2004 (10) TMI 597 - AT - Service Tax

Summary

Issues:
- Demand of Service Tax on consulting services provided by a foreign company
- Interpretation of "Consulting Engineer Service" and "Scientific and Technical Consultancy Service"
- Applicability of Service Tax on services received prior to 16-7-2001
- Analysis of relevant agreement and services provided by the foreign company

Issue 1: Demand of Service Tax on consulting services provided by a foreign company
The appeal by the revenue challenges the dropping of a demand for Service Tax on charges paid by the respondents to a foreign company for services received. The original authority imposed penalties under sections 76 to 78 of the Finance Act, 1994, based on the finding that the charges were for "Consulting Engineer Service." However, the Commissioner (Appeals) set aside the demand, stating that the services were in the nature of "Scientific and Technical Consultancy Service," which was taxable only from 16-7-2001. The appeal questions this decision.

Issue 2: Interpretation of "Consulting Engineer Service" and "Scientific and Technical Consultancy Service"
The appellant argued that the services provided by the foreign company fell under the scope of a "Consulting Engineer" as per a Board circular. However, the Commissioner (Appeals) classified the services as "Scientific and Technical Consultancy Service," which was not taxable before 16-7-2001. The agreement between the parties indicated services related to research and development of automotive tires, provided by a Chemistry Graduate, not a qualified engineer as per the Board's Circular. The description of services in the invoice as "Technical Consultancy and other related services" supported this classification.

Issue 3: Applicability of Service Tax on services received prior to 16-7-2001
The period of dispute was 2000-01, and the services in question were received and paid for before 16-7-2001. The Counsel contended that "Scientific and Technical Consultancy Service" was introduced as a new service for Service Tax levy from 16-7-2001 onwards, distinct from the pre-existing "Consulting Engineer Service." Section 137 of the Finance Act, 2001, listed "Scientific and Technical Consultancy Service" as a new item for Service Tax levy, supporting the argument that it was not part of the pre-existing services before the specified date.

Issue 4: Analysis of relevant agreement and services provided by the foreign company
The agreement between the parties outlined services related to research and development activities concerning automotive tires. The services provided by the foreign company included technical information, methods, procedures, data, and training for the project. The services were rendered by a Chemistry Graduate, not a qualified engineer as required for "Consulting Engineer Services." The nature of services and the description in the invoice indicated they were "Scientific and Technical Consultancy Service," which became taxable only from 16-7-2001. The registration of the respondents for payment of Service Tax on "Scientific and Technical Consultancy Service" further supported this classification.

In conclusion, the Tribunal affirmed the decision of the Commissioner (Appeals) and rejected the appeal by the revenue, determining that the services provided by the foreign company to the respondents were categorized as "Scientific and Technical Consultancy Service," not subject to Service Tax before 16-7-2001.