2011 (1) TMI 90 - AT - Service Tax

Demand - The agreement had 3 parts i.e. Licence Agreement, Engineering Agreement, Guarantee Agreement - it is the case where designs, technical know-how etc which were admittedly prepared by the appellant in Boston, stand transferred by them to IOCL The Commissioner, in Para2 3.2 of his order, has specifically observed that the services rendered by the appellant have been consumed in India. If that be so, it can be safely concluded that the services were not rendered in India. The consumption of service in India is not taxable event. Situs of the tax would be where the taxable event occurs and not where the effect or the consequence thereof is felt. The taxable event has not occurred inIndia, inasmuch as the activity of development of technology, technical information & know-how, transfer of design, drawing etc has taken place in USA. Extended period of limitation - Any bonafide lapse not to make enquiries about its obligation to pay duty/tax, cannot be made reason for invocation of extended period unless there is evidence to show that such lapse was on account of malafide intention, and with guilty mind of avoiding payment of tax. - Demand is barred by limitation Appeal is allowed

Summary

Issues:
1. Demand of Service Tax and penalties imposed on the appellant.
2. Whether the services provided by the appellant fall within the scope of Consulting Engineer services.
3. Jurisdiction of Indian Service Tax authority over services provided from outside India.
4. Bar of limitation in issuing the show cause notice.

Issue 1:
The judgment confirmed a demand of Service Tax of Rs.69,70,343/- against the appellant, along with penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The demand was based on the appellant's provision of Consulting Engineer Services to M/s IOCL Gujarat, as per the agreement entered into.

Issue 2:
The appellant argued that the services provided did not fall within the scope of Consulting Engineer services as they involved the transfer of technical know-how, not taxable under service tax laws. The appellant contended that the services were rendered outside India and only consumed in India, making them exempt from service tax. However, the Commissioner rejected this argument, stating that the services were consumed in India, as IOCL, the recipient, was located within Indian territorial waters.

Issue 3:
The appellant claimed that the services were provided from the USA and were beyond the jurisdiction of the Indian Service Tax authority. They argued that services rendered outside India were not subject to service tax as per the Finance Act, 1994. The appellant highlighted that the development of designs and technical information was done in the USA and sent to IOCL in India, making them non-taxable. The Tribunal agreed with this argument, emphasizing that the taxable event must occur in India for service tax liability.

Issue 4:
The judgment addressed the bar of limitation in issuing the show cause notice for the period 2000-2001. The Commissioner invoked the extended period of limitation, alleging that the appellant had suppressed the fact of taxable service intentionally. However, the Tribunal held that the demand was barred by limitation as there was no evidence of malafide intent to evade payment of duty, and the demand was raised beyond the normal period of limitation.

In conclusion, the Tribunal set aside the demand, confirmation of interest, and penalties, ruling in favor of the appellant due to the lack of taxable event occurrence in India and the demand being barred by limitation. The judgment did not delve into the merits of whether the services rendered fell under Consulting Engineer services.