2017 (5) TMI 957 - AT - Service Tax

Consultancy engg. service - supply of engineering design, drawing and documents given by GAMI and imported by the appellants - Held that - we are dealing with the same value of engineering design and drawing - the importation had been done by the appellants and not by GAMI, who provided Engineering Consultancy Service to the appellants in terms of the contract. Whatever fee is charged by GAMI for providing engineering consultancy in India has been subjected to service tax - the Original Authority admitted that the engineering drawing and designs are to be treated as goods and were processed through customs. In similar set of facts, the Tribunal in the case of Mitsui & Co. Ltd. 2013 (3) TMI 228 - CESTAT, KOLKATA has held that the supply of imported and indigenously procured drawing and designs, treating them as goods, cannot form part of tax liability under Consultancy Engineer Service . Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Dispute regarding service tax liability on imported engineering design and drawing
- Interpretation of whether engineering design and drawing should be treated as goods or as a service for tax purposes

Analysis:
1. The case involved a dispute over service tax liability on the imported engineering design and drawing by the appellant from a Chinese Institute. The appellant argued that since the design and drawing were imported as physical goods and assessed by customs, they should not be subject to service tax liability. The Original Authority, however, held that the value of the design and drawing should be taxed as consultancy engineering service under the Finance Act, 1994.

2. The appellant contended that they had already paid service tax for other services provided by the Chinese Institute and that the design and drawing were essential for the execution of the service contract. The appellant relied on previous tribunal decisions to support their argument that imported design and drawing should not be part of the tax liability under consultancy engineering service.

3. The Tribunal analyzed the legal definitions of "Consultancy Engineer" and "Consulting Engineering Service" under Section 65 of the Finance Act, 1994. The Tribunal noted that the design and drawing were physically imported goods processed through customs and held that they should not be subjected to service tax liability. The Tribunal cited the Supreme Court's decision in Associated Cement Companies and a previous Tribunal case involving Mitsui & Co. Ltd. to support their conclusion.

4. The Tribunal emphasized that the design and drawing were treated as goods by customs and were not directly provided as a service by the Chinese Institute. Therefore, the Tribunal ruled that the impugned order was not sustainable and set it aside, allowing the appeal in favor of the appellant.

5. The Tribunal's decision was based on the distinction between goods and services, highlighting that the physical importation of design and drawing as goods should not attract service tax liability. The case provided clarity on the tax treatment of imported engineering design and drawing, aligning with previous legal interpretations and judgments.