The Ahmedabad bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that no service tax was leviable on charges for activating software inbuilt into the telecom system of electronic private automatic branch exchange (EPABX), when sales tax on same was paid.
The issue before the Tribunal was whether activation charges for activating software which is inbuilt into the telecom system of EPABX are liable to service tax under Business Auxiliary Service or otherwise when the sales tax on the same activity was discharged.
Shri PP Jadeja, Consultant who appeared for the appellant submitted the same issue in the appellant’s case, only for the different period has already been decided in their favour vide this Tribunal order No. A/10004/2023 dated 04.01.2023 therefore, the issue stands settled.
Shri Rajesh Nathan, Assistant Commissioner, (AR) appeared on behalf of the Revenue and reiterated the findings of the impugned order.
The appellant has collected activation charges in respect of the telecom equipment EPABX system which was sold earlier. The case of the department is that since the activation of software activity was carried out after the sale of equipment, the same is liable for service tax under Business Auxiliary Service.
The appellant purchased EPABX from the foreign-based vendor and further sales the same to customers. The said system contains two types of software viz. Basic System Software and feature-related software.
The appellant collected the said charges thru their Invoices/ bills and paid the CST/Sales Tax on the entire amount. After retaining profit, the remaining amount is transferred by the appellant to overseas vendors. It was found that there is no service obligation in the whole transaction. The only commercial obligation is the sale of goods by the appellant to customers as and when required. The appellant did not receive any commission in this matter.
A two-member bench comprising Ramesh Nair, member (judicial) and C L Mahar, Member (Technical) held that “the appellant is not a facilitator or a service provider to customers, but is a seller to customers. Hence, a pure and simple sale/purchase transaction has been misconstrued to be a service under Section 65(19) of the Finance Act 1994 by the Department in this matter”.
The CESTAT allowed the appeal.
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