2011 (8) TMI 337 - AT - Service Tax

Penalty u/s 76, 77 & 78 - Manufacture of telecommunication equipments - These equipments are manufactured by them with the technical know how provided by certain Foreign Companies - It has been imputed that the appellant are liable to pay service tax on amount paid towards technical know how fees to the foreign companies under the category of consulting engineers - It stands held that the recipient of various services in India were not liable to pay service tax for the services received from abroad prior to 18.4.2006, when the provisions of Section 66A of Finance Act 1994 were enacted - As the period involved in the present appeal is prior to 18.4.2006 - Decided in favour of assessee.

Summary

Issues:
1. Liability to pay service tax on technical know-how fees under the category of consulting engineers.
2. Applicability of service tax liability to the service recipient in India.
3. Interpretation of relevant notifications and legal precedents.

Analysis:

Issue 1:
The case involved the question of whether the appellant, engaged in manufacturing telecommunication equipment, was liable to pay service tax on technical know-how fees paid to foreign companies under the category of consulting engineers. The adjudicating authority confirmed the demand for service tax and imposed penalties. The appellant contended that the technical know-how fell under Intellectual Property Services and not Consulting Engineers, and the services were taxable from a specific date. The Tribunal, after considering the arguments, set aside the order, ruling in favor of the appellant based on legal interpretations.

Issue 2:
The Commissioner (Appeals) rejected the appeal, asserting that the service tax recipient in India was liable to pay service tax from a certain date, shifting the burden of tax liability to the service receiver when the service provider is a non-resident or the service is provided from outside India. However, the Tribunal referenced legal precedents, specifically the Bombay High Court's decision and the Supreme Court's approval, which established that recipients of services in India were not liable to pay service tax for services received from abroad before a specific date. As the period in question in the present appeal was prior to that date, the Tribunal ruled that no service tax liability could be upheld against the appellant.

Issue 3:
The Tribunal, in its detailed analysis, highlighted the legal precedents that clarified the liability of service recipients in India for services received from abroad before a specific legislative amendment date. By referring to the Bombay High Court's decision and the Supreme Court's confirmation of the same, the Tribunal concluded that the appellant was not liable for service tax on the technical know-how fees paid to foreign companies during the relevant period. The Tribunal set aside the impugned order and allowed the appeal with consequential relief, emphasizing the application of established legal principles to the case at hand.

This comprehensive analysis of the judgment addresses the issues raised in the case, providing a detailed overview of the legal arguments, interpretations, and precedents considered by the Tribunal in reaching its decision.