2005 (8) TMI 419 - AT - Service Tax

Summary

Issues:
1. Liability to pay service tax for services received from a company.
2. Applicability of Service Tax Rules for the disputed period.
3. Interpretation of the term "Consulting Engineer" under Section 65(18) of the Finance Act, 1994.

Analysis:
1. The case involved a demand of Rs. 1,21,31,000 towards Service tax and a penalty of Rs. 2,42,62,000 for services received from M/s. Cadbury Schweppes Overseas Ltd. The appellants contested the demand on the grounds that CSOL did not provide services as a Consulting Engineer under Section 65(18) of the Finance Act, 1994, but only supplied technical know-how in the form of specifications, recipes, and procedures.

2. The appellants argued that during the period in question, from July 1997 to September 2001, the recipient of the service was not liable to pay service tax. They relied on case laws such as Bajaj Auto Ltd. v. C.C.E., Aurangabad and Navinon Ltd. v. C.C.E., Mumbai-IV to support their contention. The Tribunal noted that the amendment to Rule 2(1)(b) of the Service Tax Rules, 1994, which made the service recipient liable for service tax, came into effect only on 16-2-2002, and was prospective in nature.

3. The Tribunal found that since the disputed period predated the amendment to Rule 2(1)(b), the appellants could not be held liable to pay service tax for the period from July 1997 to September 2001. Therefore, the demand and penalty imposed by the lower authorities were not sustainable. The Tribunal concluded that the impugned order was set aside, and the appeal was allowed based on the retrospective application of the Service Tax Rules in question.

4. Due to the above finding on the applicability of the Service Tax Rules, the Tribunal did not delve into the question of whether the technical know-how received by the appellants constituted receiving services from a consulting engineer. The decision was primarily based on the temporal aspect of the rule amendment and its impact on the liability of the service recipient.

5. Ultimately, the Tribunal pronounced its decision on 18-8-2005, setting aside the impugned order and allowing the appeal in favor of the appellants. The judgment highlighted the significance of the timing of rule amendments in determining the liability for service tax payments, emphasizing the retrospective nature of such legal changes in this particular case.