2005 (2) TMI 2 - AT - Service Tax

Service Tax Foreign association (1) Service provider and Service recipient are manufacturing the same product (2) Stay/Dispensation of pre-deposit of service tax

Summary

Issues:
Demand of service tax on "Consulting Engineer Service" received from foreign collaborator; Interpretation of technical know-how as a taxable service; Applicability of service tax rules; Pre-deposit and stay of recovery.

Analysis:
The judgment deals with a demand of over Rs. 16 lakhs towards service tax on the appellants for the "Consulting Engineer Service" received from their foreign collaborator. The appellants argue that what they received was technical know-how for manufacturing steering systems, for which they paid royalty and technical know-how fee. They contest the department's classification of technical know-how as "Consulting Engineer Service" for service tax purposes. The appellants highlight that the relevant rule introducing taxation on services received from non-residents came into effect only from 16-8-2002. They also argue that no service tax should be levied when both the service provider and recipient are manufacturing the same product, citing precedent from Navinon Ltd. v. CCL Mumbai-VI.

The Tribunal considered the submissions and found that the appellants have a strong prima facie case based on the provisions and case law cited by their counsel. Consequently, the Tribunal decided to waive the pre-deposit and stay the recovery of the tax and penalty amount. This decision was made after evaluating the arguments presented by both the appellants and the department's representative. The Tribunal's ruling indicates a favorable stance towards the appellants' position, acknowledging the legal grounds and precedents supporting their case. The judgment reflects a balanced approach in interpreting the relevant service tax rules and applying them to the specific circumstances of the case.