2013 (7) TMI 861 - AT - Service Tax

Service tax under the head Consulting Engineer s Service - Appellant, NagindasJamnadasVora obtained a patent bearing no. 187148 of 08/01/1998 for a new compact oil cooler which was allowed to be used by Vora Exclusive Tools Pvt. Ltd., for which he was entitled to receive royalty - Appellant is liable to pay service tax on the royalty received Held that - appellant is only a matriculate and does not hold any professional degree in Engineering, recognized by law. Therefore, the appellant does not qualify as a Consulting Engineer as defined in law. Secondly, the appellant was a patentee and transferred the right to use the patent to his client for consideration of royalty payment. The said service merits classification under Intellectual Property Service which came into tax net with effect from 10/09/2004. Since the period in dispute is much prior to that, there is no service tax taxability with respect to the services rendered by him Decided in favor of Assessee.

Summary

Issues:
1. Liability to pay service tax on royalty received under "Consulting Engineer's Service"
2. Classification of services rendered by the appellant
3. Qualification of the appellant as a "Consulting Engineer"
4. Taxability of the service under "Intellectual Property Service"

Analysis:
1. The appellant obtained a patent for a new compact oil cooler and received royalty, leading to a demand for service tax. The department claimed the royalty as taxable under "Consulting Engineer's Service." The appellant contested, arguing that being a matriculate, he did not qualify as a "Consulting Engineer." The lower authorities upheld the tax demand, resulting in the appeal.

2. The definition of a "Consulting Engineer" under section 65 of the Act requires a professionally qualified engineer to provide advice or technical assistance. As the appellant lacked the necessary engineering qualifications, his services did not fall under "Consulting Engineer's Service." Additionally, the transfer of patent rights constituted "Intellectual Property Service," taxable from 10/09/2004, which did not apply to the disputed period.

3. The appellant's lack of professional engineering qualifications was crucial in determining his eligibility as a "Consulting Engineer." Without the required credentials, the appellant's services could not be classified under the specified category for tax purposes. The legal definition of a "Consulting Engineer" played a significant role in establishing the appellant's liability for service tax.

4. The appellate tribunal found that the appellant, being a matriculate without professional engineering qualifications, did not meet the criteria for a "Consulting Engineer." Moreover, the services provided by the appellant, involving the transfer of patent rights, were correctly classified as "Intellectual Property Service," which was not taxable during the relevant period. Consequently, the tribunal set aside the impugned order, ruling in favor of the appellant.

Judgment:
The appellate tribunal, after thorough consideration, concluded that the appellant's services did not fall under "Consulting Engineer's Service" due to his lack of professional engineering qualifications. The tribunal also clarified that the services provided by the appellant were rightly classified as "Intellectual Property Service," which was not taxable during the disputed period. Consequently, the tribunal set aside the tax demand, allowing the appeal in favor of the appellant.