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2020 (12) TMI 637 - AT - Service TaxClassification of services - Information Technology Software Service or Franchise Service? - licence fee paid to SAP AG, Germany, for grant of non-exclusive licence to use, market and sub-license the software, third party database and third-party software to ‘end user’ in the territory, on ‘reverse charge basis’ - HELD THAT:- The appellant is making payment to SAP, Germany in terms of Article 6.1, 6.2 and 3.7.2 of the agreement between them, which is payment towards license fee for use of software by the client in India for the software developed by SAP, Germany and 3rd party database / software and also towards support services for software which is essentially for upgradation of the software and for fixing technical difficulties encountered while using the software. Amount paid under Article 3.7.2 is for use of SAP software by appellant itself to SAP, Germany. We find that the services squarely covered in the forecorners of the definition of Information Technology Software Service as defined under Section 65(105)(zzzze) of the Finance Act, 1994, which was brought on statute w.e.f. 16.05.2008. Further, the same activity of the appellant was earlier classified under Consulting Engineer Service for the period 07.07.1997 to 27.02.1999 which was upheld by this Tribunal in BHARAT SANCHAR NIGAM LTD. (BSNL) VERSUS UNION OF INDIA [2006 (3) TMI 1 - SUPREME COURT] thereafter, there was exemption from March, 1999. Subsequently, for the period 16.10.1997 to 31.03.1998 the said activity was classified as Management Consultant Service. Further, admittedly the appellant is paying service tax under the head Information Technology Software Service w.e.f. 16.05.2008 which is not disputed by the Department. It is an accepted principle laid down by the Apex Court in COMMR. OF C.E. CUSTOMS & SER TAX VERSUS M/S FEDERAL BANK LIMITED [2016 (3) TMI 354 - SUPREME COURT] wherein affirming the order of the Kerala High Court that there was new head of service tax noticed and unless the same is carved out from the existing entry, the service tax under the said head cannot be said to be exigible prior the date of its enactment under any other existing head. The service in question is not taxable under the head ‘franchisee service’ rather taxable under Information Technology Software Service - Appeal allowed - decided in favor of appellant.
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