2018 (5) TMI 985 - AT - Service Tax

Taxability - Drawings and designs - whether the same activity cannot be taxed as goods and as services? - Held that - In view of the various decisions rendered by the Tribunal that the taxation of goods and that of services are mutually and explicitly conceived levies, it is clear that the same activity cannot be taxed as goods and as services - appeal allowed - decided in favor of appellant.

Summary

Issues:
Taxability of design services under section 65(105)(zzzzd) of Finance Act, 1994 for the period from 1st June 2007 to 30th September 2011.

Analysis:

1. The appeal challenges the order confirming a demand for design services taxable under section 65(105)(zzzzd) of Finance Act, 1994, amounting to significant sums for specific periods. The appellant, a wind turbine generator manufacturer, procured technical know-how from its subsidiaries in Germany and Netherland. The appellant argues that the technical know-how was outrightly transferred to them and should not be taxed as a design service. The appellant also contests the validity of the show cause notice and the adjudicating authority's decision, citing lack of consideration of submissions and improper application of law.

2. The appellant relies on the Tribunal's decision in Mitsui & Co Ltd v. Commissioner of Central Excise & Service Tax, Jamshedpur, emphasizing that imported designs and drawings were treated as goods by customs authorities, not services. Similar decisions in Solitz Corporation v. Commissioner of Service Tax, New Delhi, and Prerna Textile Industries v. Commissioner of Customs support this argument. The appellant contends that technical know-how imported against bills of entry cannot be taxed as a design service, citing The Designs Act, 2000.

3. The Authorized Representative refers to the decision in Oracle India Pvt Ltd, highlighting the permissibility of simultaneous levies under different taxing statutes. The impugned order's exclusion of intellectual property service due to the specificity of design service under section 65(105)(zzzzr) is emphasized. However, the appellant argues against this view, citing decisions in Bharat Aluminium Company Ltd v. Commissioner of Central Excise, Raipur, and other cases, stating that designs and drawings classified as goods should not be taxed as services.

4. The Supreme Court's clarification in Associated Cement Companies Ltd regarding the taxability of goods and services is discussed, emphasizing the distinction and the power to levy taxes on materials used in contracts. The Tribunal's decision in Oracle India Pvt Ltd further supports the view that customs duty and service tax can coexist on the same transaction.

5. Considering the consistent legal precedent that goods and services are distinct for taxation purposes, the impugned order is set aside, and the appeals are allowed. The judgment was pronounced on 02/05/2018 by the Appellate Tribunal CESTAT MUMBAI, with detailed analysis and references to relevant legal provisions and case law.