No Service Tax liability under Management, Maintenance or Repair Service on Non-Rendering of Service in India: CESTAT [Read Order]

Service Tax liability - Management - Maintenance - Repair Service - Non-Rendering of Service in India - Service in India - CESTAT - Customs - Excise - Service Tax - Taxscan

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that there is no Service Tax liability under management, maintenance or repair service on non-rendering of service in India.

The appellant, M/s. Dassault Systemes Simulia Private Limited, is engaged in the sale of software programme “Abaqus” to various customers. The Show Cause Notices reveal that the appellant offered various licence types to their customers and the revenue generated therefrom were duly reflected in their balance sheet as Annual, Paid-up, MES and Academic and from the break-up details that were available from the appellant’s balance-sheet, it was ascertained that the expenses related to Academic, Paid-Up Annual And Monthly, were related to the purchase of software and MES-ME related to maintenance, enhancement and support of the software provided by the foreign companies to the appellant.

The above facts appear to have weighed in the mind of the Revenue that the same constituted management, maintenance or repair service with effect from 10.07.2004 and that therefore, the appellant being the recipient in India was liable to pay Service Tax under reverse charge mechanism in terms of Section 66A of the Finance Act, 1994 read with Rule 2(i)(d)(iv) of the Service Tax Rules, 1994.

Post May 2006, the sale of the software in question as well as its upgrades, maintenance, enhancement and support were done through electronic downloading only. Upon receipt of such purchase order, the same was forwarded to the US company and the US company, thereafter, provided the password and the internet site address through which a customer / purchaser could receive his software, which could then be downloaded into his computer and be used later on for his own purposes.

The appellant expressed their bona fide belief that maintenance of computer software was not liable to Service Tax as the Explanation to Section 65 (64) of the Finance Act was introduced with effect from 01.06.2007 only.

The appellant also claimed that in their case, the foreign company having not performed the service of maintenance of software in India, whereas the same having been rendered/provided through internet, perhaps up to the insertion of the second proviso to the said Rule 3 (inserted with effect from 01.03.2008 vide Notification No. 06/2008- S.T. dated 01.03.2008), there would not be any Service Tax liability on them.

The Coram comprising of P Dinesha, Judicial Member and Vasa Seshagiri Rao, Technical Member observed that “We are of the clear view that the appellant could not have been fastened with the Service Tax liability under management, maintenance or repair service for the reason that there is no document placed on record to negate the appellant’s claim that they have not rendered any service in India and the Revenue has also not been able to place anything on record in their support to establish that the appellant had rendered nothing but management, maintenance or repair service.”

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