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Issues involved: Determination of liability for service tax on technical know-how received from foreign collaborator under Rule 6 (1) of Service Tax Rules, 1994.
Summary: The appeal was filed against Order-in-Appeal No. 1/2005-ST passed by the Commissioner of Customs and Central Excise, Cochin, regarding the demand of service tax on technical know-how received from a foreign collaborator. The appellants, manufacturers of audio systems, had a Technical Assistance Agreement with M/s. Sanyo Technosound Co. Ltd., requiring them to pay royalty for technical know-how. The Revenue alleged that the services provided by the foreign collaborator amounted to that of a 'consulting engineer', making the appellants liable for service tax under Rule 6 (1) of the Service Tax Rules, 1994. The demand and penalties imposed were contested by the appellants. The Advocate for the appellant argued that previous Tribunal decisions supported the view that technical know-how did not constitute services of a 'consulting engineer'. Additionally, the amendment to Rule 6 (1) specified that only an authorized agent of the foreign collaborator was liable for service tax, which did not apply to the appellant in this case. The Revenue pointed out that as per the Technical Assistance Agreement, the appellant was responsible for bearing all tax liabilities in India, leading to the confirmation of the demand by lower authorities. After reviewing the case records, the Tribunal concluded that the services received did not fall under the category of 'consulting engineers' for service tax liability. Citing previous decisions, the Tribunal held that technical know-how from foreign collaborators did not amount to such services. Therefore, the demand for service tax and penalties were deemed unjustified, and the impugned order was set aside, allowing the appeal with consequential relief.
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