2007 (2) TMI 78 - AT - Service Tax

Consulting Engineer Service - Assessee were demanded service tax on the transfer of technical know-how fees to foreign firms covered under Consulting Engineer service Held appellant not entitle for service tax

Summary

Issues:
1. Confirmation of service tax demands based on two show-cause notices.
2. Liability of the appellants to pay service tax for services received from non-resident firms.
3. Taxability of technical know-how fees under consulting engineer services category.
4. Appellants' challenge to the demands and penalties imposed.

Analysis:

1. The appeals arose from the confirmation of service tax demands totaling Rs. 27,71,955 and Rs. 2,38,09,000 based on show-cause notices dated 28-10-2004 and 20-5-2005, respectively. The demands were made under the proviso to section 73(1) of the Finance Act, 1994, read with rule 6 of the Service Tax Rules, 1994, for services availed by the appellants after 16-8-2001. Penalties were imposed under sections 77, 75A/76, and 78, with the period in dispute spanning from 2002 to 2004.

2. Regarding the first demand, the appellants contested the liability to pay service tax for services received from non-resident firms based in Germany and the USA. The department failed to provide evidence to establish that these foreign firms were engineering firms, a prerequisite for levying service tax on their services. The Tribunal cited precedents such as Roots India Power v. CCE and others, emphasizing that service tax on such services is not leviable if the service provider is a non-resident without an office in India. Notably, service tax was made applicable to such services only from 1-1-2005 onwards, as per Notification No. 36/2004-ST.

3. Concerning the second demand related to technical know-how fees, the Tribunal relied on established precedents, including cases like Turbo Energy Ltd. v. CCE and others, to rule that no service tax is payable under consulting engineering services for the transfer of know-how. Accordingly, the demand in this regard was also set aside.

4. Ultimately, the Tribunal found in favor of the appellants on the merits without delving into the plea of limitation raised by them. Consequently, the impugned order confirming the service tax demands and penalties was set aside, and the appeals were allowed based on the analysis and conclusions drawn regarding the liability for service tax on services received from non-resident firms and the taxability of technical know-how fees under consulting engineer services.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the Tribunal's reasoning and conclusions on each aspect of the case.