The Customs, Excise & Service Tax Appellate Tribunal Bangalore, granted relief to oracle while stating that the service tax on right to use IT software is payable after 16.05.2008.
The tribunal noted that the dispute pertains to the service of ‘software product updates’ provided by the appellants to its customers.
The bench noted that admittedly all the invoices and payments were made prior to 16.05.2008 when service tax was levied on software services under ITSS. Therefore, the question of levying Service Tax on the invoices and payments prior to 16.05.2008 when the service itself was not leviable to tax, cannot be sustained.
The tribunal observed that undisputedly the agreement has been signed on 1 st June, 2003 and the all the invoices on ‘software updates’ are admittedly issued and payments made prior to 16.05.2008. Therefore, only because the validity of the software update is for a Calander year and a part of the period falls after 16.05.2008, there cannot be a levy of service tax as per the provisions of law.
On limitation, it was noted that the same transactions for software updates were categorized under Business Auxiliary Service and show-cause notices were issued on that account for the period 2004-2009 which is inclusive of the period of dispute, which was settled under SVLDRS. The DGCEI issued notice only after a refund claim was filed by the appellant and the notice does not reveal any facts that were suppressed or mis-declared.
The bench said that the Revenue cannot expect the appellant to declare those invoices and payments paid prior to the levy of tax on ITSS to be declared in their returns.
Facts
The appellant, M/s. Oracle India Pvt. Ltd. (OIPL) is a wholly owned subsidiary of M/s. Oracle Systems Corporation, USA. They are engaged in distribution, promotion, marketing, licensing and sub-licensing of the software products developed by OIPL, USA.
The software updates sold and distributed by the appellant were valid for a prospective period of one year. These software updates are improved releases of the software program licenses updated and improved versions of base software programs which M/s. Oracle Systems Corporation, USA keeps developing on an ongoing basis through research and development. On all the software updates sold on or after 16.05.2008, Service Tax was paid since the Information Technology Software Service (ITSS) under Section 65(105)(zzzze) came into effect from 16.05.2008.
For the software updates sold under the invoices issued prior to 16.05.2008 where services were continued to be provided even after 16.05.2008, that part of value of services which were provided or to be provided on or after 16.05.2008 are liable for payment of Service Tax on pro-rata basis is the contention of the Department. Accordingly, based on the definition of ITSS, the appellant was liable to pay duty for the software updates which were used in the course of business.
The Commissioner invoking suppression on the part of the appellant, confirmed duty amount along with the interest in terms of proviso to Section 73(1) read with Section 73(2) of the Finance Act, 1994 by allowing the cum-tax benefit.
Case Details
Case Name: M/s. Oracle India Pvt. Ltd. v/s The Commissioner of Service Tax
Citation: Service Tax Appeal No. 3061 of 2011
Counsel for Petitioner : Shri Bharat Raichandani, Advocate
Counsel for Respondent : Shri Dyamappa Airani, Dy. Commissioner (AR)
Court: CESTAT, Bangalore
Judge: Dr. D.M. Misra, Member (Judicial) and Mrs. R. Bhagya Devi, Member (Technical)
Decision Date: 08/08/2024
