Case Note & Summary
The dispute arose from a service tax demand against a software company for not paying service tax on antivirus software sales. The revenue alleged that the company failed to pay service tax on transactions involving the supply of license keys for antivirus software from 01.03.2011 to 31.03.2014. A show cause notice was issued proposing a demand of over Rs. 62 crores, which was adjudicated, leading to a confirmed demand of Rs. 56 crores. The company appealed to the Tribunal, which ruled in its favor, stating that the software did not exhibit interactivity and thus was not subject to service tax. The revenue challenged this decision in the Supreme Court, raising questions about the classification of the software and the applicability of service tax. The court analyzed the Tribunal's findings, particularly referencing the Supreme Court's earlier ruling in Tata Consultancy Services v. State of Andhra Pradesh, which classified packaged software as goods. The court agreed with the Tribunal that the transaction constituted a deemed sale and upheld the Tribunal's decision that no service tax was applicable. The court ultimately dismissed the revenue's appeal, affirming the Tribunal's ruling.
Headnote
A) Taxation Law - Service Tax Liability - Determination of Service Tax Applicability - Central Excise Act, 1944, Section 35L(b); Finance Act, 1994, Section 65(105)(zzzze) - The Tribunal found that the antivirus software did not involve interactivity and thus was not liable for service tax prior to 01.07.2012. The court upheld the Tribunal's conclusion that the transaction constituted a deemed sale under Article 366(29A) of the Constitution, thereby exempting it from service tax. Held that the license agreement did not interfere with the right to use the software (Paras 30-34).
Issue of Consideration
Whether the transaction involving the supply of antivirus software license keys constitutes a deemed sale and is liable to service tax.
Final Decision
The Supreme Court dismissed the revenue's appeal, affirming the Tribunal's decision that the transaction constituted a deemed sale and was not liable for service tax.
Law Points
- Service Tax
- Information Technology Software Service
- Deemed Sale
- Central Excise Act
- 1944
- Finance Act
- 1994
