncanned software' is programmed to specific and particular needs and requirements. This Court held that in India the test to determine whether a property is "goods", for the purpose of sales tax, is not confined to whether the goods are tangible or intangible or incorporeal. The correct test would be to determine whether an item is capable of abstraction, consumption and use and whether it can be transmitted, transferred, delivered, stored, possessed, etc. It was held that both in the case of 'canned' and 'uncanned' software all these are possible (sic para 16). 52. From the judicial decisions, the settled essential requirement of a transaction for the transfer of the right to use the goods are: (i) It is not the transfer of the property in goods, but it is the right to use the property in goods; (ii) Article 366(29A)(d) read with the latter part of the clause (29A) which uses the words, "and such transfer, delivery or supply"... would indicate that....
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.... assigned by us while dismissing the Civil Appeal (Diary No. 24399 of 2020), as above. 71. However, while allowing these appeals, we may only observe that in the case of M/s. Infotech Software Dealers Association v. Union of India (supra) the challenge was to the validity of Section 65(105)(zzzze) levying service tax on the information technology software service. The High Court held that the question whether the software is "goods" or not would depend on the facts and circumstances of individual case. It is evident on plain reading of the judgment rendered by the Madras High Court in the case of M/s. Infotech Software Dealers Association (supra) that it has not referred to the decision of this Court in the case of TATA Consultancy Services (supra)." (emphasis supplied) 18. In the present case, the End User Licence Agreement is similar to the End User Licence Agreement referred to in paragraph 44 of the decision of the Tribunal and in paragraph 53 of the judgment of the Supreme Court in Quick Heal Technologies. The relevant portions of the End User Licence Agreement in the present case are reproduced below : Standard End User Licence Agreement "1. Licence Grant. Subject to....
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.... such information available for any reason, including (without limitation) costs you shall be permitted to take such steps to achieve inter operability provided that you may only reverse engineer or decompile to the extent permitted by law, 1.1.4. You shall not, nor permit any third party to copy (other than as expressly permitted herein), make error corrections to or otherwise modify, adaptor; translate the Software nor create derivative works of the Software. 1.1.5. You shall not rent, lease or lend the Software to any other person, nor transfer or sub-licence your licence rights to any other person. 1.1.6. You shall not use this Software in automatic, semi-automatic or manual tools designed to create virus signatures, virus detection routines, any other data or code for detecting malicious code or data. 1.2 Service-Mode Use. You may use the Software on a Client Device or on or as a server ('Server') within a multi-user or networked environment ('Server-Mode') only is such use is permitted in the applicable price list or product packaging for the Software. A separate licence is required for each Client Device or "seat" that may connect to the Server at any time, regardles....
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....is Agreement at any point by destroying all copies of the Software and the Documentation. 3. Support. (i) Kaspersky Lab will provide you with the support services ("Support Services") as defined below for a period of one year on: (a) Payment of it's then current support charge; and (b) Successful completion of the Support Services Subscription Form as provided to you with this Agreement or as available on the Kaspersky Lab website, which will require you to produce the Key Identification File which will have been provided to you by Kaspersky Lab with this Agreement. It shall be in the absolute discretion of Kaspersky Lab whether or not you have satisfied this condition for the provision of Support Services. (ii) Support Services will terminate unless renewed annually by payment of the then current annual support charge and by successful completion of the Support Services Subscription Form again. (iii) "Support Services" means: (a) Daily updates of antivirus databases; (b) Free software updates, including version upgrades; (c) Extended technical support via E-mail and hot phone-line provided by Vendor and/or Reseller; (d) Virus detection and curing updates in 24-....