2025-VIL-426-CESTAT-BLR-ST
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SERVICE TAX CESTAT Cases

Service Tax - Annual Technical Support (ATS) service under software and support service agreement, Deemed Sale, Works Contract – Appellant is engaged in providing various services including 'Annual Technical Support Service' (ATS) to its clients and discharged service tax only on 25% of the bill value - Department alleged that the ATS services fall under the category of Management, Maintenance or Repair Service (MMR Service) and raised demand for service tax on 100% of the invoice value along with interest and penalty - Whether the ATS services provided by the appellant are liable to service tax on 100% of the invoice value or only on 25% of the value - HELD - the ATS services included providing software upgrades and maintenance releases, which were provided free of cost to the customers. Therefore, there was no element of 'deemed sale' or 'works contract' involved in the ATS services – The Annual Technical Support (ATS) does not include cost of materials and only new functionalities are priced separately. Therefore, the question of abatement under Notification No. 12/2003-ST dated 20.06.2003 does not arise – Further, VAT is paid only on deemed sale and clearly goods are not found to be part of the Annual Technical Support Service, hence, the question of abatement does not arise even though the sale is considered to be deemed sale and VAT is discharged by the appellant – The demand of service tax on the entire invoice value is upheld - the demands along with interest are limited only to the normal period and all other penalties are set aside – The appeal is partially allowed - Whether the extended period of limitation could be invoked by the department to demand the service tax - HELD - The extended period of limitation could not be invoked against the appellant as the department was aware of the issue through various correspondences with the appellant since December 2005. The Tribunal relied on the decision of the Supreme Court in Uniworth Textiles Ltd. to hold that the Dept must make specific and explicit averments in the show-cause notice to invoke the extended period of limitation, which was not done in the present case.
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