2013 (9) TMI 470 - AT - Service Tax

Stay - demand of service tax - Technical Know-how - Held that - in case of Double accounting of Technical Know-how , the applicant had submitted Chartered Accountant s certificate explaining as to how exactly Revenue has made error of double counting. The certificate is couched in plain language and capable of verification by persons with basic knowledge of accounting. The adjudicating authority has not taken assistance of any person professionally qualified in Accountancy for rebutting the certificate issued by the Chartered Accountant. An asset or liability appearing in financial years of consecutive year cannot lead to the inference that such assets or liabilities were distinct. So, at this prima facie stage, we are accepting by the certificate given by the Chartered Accountant. Salary paid to Foreign Employees - Man-power Supply Agency 66A - Technical Know-how - whether the activity undertaken by the assesse could come under the category of Man-Power Supply Agency u/s 66A - Held that - In the case of Salary paid to employers , we find that the demand involved is paid in India to the employees in India and no part of it seems to have been remitted to the parent company abroad. If that be the case, we are, prima facie, not convinced with the arguments put forth by Revenue regarding taxability under the category of Man-power Supply Agency under Section 66A of the Finance Act, 1994 Technical Testing Service - Held that - In the case of Technical Testing Service, the argument of the Revenue is that drawal of sample was done in India. There are also other small amounts about which detailed hearing has not been given to either side. Prima facie the certificate given by the Chartered Accountant was accepted - The adjudicating authority had not taken assistance of any person professionally qualified in Accountancy for rebutting the certificate issued by the Chartered Accountant - An asset or liability appearing in financial years of consecutive year cannot lead to the inference that such assets or liabilities were distinct. Waiver of Pre-deposit 30 lakhs were ordered to be paid as a pre-deposit stay granted partly.

Summary

Issues:
1. Liability under Section 66A of the Finance Act, 1994 for services provided by a foreign company.
2. Stay petition for waiver of pre-deposit of dues arising from the order.
3. Demand on technical know-how fee, salary paid to foreign employees, and technical testing service.

Analysis:
1. The judgment dealt with the liability of the applicant under Section 66A of the Finance Act, 1994 for services provided by a foreign company, M/s. Mando Corporation, Korea (MANDO), related to the manufacturing of "brake systems" and "shock absorbers and parts thereof." The Revenue contended that certain services were chargeable under Section 66A, leading to a demand for tax amount of Rs.2,63,60,667/-, along with interest and penalties. The applicant challenged this demand through a stay petition.

2. The applicant filed a stay petition seeking waiver of pre-deposit of dues arising from the order. They had already paid a portion of the amount and sought a waiver for the remaining sum. The total remaining amount in question was about Rs.1.48 crores, categorized into technical know-how fee, salary paid to foreign employees, and technical services.

3. Regarding the demand on technical know-how fee, the applicant argued that the tax should only be levied once for the value of services reflected in the contract, which was approximately Rs.2.2 crores. However, the Revenue had confirmed the demand on a higher value of Rs.4.2 crores. The applicant also contested the taxability of salary paid to foreign employees, claiming it did not constitute a provision of service. Additionally, they disputed the tax on technical testing service, asserting that since the service was performed entirely outside India, no tax was due.

4. The Tribunal considered arguments from both sides and found merit in the applicant's contentions regarding technical know-how fee and salary paid to foreign employees. They accepted a Chartered Accountant's certificate provided by the applicant, which explained the error in double counting and directed a deposit of Rs.30 lakhs within six weeks. Subject to this pre-deposit, the balance dues were waived, and collection stayed pending the appeal's disposal. The judgment highlighted discrepancies in the Revenue's arguments and supported the applicant's position on certain aspects, leading to a favorable decision on the pre-deposit requirement.