Installing Software With COA Stickers Is Sale—Not Service | SC

Case Details: Commissioner of Service Tax (LTU) Versus VXL Instruments Ltd. (2025) 33 Centax 274 (S.C.) 

Judiciary and Counsel Details

• J.B. Pardiwala & R. Mahadevan, JJ.
• S/Shri Raghavendra M. Kulkarni, Navanjay Mahapatra, Keshav Thakur, Snehashish Mukherjee, Advs. & Gurmeet Singh Makker, AOR, for the Petitioner

Facts of the Case

The appellant was engaged in the manufacture of Thin Clients, which required software to be embedded to render the system functional. For this purpose, the appellant entered into an agreement with Microsoft (MS), under which they were authorized to procure off-the-shelf MS operating system software and replicate it into individual hard discs subsequently installed in the Thin Clients. The appellant further procured Certificates of Authenticity (COA) stickers separately from authorized MS distributors, which were essential for making the software operational, and these COAs were purchased on a High Sea Sale basis. The entire activity involved installation of software and later affixation of COA stickers on the Thin Clients. The Tribunal had earlier held that the whole transaction amounted to a sale and not a service. Aggrieved by the said decision, the appellant approached the Supreme Court under Section 130E of the Customs Act, 1962, and the matter was accordingly placed before the Supreme Court. 

Supreme Court Held

The Supreme Court held that the order of the Tribunal did not call for interference, as the transaction in its entirety was rightly treated as a sale and not as a service. It observed that the appeal disclosed no substantial question of law warranting consideration and accordingly dismissed the appeal. The Court thereby affirmed the Tribunal’s finding that the installation of software together with the affixation of COA stickers formed part of a composite sale transaction. 

List of Case Cited 

• VXL Instruments Ltd. v. Commissioner — (2025) 33 Centax 273 (Tri. – Bang.) — Affirmed [Para 2]