P.G. Chacko, Judicial Member - This application filed by the appellant seeks waiver and stay in respect of service tax of Rs.12,04,76,672/- (education cess also included) demanded for the period from 16.5.2008 to 6.7.2009 as also in respect of interest on tax besides penalties. On a perusal of the records and hearing both sides, we find that a major part of the above demand is beyond the normal period of limitation and that the amount of tax coming within the normal period is Rs.18.55 lakhs approximately. We further find that the demand is on the sale value, in India , of certain ‘Information Technology Software’ imported by the appellant from a UAE-based company and sold in India during the aforesaid period. The case of the appellant mainly is that they are not liable to pay service tax on the sale value on which they paid VAT. It has also been stated that the appellant paid Customs duty as applicable on the software at the time of import. In this connection, the learned counsel has relied on a decision of this Bench viz. Altair Engineering India (P.) Ltd. v. CST Stay order No. 602 of 2011, dated 25-7-2011. The learned counsel has relied on this decision on another point as well. It is submitted that the invocation of extended period in this case for recovery of the service tax from the appellant cannot be justified inasmuch as the adjudicating authority itself entered a clear finding that the appellant did not have any guilty mind and, therefore, any penalty under Section 78 of the Finance Act, 1994 was not imposable on them. The learned counsel points out that the ground for invoking the extended period under Section 73(1) of the Act is no different from the ground for imposing a penalty under Section 78 of the Act and, therefore, in view of the above finding of the learned Commissioner, a prima facie view is liable to be taken against the demand for the extended period.

2. Per contra, the learned Idea Mobile Communication Ltd. v. CCE [2011] 32 STT 262/ (SC) submits that the demand of VAT on the sale value of the software in India cannot per se preclude levy of service tax on the taxable service involved in the transaction. In this connection, the learned Addl. Commissioner (AR) submits that the ownership over the software imported by the appellant remains with the foreign seller and, therefore, the transaction which took place in India in respect of the same item cannot be accepted as absolute sale and, therefore, the submission of the appellant based on the factum of payment of VAT may not be prima facie acceptable.

3. We have carefully considered to the submissions. Prima facie, on a perusal of the relevant agreement between the appellant and the foreign company, we find that no proprietary rights were transferred to the appellant. Further, the Hon’ble Supreme Court’s decision in Idea Mobile Communication Ltd. case (supra) is to the effect that the mere payment of VAT on sale value would not per se preclude the Revenue from levy of service tax on the taxable service involved in the transaction. Prima facie, therefore, the appellant is liable to pay service tax on the service element of the transaction involving the software in India. However, as regards the demand for the extended period, they seem to have a valid point, which is that the findings recorded by the Commissioner in the context of dropping Section 78 penalty are in favour of the appellant also in the context of their challenge to the demand of service tax for the extended period. If the appellant did not have guilty mind for the purpose Section 78, they did not have it for the purpose of the proviso to Section 73 (1) of the Act as well, which is our prima facie view.

4. In the result, there will be a direction to the appellant to pre-deposit a sum of Rs.18.55 lakhs (Rupees Eighteen lakhs fifty five thousand only) within six weeks from today and report compliance to the Assistant Registrar on 18.7.2012. The Assistant Registrar to report to the Bench on 25