IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN TUESDAY, THE 26TH JULY 2011 / 4TH SRAVANA 1933 ST.Rev..No. 182 of 2010() ------------------------- TA.301 TO 303 OF 2009 of S.T.A.TRIBUNAL,ADDL.BENCH, KOZHIKODE. .................... PETITIONER/APPELLANT/APPELLANT/ASSESSEE ------------------ SEASAME SOFTWARE SOLUTIONS PVT LTD, H.O.MAYON BUILDING, JAIL ROAD, CALICUT - 673 004 REPRESENTED BY ITS MANAGING DIRECTOR. BY ADV. SRI.SHYAM PADMAN SRI.A.RANJITH NARAYANAN SMT.M.LISHA RESPONDENT/ RESPONDENT/RESPONDENT/REVENUE --------------------- STATE OF KERALA, REPRESENTED BY COMMISSIONER, COMMERCIAL TAXES, KOZHIKODE. GOVT.PLEADER, SRI.MOHAMMED RAFEQ THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 26/07/2011, ALONG WITH STRV NO. 183 OF 2010 & STRV NO. 184 OF 2010, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: APPENDIX ANNEXURE-A1: COPY OF THE ORER DT.30.01.2008 OF INTELLIGENCE OFFICER (IB) COMMERCIAL TAXES, KOZHIKODE FOR THE PERIOD 2002-2003. ANNEXURE-A2: COPY OF THE JUDGMENT DT.2.6.2008 IN W.A.NO.1111/2008 ANNEXURE-A3: COPY OF ORDER DT.13.05.2009 OF THE DEPUTY COMMISSIONER (APPEALS) ANNEXURE-A4; COPY OF THE JUDGMENT DT.16.11.2009 IN W.P.(C) NO.32815/2009 ANNEXURE-A5: COPY OF THE ORDER DT.20.03.2010 OF THE APPELLATE TRIBUNAL. //TRUE COP// PA TO JUDGE C.N.RAMACHANDRAN NAIR & P.S.GOPINATHAN, JJ. ------------------------------------------ S.T.R.V.Nos.182 , 183 & 184 OF 2010 ------------------------------------------- Dated this the 26th day of July, 2011 J U D G M E N T ~~~~~~~~~~~ C.N.Ramachandran Nair, J. The connected cases are filed challenging the penalty sustained by the Tribunal at equal amount of tax on the petitioner for the years 2002-2003, 2003-2004 and 2004-2005. 2. We have heard the learned counsel for the petitioner and the learned Government Pleader for the respondent. 3. According to the learned Government Pleader, the petitioner is engaged in development of software and sale of the same. Besides, standard software produced and sold, the petitioner was developing customised software for their clients. The case of the department is that the entire collection for sale of software attract tax. However, assessee's counsel contended that the petitioner is engaged in development of customised software for their clients and the work is purely rendering a S.T.R.V.Nos.182, 183 & 184/2010 2 service which does not attract liability under the Sales Tax Act. Both sides have referred to the judgment of a Constitution Bench of the Supreme Court in Tata Consultancy Service case, wherein a separate but concurrent judgment is written by one of the Judges dealing with customised software also. All the authorities including the Tribunal held that the petitioner is liable and consequently, it was held that the petitioner was liable for penalty for non- registration and non-payment of tax. However, the Tribunal reduced the penalty levied under Section 45(A) of the KGST Act to equal amount of tax against which the revisions are filed. 4. During hearing, the learned counsel for the petitioner relied on the decisions of various courts and also submitted that the assessment cases where the matter is exclusively considered are pending before the Tribunal for the very same assessment years. The learned counsel also relied on notification issued by the Central Government exempting branded software from service tax which according to him goes to establish that sale of branded software only can attract sales tax. According to the S.T.R.V.Nos.182, 183 & 184/2010 3 counsel, so far as customised software is concerned, the tax leviable is only service tax payable to the Central Government under Finance Act, 1994. 5. After hearing both sides, we feel the matter needs to be considered more elaborately which we are sure the Tribunal should consider first while hearing for disposal of the assessment appeals. We do not want to express our opinion about the liability or otherwise because we feel that the Tribunal should hear the matter elaborately in the assessment appeals of the very same petitioner pending before the Tribunal. Since there is a genuine controversy as to whether there is liability, even if assessment is sustained, we feel there may be a case for reduction of penalty which also the Tribunal should consider. Accordingly, we allow the revision by setting aside the orders of the Tribunal and restore the appeals to the Tribunal with direction to the STAT to post these appeals along with the assessment appeals by the petitioner and dispose of all the appeals within a period of three months from the date of receipt of a copy of this judgment. Since Kerala has so many software S.T.R.V.Nos.182, 183 & 184/2010 4 companies, the department should furnish before the Tribunal the data relating to payment of tax, dispute, if any, raised by other software companies and orders obtained by them from Tribunals or courts so that the comprehensive consideration is made by the Tribunal while disposing of the assessment appeals and the penalty appeals now restored by us before the Tribunal. We make it clear that based on our judgment the petitioner should not claim refund of penalty paid which will be adjusted or refunded depending on the final orders issued by the Tribunal in the restored appeals to be decided along with assessment appeals. (C.N.RAMACHANDRAN NAIR, JUDGE) (P.S.GOPINATHAN, JUDGE) ps