Tribunal rules that maintenance of software would be liable to service tax only from 16 May 2008

Tribunal rules that maintenance of software would be liable to service tax only from 16 May 2008

Court : Tribunal, Bangalore

Brief : The Tribunal ruled that maintenance of software which is in the nature of upgradation or enhancement would be covered under the definition of Information Technology Software Service (ITSS) with effect from 16 May 2008.

Citation : SAP India Pvt Ltd. v. CCE, Bangalore Final Order 1443/ 2010 dated 18 November 2010

Judgement :

 

Factual background :- SAP India Pvt. Ltd. (Appellant) is engaged in the provision of consultancy, licensing and maintenance or ERP software.  The Commissioner, Service Tax had confirmed service tax demand of INR 20 crores on the Appellant under 'maintenance and repair' service during the period July 2004 and January 2006. In addition to the service tax demand, the Commissioner had also confirmed interest and penalties against the Appellant. 

 

Decision of Tribunal

 

The Tribunal held that maintenance or repair of goods will not normally result in the upgradation of its value or functional capacity or efficacy to higher level than what originally existed, while maintenance of software as per the technical literature can improve the software's applicability to new functional areas/ efficacy and value. 

The Tribunal held that activities undertaken by the Appellant would be within the coverage of ITSS w.e.f. 16 May 2008 under clause "adaption, upgradation, enhancement, implementation and other similar services related to information technology software. 

 

Finally, the Tribunal held that the maintenance charges collected by the Appellant during July 2004 and January 2006 would not be liable under 'maintenance or repair' service.

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Regards

Ankitha Singhvi

Hope sees the invisible, feels the intangible & achieves the impossible :)