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2019 (4) TMI 579 - HC - VAT and Sales TaxNature of activity - sale or service? - Unbranded software/uncanned software - software developed according to the specification of the client tailor made to the customers particular requirement - whether comes under the scope of 'Goods' or not? - levy of tax - Held that:- In the present case, it is not disputed that no agreement or contract was ever filed or brought to the notice of the assessing authority or the appellate authority by the assessee, despite the show cause notice given by the assessing authority. Argument of Sri Gulati to the extent that had the assessing authority called for further information or document, the assessee was ready to furnish the same does not have much force, as the entire case of the revisionist-assessee rest upon the fact that software so developed, is on the instructions and specification of client and after the software is developed it becomes the property of the client as per the contract or agreement so arrived between them, hence the agreement/contract is the basis of claim of the assessee, relying upon which his case falls apart from the definition of goods and immediately come within the purview of service. Where any assessee is carrying on both the work of sale of software and development of software, then the assessing authority has to distinguish and indentify between the two in such a harmonious way so as to uphold the right of both the Legislation to levy tax, which falls within their respective area for arriving at such conclusion the assessee is also duty bound, apart from submitting his return to produce such documents as may be necessary and demanded by the authority concerned to segregate between the two, so as to make it abundantly clear as to which Law i.e. the State Law or the Central Act will be applicable. In the present case, the moment assessee produces/submits work contract/agreement before the assessing authority so as to bring his case within the purview of software development, the case comes out of the purview of the State Taxing authority and the same becomes amenable to Service Tax under the Law enacted by the Parliament. There is no doubt as to the fact that the Company is dealing in two types of products, namely, the branded software which are sold off the shelf, which is not under dispute and the other unbranded software, which is developed according to the specification of the client. These softwares so developed are undoubtedly are for the clients and the same becomes the property of the client, the moment it is developed and the assessee Company has no right over the same, nor it can sell the same to the other clients as a branded item - But, in the present case during the assessment proceedings when the assessee Company was required by the assessing authority to substantiate the sale under the head 'unbranded software', it was the duty of the Company to have placed the basic material, i.e., the agreement or the contract so entered by it with its client to bring the said software out of the purview of the goods. The assessee failed to bring, not only before the Assessing Authority, First Appellate Authority as well as the Tribunal the agreement, which it is relying upon before this Court. The matter is remitted back to the Tribunal to record specific finding after going through the agreements/contract as to the claim of the assessee in regard to the application of software development and support service given to its client as unbranded software not covered under the definition of goods and is a service to the customers - Matter on remand.
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