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Title And Ownership Over A Software Includes Right To Use The Software And Would Amount To Deemed Sale: Thus, Would Not Be Levied Service Tax As Per Sub­ Clause (D) Of Article 366(29A) Of The Constitution

Sravika Reddy Kohir ,
  09 August 2022       Share Bookmark

Court :
Supreme Court of India
Brief :

Citation :
Civil Appeal No. 5167 of 2022

Commissioner of Service Tax New Delhi Vs Quick Heal Technologies Ltd

August 5, 2022.

Justice. Abhay S. Oka
Justice. J.B. Pardiwala

Appellant – Commissioner of Service Tax New Delhi
Respondent – Quick Heal Technologies Ltd


  • The appellants filed the appeal against the impugned judgement with regards to the levy of service tax on the respondents for their sale of anti-virus software in the form of CDs/DVDs.


  • Whether the sale of software in CDs/DVDs would attract service tax under the Sub Clause (D) of Article 366(29A) of the Constitution?
  • Whether the Quick Heal Technologies Ltd is liable to pay service tax for sale of anti-virus software?


SECTION 35L(b) OF THE CENTRAL EXCISE ACT, 1944: This section provides for an appeal to the supreme court from any order passed by any tribunal with respect to the duty of excise or with reference to the value of goods foe assessment.

SECTION 83 OF CHAPTER V OF THE FINANCE ACT, 1994:This section provides for the application of certain provisions of Central Excise Act, 1944 to the service tax.

SECTION 66E(d) OF THE FINANCE ACT, 1994:This section provides for the services that are constituted as declared services under the Act.

ARTICLE 366 (29A) OF THE CONSTITUTION OF INDIA: This Article provides for the incomes that are considered to be as deemed to sale and only sales tax is applicable for the same.


  • The respondent is engaged in the development of Quick Heal brand Antivirus software and they same were supplied with license or product code either on the CDs/DVDs or online to the end customers.
  • The Directorate General of Central Excise Intelligence thus noticed that the respondent has not paid service tax on the services covered under the Information Technology Software Service, for the same an inquiry was initiated and thus held that the respondents are liable to pay service tax and they failed to do the same on the consideration they ascertained from the supply of license code/ product code of Antivirus Software to end customers.
  • Order for the same has been passed by the Additional Director General(Adjudication), an appeal was filed by the respondent and the tribunal thus held that the software has to be treated as a good when it is put on a medium like CD/DVD.
  • Thus, aggrieved by the same the appellants have filed an appeal against orders passed by the tribunal under section 35L(b) of the Central Excise Act, 1944.


  • The counsel on behalf of the appellant argued that the Tribunal has made a grave error as it relied upon the judgement of the case Tata Consultancy Services vs. State of Andhra Pradesh, [2005 1 SCC 308] as the issues raised under both were different and there was no comment as to canned software is service.
  • The counsel further submitted that in the case of Bharat Sanchar Nigam Ltd. v. Union of India, [(2006) 3 SCC 1] the test as to what falls in the category of goods or services is to determine the substance of the contract.
  • The counsel further relied upon the decision of Madras High Court in the case of M/s Infotech Software Dealers Association vs Union of India, [2010 (20) S.T.R. 289 (Mad.)] wherein it was held that the supply of packaged antivirus software to end users as per the end users license agreement with a license fee amounts to service and not sale.


  • The counsel on behalf of the respondent held that the decision in the Tata Consultancy Services vs. State of Andhra Pradesh, [2005 1 SCC 308] the state of Andhra Pradesh has levied a sales tax on the software CDs that were packaged and sold to the end customers.
  • The counsel further relied upon the CBEC Circular/Education Guide that any pre-packaged or canned software shall not be covered as information technology software service as the same was determined as goods as per the TCS case. The same when sold shall attract sales tax and not service tax.
  • The counsel further submitted that any transaction cannot be bifurcated as sale of CD and its updates as another and would not attract separate service tax.


  • The court observed both the parties and held that the under the Article 366(29A) (d) the right to use of goods for a valuable consideration and is transferred is called as deemed sale. The court held that once a sales tax is levied upon a sale of CD further service tax cannot be levied upon the same if there have been any updates provided on such software.
  • The bench thus held that the service tax is not levied on a retail package sale of software and thus all the appeals were dismissed.


  • The Supreme Court thus held that when the right to use a software is transferred by sale for a consideration it would under the Article 366(29A) would be deemed to be a sale and thus would only attract sales tax and no further service tax shall be applied for the updates in software.

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