HCL Infosystems Ltd. Vs Principal Commissioner (CESTAT Allahabad)
Summary: The Customs, Excise & Service Tax Appellate Tribunal, Allahabad Regional Bench, allowed the appeal filed by M/s HCL Infosystems Ltd. against Order-in-Original No. 22-COMMR-ST-NOIDA-2018-19 dated 31.10.2018, whereby the Commissioner, CGST & Central Excise, Noida had confirmed service tax demand of Rs. 16,67,01,000/- along with interest under the proviso to Section 73 of the Finance Act, 1994 and imposed penalties under Sections 76, 77 and 78.
The Appellant was engaged in manufacturing Automatic Data Processing Machines, including computers and units thereof. For pre-installation of operating software such as Windows XP and Windows Vista in computers manufactured by it, the Appellant procured licences from Microsoft Corporation and paid royalty. Under the Microsoft Desktop Operating System License Agreement dated 01.08.2006, the Appellant was permitted to pre-install the product software, pre-install a backup copy on the computer hard disk and distribute and sub-license the pre-installed product to the end customer.
The Appellant loaded the operating system onto the hard disk drives at its factory and assembled the computers. The computers were cleared along with external media and manuals, while the Certificate of Authenticity was affixed to the computer chassis. The Appellant paid applicable Central Excise duties on the hardware as well as software. According to the Appellant, the end customer obtained the right to use the software under the applicable End User Software License Terms, while ownership of the software remained with Microsoft.
