2012 (9) TMI 377 - AT - Service Tax

Consulting Engineer Service - Short payment of service tax - assessee contested to consider the service as Intellectual Property Right Service - Held that - Considering reply to the show cause notice the appellants submitted that they had paid R & D Cess and what was received by them was Intellectual Property Rights Service. Obviously there was a mistake on the part of the appellants in showing the classification of service in the return wrongly but it cannot be said that they treated the service as consulting engineering service in view of the fact that they had paid R & D Cess in September 09 itself i.e. before filing the return for the period ending 30.09.09 as evident from challans submitted. As the Commissioner (Appeals) would have examined the contract, nature of service received and give reasons as to why the service cannot be classified as Intellectual Property Right Service matter is required to be remanded to the Commissioner (Appeals) to pass a well reasoned order - orders for waiver of predeposits.

Summary

Issues:
Short payment of service tax under Consulting Engineer Service category, imposition of penalty under Section 76 of Finance Act, 1994, reclassification of service as Intellectual Property Right Service, adequacy of reasoning in Commissioner's order.

Short Payment of Service Tax under Consulting Engineer Service Category:
The appellants were found to have short paid service tax on the taxable value of Rs.2,99,91,351 under Consulting Engineer Service category. A show cause notice was issued for recovering the differential duty, interest, and imposing penalties under relevant sections of the Finance Act, 1994. After due process, the demand for service tax of Rs.1,20,032 with interest was confirmed, and penalty under Section 76 was imposed.

Reclassification of Service as Intellectual Property Right Service:
The appellants claimed that the service received by them should be classified as Intellectual Property Right Service, not Consulting Engineering Service. They argued that they had paid R & D Cess before filing the ST-3 return, treating the service as IPR service. The Tribunal noted that the appellants had made a mistake in showing the classification of service in the return but found that they had paid R & D Cess before filing the return, indicating their treatment of the service as IPR service. The Tribunal observed that the Commissioner had not adequately examined why the service received could not be considered as IPR service and remanded the matter for a well-reasoned order.

Adequacy of Reasoning in Commissioner's Order:
The Tribunal found that the Commissioner had simply rejected the appellant's claim for reclassification without providing sufficient reasoning. It was noted that the Commissioner needed to examine the contract, nature of service received, and give reasons for the classification as Consulting Engineer Service. The Tribunal emphasized that the matter required proper attention and remanded it to the Commissioner for a well-reasoned order after giving the appellants a reasonable opportunity to present their case.

Conclusion:
The Tribunal waived the requirement of pre-deposit and set aside the impugned order, remanding the matter to the Commissioner for a well-reasoned order on the classification of service and the appellant's appeal. The Tribunal emphasized the importance of providing detailed reasoning in such matters and ensuring a fair opportunity for the appellants to present their case.