2019 (5) TMI 511 - AT - Service Tax

Classification of service - Consulting Engineer Service or not - service of technical know-how for manufacture of plastic extrusion machinery to M/s Kabra Extrusiontechnik - whether the appellant being corporate was not covered under the definition of Consulting Engineer service? - HELD THAT - The corporate was inserted in the definition of Consulting Engineer only from 2006 onwards. The period involved in the present case is 1999-2002 and at that relevant period, corporate was not taxable under the head of Consulting Engineer - the appellant is not liable to pay service tax under the head of Consulting Engineer service - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability to pay service tax for technical know-how services provided from abroad.
2. Interpretation of the definition of "Consulting Engineer" prior to 2006.
3. Applicability of service tax on services provided by a corporate entity.

Analysis:

Issue 1: Liability to pay service tax for technical know-how services provided from abroad
The appellant, located in Germany, provided technical know-how services for manufacturing plastic extrusion machinery to a company in India. The department contended that the service falls under Consulting Engineer Service and is liable to service tax. However, the appellant argued that during the relevant period of 1999-2002, they were not required to pay service tax as the levy on services provided from abroad was introduced under Section 66A in 2006. The appellant also emphasized that as a corporate entity before 2006, they were not covered under the definition of Consulting Engineer Services. The Tribunal examined various judgments supporting the view that providing technical know-how services does not fall under Consulting Engineer Service.

Issue 2: Interpretation of the definition of "Consulting Engineer" prior to 2006
The Tribunal referred to the definition of "Consulting Engineer" under Section 65(13) of the Finance Act, 1994, which required a person to be a professionally qualified engineer or an engineering firm to be covered under the definition. The definition was amended in 2006 to include "anybody as corporation or any other firm." The Tribunal cited a judgment highlighting that prior to the amendment, companies were not included in the definition of consulting engineers. Therefore, the services provided by the appellant in transferring technical know-how for pharmaceutical and bulk drugs did not fall under the category of Consulting Engineer Services before 2006.

Issue 3: Applicability of service tax on services provided by a corporate entity
The Tribunal emphasized that the term "corporate" was inserted into the definition of Consulting Engineer only from 2006 onwards. Since the period in question was 1999-2002, when corporations were not taxable under the head of Consulting Engineer, the appellant was deemed not liable to pay service tax under that category. The Tribunal set aside the impugned order and allowed the appeal based on this finding, without delving into other issues.

In conclusion, the Tribunal held that the appellant, being a corporate entity providing technical know-how services from abroad, was not liable to pay service tax under the head of Consulting Engineer Service for the period of 1999-2002. The impugned order was set aside, and the appeal was allowed based on this crucial point.