2010 (7) TMI 598 - AT - Service Tax

Waiver of pre-deposit - Demand of service tax along with interest and penalty - The maintenance and repair of software undertaken by applicant was not covered under the definition of maintenance or repair service under Section 65(64)- The period involved in this case is 9-7-2004 to 30-4-2006 and at that time the applicant was aware of the Board s circular dated 17-12-2003 which was not withdrawn till 9-5-2007 and in the definition of maintenance service clause (b) maintenance or repair of properties whether immovable or not was substituted only with effect from 1-5-2006 - Find that the period involved in the case is 9-7-2004 to 30-4-2006 i.e. prior to the amendment of the definition - Held that software in canned form will be covered as goods - However the Board s circular dated 17-12-2003 remained in force till 9-5-2007 - The applicant has been able to make out a prima facie case in their favour - The pre-deposit of duty interest and penalty is waived and recovery of the same is stayed during the pendency of the appeal - Application allowed.

Summary

Issues:
- Application for waiver of pre-deposit of service tax
- Interpretation of maintenance or repair service under Section 65(64) of the Finance Act, 1994
- Impact of Board's Circular dated 17-12-2003
- Relevant case laws and their application
- Applicability of the definition of maintenance service during the period in question
- Consideration of the Tribunal's decision in Ruchi Infotech case
- Analysis of the Supreme Court's decision in Tata Consultancy Services case

Analysis:
The judgment revolves around an application for the waiver of pre-deposit of service tax amounting to Rs. 5,63,333/- along with interest and penalty imposed. The applicant argued that the maintenance and repair of software undertaken by them was not covered under the definition of maintenance or repair service under Section 65(64) of the Finance Act, 1994 until the insertion of sub-clause (b) on 1-5-2006. They relied on the Board's Circular dated 17-12-2003, which remained in force until 9-5-2007, supporting their contention. The applicant cited various case laws, including the Tribunal's decision in Ruchi Infotech case, to demonstrate confusion in interpretation and limitation grounds.

The Revenue contended that software in canned form would be considered goods and, therefore, the service provided for maintenance or repair would be applicable. The period in question in this case was from 9-7-2004 to 30-4-2006, predating the amendment of the definition of maintenance service. Despite the Supreme Court's decision in Tata Consultancy Services case, the Board's circular remained in force until 9-5-2007. The Tribunal found that the applicant had a prima facie case in their favor, especially considering the period involved and the confusion in interpretation highlighted in the Ruchi Infotech case.

Ultimately, the Tribunal allowed the application, waiving the pre-deposit of duty, interest, and penalty, and stayed the recovery during the pendency of the appeal. The decision was based on the applicant's ability to establish a prima facie case and the interpretation of the relevant legal provisions and circulars during the period in question.

This judgment highlights the importance of considering the specific legal provisions, circulars, and case laws applicable to the issue at hand when determining the liability for service tax and the grounds for waiver of pre-deposit.