Antivirus Software nature of goods, subject to Sales Tax/ VAT and not service tax
49. The decision of the Madras High Court in Infotech Software Dealers Association v/s Union of India, has also been relied upon by the learned Authorized Representative of the Department. The issue was whether the Parliament had the legislative competence to insert provisions of section 65(105) (zzzze) in the Act in 2019 by virtue of powers under Entry 97 of List II of Schedule VII of the Constitution. The Madras High Court observed as follows:-
32. The above discussion as to the canned/packaged software or customised software is in respect of the transactions that are prevalent among the software re-sellers and their customers and the discussion is not with reference to any specific transaction. The challenge to the amended provision is only on the ground that the software is goods and all transaction would amount to sales. The said challenge is opposed on the ground that though the software is goods, the transaction may not amount to a sale in all cases and it may vary depending upon the End User Licence Agreement. As already pointed out, the Parliament has the legislative competency to bring in enactments to include certain services provided or to be provided in terms of information technology software for use in the course or furtherance of business or commerce to mean a taxable service, in terms of the residuary Entry 97 of List I of Schedule VII, the challenge to the amended provision cannot be accepted so long as the residuary power is available. However, the question as to whether a transaction would amount to sale or service depends upon the individual transaction and on that ground, the vires of a provision cannot be questioned.
35. For all the above reasons, we dismiss the writ petitions holding that the software is goods and whether the transaction would amount to sale or service would depend upon the individual transaction and for the reason of that challenge, the amended provision cannot be held to be unconstitutional so long as the Parliament has the legislative competency to enact law in respect of tax on service in exercise of powers under Entry 97 of List I of Schedule VII.―
50. This decision also does not help the Revenue as only the legislative competence of the Parliament was upheld. Software was held to be ‘goods’, but whether the transaction would be sale or service, it was held, would depend upon the terms of the agreement.
51. Thus, viewed from any angle, the transaction in the present Appeal results in the right to use the software and would amount to ‘deemed sale’. It is, therefore, not possible to accept the contention of the learned Authorized Representative of the Department that the transaction would not be covered under sub-clause (d) of article 366(29A) of the Constitution.
52. Thus, none of the contentions advanced by learned Authorized Representative of the Department have any tax.
53. It is, therefore, not possible to sustain the impugned order for all the reasons stated above. It is, accordingly, set aside and the Appeal is allowed.