2008 (10) TMI 35 - AT - Service Tax

Demand on foreign design and drawing - appellant is a company incorporated in Japan and has a project office at Jamshedpur. They entered into agreement with TISCO to supply the design and drawing to the office of TISCO/their consultant M/s M.N. Dastur Co. Ltd., Calcutta in connection with installation for their Mill - held that mere supply of technology pertaining to design, engineering and technical specifications has no access with the activity of consulting engineer services

Summary

Issues:
Demand of service tax on foreign design and drawings under consulting engineering service.

Analysis:
The case involved an appeal against a Commissioner's order demanding Rs.2,79,30,192/- on foreign design and drawings, along with interest and penalty under Sections 76 and 77 of the Act. The appellant, a company incorporated in Japan, had entered into an agreement with TISCO to supply designs and drawings for a project in India. The Commissioner held that the supply of foreign design and drawing fell under consulting engineering service and confirmed the duty demand. The appellant contested the demand on grounds that the drawings should be considered as goods, relying on a Tribunal decision and arguing that the services were rendered outside taxable territories. The appellant also challenged the invocation of extended period of limitation. The Departmental Representative reiterated the Commissioner's findings, stating that the designs and drawings were services rendered in India.

The Tribunal considered the submissions and the Commissioner's findings. The Commissioner had held that although the designs originated in Japan, they were delivered in India, making it a service provided within Indian territory. The Tribunal noted that the entire work related to designs and drawings was completed in Japan, and the designs were delivered through courier. The contract referred to the supply of designs and drawings as a purchase, indicating a transaction of goods. The Tribunal agreed with the appellant's argument that the drawings should be treated as goods, as upheld in a previous case. The Tribunal concluded that the demand for service tax on foreign designs and drawings under consulting engineering service was not justified. Additionally, the Tribunal found that the Commissioner's invocation of the extended time limit for demanding service tax was not valid. Therefore, the appeal was allowed with consequential relief.

In summary, the Tribunal ruled in favor of the appellant, holding that the supply of foreign design and drawings should be treated as goods rather than a taxable service under consulting engineering service. The Tribunal also found that the Commissioner's decision to invoke the extended time limit for demanding service tax was not justified.