Service Tax Demand on Software Charges without Examining Nature of Software from Invoices : CESTAT Directs Re-adjudication

The Ahmedabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) directed re-adjudication to the adjudicating authority on the service tax demand on the software charges without examination of the exact nature of the software invoices. 

Linde Engineering India Private Limited, the appellant assessee was registered with the jurisdictional service tax department, having a centralized service tax registration, and engaged in the business of providing taxable output services under the category of consulting engineer services, erection, commissioning, and installation service, and construction services other than residential complex, including commercial/ industrial buildings or civil structures and works contract services, etc. to customers located within /outside India and also engaged in the provision of services to its clients which are spread in various countries. 

The assessee appealed against the order passed by the adjudicating authority for confirming the service tax demand on various services rendered by the assessee such as Professional fee/engineering services, Corporate cost allocation, Consultancy fees, Bank charges, and others amounting to Rs. 4,94,88,067/- along with interest under Section 75 and penalty under Section 78(1) and 77(2) of the Finance Act,1994. 

Venkateshwaran and Nikita Jain, the counsels for the assessee contended that the payments are recorded as subscription/license fees; this software are classified as goods and not covered under the very changeability/levy of service tax as per section 66B of the Finance Act and that the payment in question has been made for the purchase of goods (i.e. software) and hence the very question of charging service tax on the same does not arise; that in the impugned order. 

Tara Prakash, the counsel for the department contended that the software was taxable before the period of 1.7.2012, software had been defined as a taxable service under Section 65(105)(ze) of the Finance Act. 

The Bench observed that the adjudicating authority had confirmed the taxability as impugned services hypothetically without examining the nature of software from the invoices that the assessee had submitted in respect of such goods (software). 

The two-member bench comprising Ramesh Nair (Judicial) and C L Mahar (Technical) remanded the matter back to the adjudicating authority to pass a fresh order after examining the invoices. 

To Read the full text of the Order CLICK HERE

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