2007 (2) TMI 114 - AT - Service Tax

Demand (Service tax) - Department contended that appellant is taxable under Consulting Engineer Service and accordingly demand were made along with penalty - Held that department contention was not correct and set aside demand and penalty

Summary

Issues:
1. Confirmation of service tax demands raised in show cause notices dated 28-10-2004 and 20-5-2005.
2. Liability of the appellants to pay service tax on services received from non-resident firms.
3. Taxability of technical know-how fees as consulting engineer services.
4. Applicability of service tax laws for the period prior to 1-1-2005.

Analysis:
1. The appeals challenged the confirmation of service tax demands totaling Rs. 27,71,955/- and Rs. 2,38,09,000/- in show cause notices dated 28-10-2004 and 20-5-2005, respectively. The Commissioner of Central Excise imposed penalties under various sections of the Finance Act, 1994. The period in dispute was 2002 to 2004.

2. Regarding the first demand, the appellants disputed the liability to pay service tax on services received from German and US firms. The Tribunal noted that the department failed to prove that these firms were engineering firms, a prerequisite for levying service tax. The service tax laws applicable to non-resident firms without an office in India came into force on 1-1-2005, while the disputed period was prior to this date. Citing relevant case laws, the Tribunal held the demand of Rs. 27,71,955/- as unsustainable and set it aside.

3. Concerning the second demand, which pertained to technical know-how fees, the Tribunal referenced previous decisions stating that no service tax was payable under consulting engineer services for the transfer of know-how. Relying on established case laws, including specific tribunal orders, the Tribunal set aside this demand as well.

4. Ultimately, the Tribunal ruled in favor of the appellants, setting aside the impugned order confirming service tax demands and penalties. The appeals were allowed based on the merits of the case, without delving into the plea of limitation raised by the appellants. The judgment was pronounced in court, concluding the legal proceedings.