Case Law Details
Court :Tribunal, Bangalore
Citation :SAP India Pvt Ltd. Vs CCE, Bangalore
Final Order 1443/ 2010 dated 18 November 2010
Brief :The Tribunal ruled that maintenance of software which is in the nature of up gradation or enhancement would be covered under the definition of Information Technology Software Service (ITSS) with effect from 16 May 2008.
Factual background :- SAP India Pvt. Ltd. (Appellant) is engaged in the provision of consultancy, licensing and maintenance or ERP software. The Commissioner, Service Tax had confirmed service tax demand of INR 20 crores on the Appellant under ‘maintenance and repair’ service during the period July 2004 and January 2006. In addition to the service tax demand, the Commissioner had also confirmed interest and penalties against the Appellant.
Decision of Tribunal
The Tribunal held that maintenance or repair of goods will not normally result in the up gradation of its value or functional capacity or efficacy to higher level than what originally existed, while maintenance of software as per the technical literature can improve the software’s applicability to new functional areas/ efficacy and value.
The Tribunal held that activities undertaken by the Appellant would be within the coverage of ITSS w.e.f. 16 May 2008 under clause “adaption, up gradation, enhancement, implementation and other similar services related to information technology software.
Finally, the Tribunal held that the maintenance charges collected by the Appellant during July 2004 and January 2006 would not be liable under ‘maintenance or repair’ service.
Comments and analysis
This is a very important decision of the Tribunal as most software companies who provide services which while characterised as ‘maintenance’ services actually provide services which are beyond mere repair and maintenance of the software and gives additional functionality to the existing software.
This decision of the Tribunal is in close proximity to another decision of the Tribunal in the case of IBM India Pvt. Ltd v. CST, Bangalore [2010 (17) STR 317] wherein it was held that advice and implementation in relation to ERP software were not classifiable under ‘management consultancy service’ and were classifiable under ITSS.
It would be pertinent to note that the Tribunal did not provide an interpretation to the distinction between information technology software and computer software.
