“Software maintenance services” do not fall under BAS until the 2007 amendment: CESTAT

The Bangalore Bench of the Customs, Excise and Services Tax Appeals Tribunal (CESTAT) held that software maintenance services should not be covered by the definition of “ancillary business services” under the finance law of 1994.

The appellants provide “management, maintenance or repair services and information technology software services”. The department, during the audit, found that the appellants had received an amount of Rs.6320.52 lakhs for services rendered under the maintenance and repair of the software service for the period of 9.7.2004 to 30.11.2005 and that this service was subject to service tax from 1.7.2003 .

Building on the precedents, the CESTAT bench composed of technical member Mr. P Anjani Kumar and judicial member P Dinesha observed that until the advent of the 2007 finance law, information technology, which included the maintenance of computer software, were not the purview of the “enterprises”. ancillary service”, in particular under Article 65 and the term “goods” in the Finance Act 2007 included “computer software” under Article 65(105)(zzg).

“However, under the contested circular, the second defendant relied on the judgment of the Supreme Court in Tata Consultancy Service v. State of Andhra Pradesh. [(2005) 1 SCC 308] to conclude that since software is property, any service related to the maintenance, repair and upkeep of it is also subject to the service tax,” the bench said.

“In light of the foregoing, we conclude that the matter is no longer res integra and we find that the appellants are not liable to pay service tax on software maintenance services during the period from July 9, 2004 to July 30 November 2005.”

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Margie D. Carlisle