Order date – 05 August 2022

Facts – 

• The Appellant, Quick Heal Technologies Limited, is engaged in the development of Quick Heal brand Antivirus Software which is supplied along with the license code either online or on the replicated CDs/DVDs to the end ­customers in India and paid sales tax on the same.
• A show cause notice dated 02.02.2015 issued to the petitioner proposing a demand of Service tax amounting to Rs. 62,73,05,953.36/- on the taxable value of Rs. 5,30,94,66,783/- for supplying Quick Heal Antivirus Software replicated CDs/DVDs in the retail packs (i.e. Information Technology Software Service) through its dealers to the end customers in India for the period between 01.03.2011 and 31.03.2014 under the proviso to Section 73(1) of the Act 1994 by invoking the extended period of limitation with interest and penalty.
• Aggrieved the appellant filed an appeal.

Issue – 

• Whether the demand of Service tax along with interest and penalty by invoking extended period of limitation is sustainable?

Order – 

• The Supreme Court held that the contract cannot be vivisected or split into two. Once a lumpsum has been charged for the sale of CD (as in the case on hand) and sale tax has been paid thereon, the revenue cannot levy service tax on the entire sale consideration once again on the ground that the updates are being provided, the same view was taken in BHARAT SANCHAR NIGAM LTD. (BSNL) VERSUS UNION OF INDIA as well.
• The artificial segregation of the transaction, as in the case on hand, into two parts is not tenable in law. It is one transaction of sale of software and once it is accepted that the software put in the CD is “goods”, then there cannot be any separate service element in the transaction. It is so because even otherwise the user is put in possession and full control of the software. It amounts to “deemed sale” which would not attract service tax.
• The impugned orders were set aside and the appeal was allowed.