The Customs, Excise, and Service Taxes Appellate Tribunal (CESTAT) held that the service tax is applicable on developing an internet-based trading software and licensing to its customers.
The appellants, M/s. Religare Technova Global Solutions Ltd. are developers of an internet-based trading software “Trade Anywhere‟ and licensing the same to its customers who primarily share broking houses or financial institutions or banks and media portals.
The appellant for providing such software license, has entered into Software License Agreements with various share broking houses, etc. For licensing of software, appellants are collecting charges termed as “license fee‟ and on this value they are collecting and discharging CST at the rate of 4% for interstate sales and excise duty.
The department entertained the view that the appellants are liable to pay service tax under Management or Business Consultant Service as provided in Finance Act, 1994 but are not paying the same and has also not informed the department about non-payment of service tax on Management or Business Consultant Service. Department thereafter issued a show-cause notice to the appellant on the various allegations.
The Counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts involved in the case and without considering the precedent decisions of this Tribunal and the higher courts.
It was further submitted that as regard “Trade Anywhere‟ software, they are not undertaking any consultancy work. The skill required and the service provided are in the field of engineering rather than in the field of trading or finance.
It was further contended that the demand in the present case is entirely barred by limitation.
The appellant’s software and the related services are to be treated as a product in the field of engineering notwithstanding any inputs that might have been taken from other domain groups.
In fact, according to the appellant, the department has not verified from any customers of the appellant as to what kind of advice if any are being received by them from the appellant.
The coram consists of a Judicial Member S.S. Garg and Technical Member, P. Anjani Kumar held that as per the terms of the Agreement entered into between the appellant and their clients, the activities undertaken by the appellant are 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 May 16, 2008. Further, the activities alleged in the show-cause notice clearly fall within the ambit of Information Technology Software Service as defined in the Finance Act, 1994.
The CESTAT noted that the period involved in the present case is from March 1, 2006 to May 15, 2008 whereas the show-cause notice was issued on April 8, 2011 by invoking the extended period of limitation alleging suppression of facts with intent to evade payment of tax by the appellant.
“The department was very much aware of the activities of the appellant as the department conducted audit of the accounts of the appellant from time to time and the last audit was conducted in December 2009 but has not raised any objections regarding the activities of the appellant, hence, allegation of suppression of material facts against the appellant is not sustainable and we hold that entire demand is time barred,” the CESTAT said.
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