2013 (12) TMI 1623 - AT - Service Tax

Summary

Issues involved:
The issues involved in this case are the classification of services provided by an offshore company under a technical collaboration agreement, liability for payment of Service Tax, and imposition of penalties under the Finance Act, 1994.

Classification of services provided by the offshore company:
The appellant, a company based in Korea, entered into an agreement with M/s. Samcor Glass Ltd., Kota for transfer of technology and technical assistance for manufacture of colour picture tubes for which they charged royalty. The department treated the services as Consulting Engineer's services and issued a show cause notice for demand of Service Tax. The Addl. Commissioner initially dropped the proceedings against the appellant, holding that transfer of technology under a licence agreement does not fall under Consulting Engineer's service. However, the Commissioner later held that the transfer of technology under the licence agreement is covered by service of Consulting Engineers. The Tribunal, considering the absence of any provision to charge Service Tax from an offshore service provider in India, set aside the impugned order, ruling that no Service Tax can be charged from the offshore service provider. The appeal was allowed based on this reasoning.

Liability for payment of Service Tax:
The Commissioner confirmed the demand for Service Tax against the appellant for the period from 1-4-2002 to 15-8-2002, as the liability to pay Service Tax in respect of a taxable service provided by an offshore service provider not having any branch or business establishment in India, to a person in India was determined to be that of the service recipient. The demand confirmed against the Appellant was Rs. 9,97,130/- along with interest. However, the Tribunal held that irrespective of the taxable nature of the service provided by the appellant, no Service Tax can be charged from them in accordance with relevant judgments. The impugned order was deemed unsustainable and set aside.

Imposition of penalties under the Finance Act, 1994:
In addition to confirming the Service Tax demand, the Commissioner imposed penalties of equal amount on the Appellant under Section 78 of the Finance Act, 1994, and also penalties under Sections 76 and 77 of the same Act. The Tribunal's decision to set aside the impugned order also nullified the imposition of these penalties, as the Service Tax demand itself was deemed invalid. The appeal was allowed based on the Tribunal's finding that no Service Tax could be charged from the offshore service provider.