Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The Coram of S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) allowed an appeal directed against the order passed by the Commissioner of Service Tax.
The appellants were developer of an internet based trading software “Trade Anywhere” and licensing the same to its customers who were primarily share broking houses / financial institutions / banks and media portals. The appellant for providing such software license, had entered into Software License Agreements with various share broking houses, etc. For licensing of software, appellants were collecting charges termed as “license fee” and on this value they were collecting and discharging CST @ 4% for interstate sales and excise duty. The department entertained the view that the appellants were liable to pay service tax under Management or Business Consultant Service as provided in Finance Act, 1994 but were not paying the same and had also not informed the department about non-payment of service tax on Management or Business Consultant Service. Appellant filed detailed reply to the show-cause notice praying that proceedings be dropped as the appellants were not liable to pay service tax under the category of Management or Business Consultant Service. The Commissioner rejected the contentions of the appellant and confirmed the demand in the impugned order, thus the instant appeal.
The counsel for the appellant, Mr. Syed Khamnuddin submitted that as regard “Trade Anywhere” software, they were not undertaking any consultancy work. The skill required and the service provided were in the field of engineering rather than in the field of trading or finance. The appellant’s software and the related services were to be treated as a product in the field of engineer notwithstanding any inputs that might have been taken from other domain groups. He further submitted that the respondent had failed to establish that the appellant’s customers were receiving any advice / consultation from the appellants in the areas of management. He further submitted that Information Technology Software Service was specifically made taxable under Information Technology Software Service only from 16-5-2008 and the disputed period in this case was prior to 16-5-2008 and therefore, no service tax could be demanded during the period prior to 16-5-2008.
The issue before the Tribunal was to decide whether the services rendered by the appellant as per their agreement with their customers fell in the definition of taxable services of Management or Consultant Service as alleged by the department or it fell under the definition of Information Technology Software Service as claimed by the appellant. The Tribunal considered the view given by the Commissioner that the services rendered by the appellant were covered under the category of Enterprise Resource Planning (ERP) Software Application but did not agree with the view that ERP would fall under Management or Business Consultant Service or Information Technology Software Service and would be liable for service tax. The Tribunal further found that as per the terms of the Agreement entered into between the appellant and their clients, the activities undertaken by the appellant were covered under the definition of Information Technology Software Service as specifically covered under the Information Technology Services as taxable under Section 65(105)(zzzze) with effect from 16-5-2008. The Tribunal relied on the judgment of IBM India v. Commr. of Service Tax, Bangalore: [2009] 23 STT 338 (Bang.-CESTAT) maintained by the Supreme Court in Commr. v. IBM (P) Ltd., 2010 (18) STRJ 137 (SC) for deciding the issue involved quoting the relevant paras.
The Tribunal while allowing the appeal held that the appellants were not liable to pay service tax during the disputed period under the category of Management or Business Consultant Service.[Religare Technova Global Solutions Ltd. v. CST, 2020 SCC OnLine CESTAT 320, decided on 24-11-2020]
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