Yokogawa India Limited Vs Commissioner of Central Excise & Service Tax (CESTAT Bangalore)
CESTAT Bangalore held that sale of the customized software on a CD as part of the ‘Distributed Control Systems’ DCS is excisable goods and hence it cannot be considered for levy of service tax.
Facts- The appellants are engaged in the manufacture of “Distributed Control Systems” (DCS) falling under Chapter sub heading 90328990 of CETA, 1985. It comprises of both hardware and software. The said DCS is required and used for process automation in various industries including in refineries, petrochemicals, cement plants, power plants, fertilizer plants, etc.
The appellants have been availing exemption under Notification No. 6/2006-CE dt. 01/03/2006 under the category of Customized Software mentioned at Sl. No. 27 of the said notification by treating the customized software as goods. After introduction of service tax on ‘Information Technology Software Services (ITSS) w.e.f. 16/05/2008 and subsequent amendments to the said definition in 2009, it is alleged by the Department that the activities undertaken by them viz. development, adaptation, upgradation, enhancement, implementation, design and promotion and other similar services relating to ITSS as per the requirement of the customers, they failed to discharge service tax on the customized software for the period from 16/05/2008 to 31/08/2009.
Periodical Show-cause notices were issued to the appellant for recovery of the said service tax amount along with interest and penalties thereafter. The said demand Notices were later adjudicated and confirmed with interest and penalties u/s. 76 and 77 of the Finance Act, 1994. Aggrieved by the said Orders, the present appeals are filed.
Conclusion- The sale of customized software by the Appellant is ‘excisable goods’ and classifiable under Chapter subheading 85238090; hence leviable to excise duty, and subject to the exemption notification No. 6/2006-CE dt.1.3.2006 and 12/2012-CE dt. 17.03.2012, as the case may be, on fulfilment of laid down conditions as claimed by the appellant.
Held that in the present case, the Purchase Orders placed by the customers on the appellant reveal that the transaction between the appellant and their customers are not for supply of software as that of a ‘service’, but it is sale of the customized software on a CD as part of the DCS; accordingly, the same should be considered as ‘excisable goods’ and not as ‘service’, precisely, ITSS.”
FULL TEXT OF THE CESTAT BANGALORE ORDER
These six appeals are filed against the respective Orders-in-Original passed by the Commissioner of Central Excise, Bangalore. The details of appeals are tabulated as under:-
