2018 (12) TMI 252 - AT - Service Tax

Classification of service - Scientific and Technical Consultancy service or not - appellant had entered into Technology Transfer agreement with M/s Vijai Electricals Ltd. - Held that - The appellants are neither a scientist nor a technocrat nor they are science and technology institution nor organization. Therefore, they are not satisfying the requirement of definition of Scientific or Technical Consultancy Service. The said show cause notice is not sustainable as the appellants are not satisfying definition of Scientific or Technical Consultancy Service - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against Order-in-Appeal regarding Service Tax on Technology Transfer Agreement.

Analysis:
The appeal was directed against Order-in-Appeal No.171-ST/LKO/2014 passed by the Commissioner (Appeals), Customs, Central Excise & Service Tax, Lucknow. The appellants, engaged in manufacturing Electrical Conductors and registered for Service Tax, were alleged to have received consideration from a Technology Transfer agreement with another company. The Revenue claimed this consideration was for 'Scientific and Technical Consultancy' service. A show cause notice was issued, demanding recovery of ?8,75,500 as service tax for the period from May 2008 to September 2010. The Original Authority upheld the demand and penalty, despite the appellants' argument that they were manufacturers, not scientists or technocrats. The Commissioner (Appeals) also affirmed the Order-in-Original. The appellant contended that they did not provide scientific or technical consultancy services as per the definition under Section 65(92) of the Finance Act, 1994. They cited precedents where it was held that manufacturers do not provide such services. The appellant had paid ?2,57,500 as service tax to the exchequer, though the invoice did not specify it as scientific or technical consultancy service. The amount of ?6,18,000 plus interest was deposited based on the Revenue's audit team insistence.

The learned Assistant Commissioner argued that the appellants invoiced ?25 lakhs to the other company, including service tax, and therefore could not retain the tax collected merely based on classification grounds. The Tribunal examined the records and submissions. It noted that the appellants did not qualify as scientists, technocrats, or science and technology institutions or organizations, hence not meeting the definition of Scientific or Technical Consultancy Service. The show cause notice's contention that the appellants provided such services was deemed unsustainable. Consequently, the Tribunal set aside the impugned order and allowed the appeal.