Custom, Excise & Service Tax Tribunal Pro Active Solutech India Pvt Ltd vs Cst Ch Ii on 25 March, 2025 CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL CHENNAI REGIONAL BENCH COURT No. I Service Tax Appeal No.41714 of 2015 (Arising out of OrderinAppeal No. 123/2015 (STAII) dt. 18.05.2015 passed by Commissioner of Service Tax (AppealsII), Chennai 600 034) M/s. Pro Active Solutech (India) Pvt Ltd .... Appellant No.4, 5th Floor, Mookambika Complex Lady Desika Road, Mylapore Chennai 600 004 VERSUS The Commissioner of CGST & Central Excise .... Respondent Chennai North Commissionerate, 26/1, Mahatma Gandhi Marg Nungambakkam, Chennai 600 034 APPEARANCE: Shri M.N. Bharathi, Advocate for the Appellant Shri Harendra Singh Pal, Authorised Representative For the Respondent HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) HON'BLE MR. AJAYAN T.V., MEMBER (JUDICIAL) FINAL ORDER No.40392/2025 DATE OF HEARING: 03.02.2025 DATE OF DECISION: 25.03.2025 Per Mr. Ajayan T.V. The appellant is before this Tribunal assailing the impugned Order in Appeal (OIA) where by the Appellate Authority has upheld the Order in Original (OIO) of the Adjudicating Authority in its entirety. By the impugned OIO, the Adjudicating Authority has confirmed the demand of Rs.10,15,580/ being the Service Tax payable under 'Information Technology Software Solution' (sic) for the period from May 2008 to December 2010 along with appropriate interest imposing equivalent penalty under Section 78 of the Finance 2 ST/41714/15 Act as well as penalty of Rs.10,000/ under Section 77 (2) of the Finance Act. 2. The facts in brief are that the appellants are engaged in the business of providing various professional services such as corporate finance and legal consultancy accounting services, pay roll processing services, corporate secretarial services to corporate clients. The appellants are registered under service tax as a "Management Consultant" w.e.f. 25.11.1998. The appellants are also engaged in designing and developing of 'software packages' catering to corporate clients and are selling the same on payment of VAT. During the audit, the department found that in respect of design and development of software solutions to corporate clients, the appellants were raising invoices on their customers under two heads namely license fee and separate customisation fee. It is the case of the department that the appellant was paying service tax on the customisation charges, but it was not paying tax on license fee. The department being of the view that they should have paid service tax on the full value of the invoice under 'Information Technology Software Services' issued a Show Cause Notice demanding Service Tax for the period May 2008 to December 2010 along with applicable interest and imposition of penalties. After due process of law the demands were confirmed as cited supra vide Impugned OIO No. 201/2012 dated 31.10.2012. 3. Aggrieved by the impugned OIO the appellant preferred an appeal before the Commissioner of Service Tax (AppealsII), Chennai, 3 ST/41714/15 who, vide OIA No.123/2015 (STAII) dated 18.05.2015 rejected the appeal and upheld the OIO. Aggrieved by the same, the appellant has preferred this appeal and is before this Tribunal. 4. Shri M.N. Bharati, Ld. Advocate appeared and argued for the appellant. The Ld. Advocate submits that it is not disputed in the impugned OIO and OIA that the appellants had not discharged sales tax on the disputed value of license fees. It is then clearly established that Service Tax Authorities have acknowledged that such value of licence fees has suffered sales tax as sales proceeds towards sale of software. Under such circumstances, since sales tax has already been paid on the said value, it is under bonafide belief that the appellant did not pay service tax on such value of license fees on sale of software. Ld. Counsel submits that at para 8 of the Impugned order in Appeal the Commissioner (Appeals) has not disputed the development of software solutions and has in fact admitted that the appellants developed software as per the requirements of the customers and provide the same to them for which they have received consideration in money. 5. The Ld. Counsel further submits that the intention of the contracting parties is reflected in the agreement and the