2011 (4) TMI 132 - AT - Service Tax

Demand - Scientific or Technical consultancy - NGRI undertook several R&D projects classifiable under sponsored projects collaborative projects grant-in-aid projects and composite projects - All the activities undertaken by the assessee fell within the survey and map-making services as per the clarification - As this service was brought under the tax net with effect from 16-6-2005 the demand raised for the period prior to 16-6-2005 was not sustainable - The assessee was under the bona fide belief that it had not carried out any activity exigible to service tax under the Act - It also includes services providing information on sub-surface earth formations by different methods such as seismographic gravimetric magneto-metric methods or other sub-surface surveying methods - The assessee or the revenue has not furnished details of the report furnished to the various agencies/entities on completion of the project by NGRI without which we cannot decide if NGRI also provided scientific or technical consultancy to its clients Regarding cum-tax benefit - it is argued that prior to 18-4-2006 when sub-section (2) of section 67 was enacted there was no provision for exclusion of service tax in computing the taxable value in cases where the gross amount charged was inclusive of service tax payable - Held that - issue is settled in favor of assessee in CCE&C v. Advantage Media Consultant 2008 (3) TMI 59 - CESTAT KOLKATA - as upheld by Apex Court - Decided in the favour of the assessee by way of remand

Summary

Issues Involved:
1. Restoration of Appeal.
2. Classification of Services Provided by NGRI.
3. Invocation of Extended Period for Demand.
4. Cum-Tax Benefit for Service Tax Computation.

Detailed Analysis:

1. Restoration of Appeal:
The revenue filed a miscellaneous application for the restoration of appeal No. ST/48/2009, which was dismissed due to the absence of clearance from the Committee on Disputes (COD). The revenue subsequently obtained the COD clearance, and the Tribunal allowed the miscellaneous application, restoring the appeal for disposal along with appeal No. ST/21/2009.

2. Classification of Services Provided by NGRI:
The Commissioner held NGRI liable for service tax under the category "Scientific or Technical Consultancy" for services rendered from 1-10-2001 to 31-3-2005. The show-cause notice detailed several projects undertaken by NGRI, which involved tasks like seismic data interpretation, geophysical studies, and groundwater quality analysis. NGRI argued that these were research projects and not consultancy services. The Tribunal noted that NGRI gathered data on sub-surface strata and provided scientific interpretation useful to clients but did not furnish expert opinions. The Commissioner concluded that NGRI provided consultancy, but the Tribunal found insufficient evidence to substantiate this. Therefore, the matter was remanded for fresh adjudication to determine if NGRI provided scientific or technical consultancy based on project reports.

3. Invocation of Extended Period for Demand:
The Commissioner invoked the extended period under section 73 of the Finance Act, 1994, citing suppression of facts by NGRI, which had not filed returns and registered as a service provider only in 2008. NGRI contended that it was under a bona fide belief that its activities were not taxable. The Tribunal noted that NGRI, being a Central Public Sector Unit, had no motive to evade tax and could have passed the tax burden to clients. The Tribunal found the invocation of the extended period questionable and remanded the matter for re-evaluation.

4. Cum-Tax Benefit for Service Tax Computation:
The revenue challenged the Commissioner's decision to allow cum-tax benefit for the entire disputed period, arguing that such benefit was not available before 18-4-2006. The Tribunal referred to its decision in the case of CCE&C v. Advantage Media Consultant, upheld by the Supreme Court, which stated that the gross amount should be treated as inclusive of service tax unless collected separately. The Tribunal set aside the Commissioner's order and remanded the issue for fresh adjudication, directing that if NGRI is found liable, the tax due should be determined in light of the Tribunal's decision.

Conclusion:
Both appeals were allowed by way of remand for fresh adjudication. The Tribunal emphasized the need for detailed examination of project reports to determine if NGRI provided consultancy services and directed re-evaluation of the extended period invocation and cum-tax benefit in line with established legal principles.