Case Law Details
Quick Heal Technologies Limited Vs Commissioner of Service Tax (CESTAT Delhi)
Conclusion: Quick Heal Antivirus software was held to be ‘goods‘, but whether the transaction would be sale or service, would depend upon the terms of the agreement. Thus, the transaction in the present Appeal resulted in the right to use the software and would amount to ‘deemed sale‘ not liable to service tax.
Held: Assessee was engaged in the business of Research and Development of Antivirus Software under the brand name ―Quick Heal. According to assessee, during the disputed period from 1 March, 2011 to 31 March, 2014, the Antivirus Software was developed in a ready to sell condition mentioning unique Key number (license key) and MRP. Being a Canned Software, it was in the nature of ‘goods‘ and was subject to Sales Tax/ VAT and so no service tax was to be paid. They were thereafter transferred by assessee to various Sales Offices from where the ultimate sale took place on payment of applicable VAT in the respective States. Assessee claimed that this activity was initially undertaken from Pune by sending the Master CD to the Replicators like M/s Sagarika Acoustronics Pvt. Ltd. and M/s Moser Beer India Ltd., who replicated the CD and supplied them to various branches/ sales offices of assessee, where the CDs were packed in boxes bearing MRP and sold after pasting a sticker bearing the license/ personal key number. Assessee paid Central Excise Duty on such pre-packaged Antivirus Software. A show cause notice was issued by the Additional Director General demanding service tax with interest and penalty. It was stated that assessee had supplied ―Quick Heal brand Antivirus Software key/codes to the end users through dealers/distributors without discharging the service tax liability on such transactions. The supply of packed Antivirus Software to the end user by charging license fee would amount to a provision of service and not sale. It was held deemed sales are elaborated as those which are not really “sales” but have been deemed as sales. Article 366(29A) of the Constitution elaborates as tax on income includes a tax in the nature of an excess profits tax; tax on the sale or purchase of goods includes, a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration. Software was held to be ‘goods‘, but whether the transaction would be sale or service, would depend upon the terms of the agreement. Thus, the transaction in the present Appeal resulted in the right to use the software and would amount to ‘deemed sale‘. It was, therefore, not possible to accept the contention of the Department that the transaction would not be covered under sub-clause (d) of article 366(29A) of the Constitution. Hence, the transaction was not liable to service tax.
FULL TEXT OF THE CESTAT JUDGMENT
This Appeal is directed against the order dated 28 January, 2016 passed by the Additional Director General (Adjudication)1 by which the demand of service tax amounting to Rs. 56,07,05,595/- on the services alleged to have been provided by the Appellant from 1 March, 2011 to 31 March, 2014 has been confirmed with interest and penalty.
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