2006 (2) TMI 18 - AT - Service Tax

Service Tax Consulting Engineer service Service tax collected by service recipient instead of service provider under their mutual arrangement Contractual arrangement

Issues Involved:
1. Refund claim of service tax paid under protest.
2. Applicability of exemption Notification No. 18/2002-S.T., dated 16-12-2002.
3. Whether the notification had retrospective effect.
4. Liability of the appellant under Section 68(2) of the Finance Act, 1994.
5. Arguments regarding the transfer of technology versus technical assistance.
6. Validity of the self-assessment and the basis of the refund claim.

Detailed Analysis:

1. Refund Claim of Service Tax Paid Under Protest:
The appellant made an application for refund of service tax amounting to Rs. 10,56,648/- on 14-6-2003, claiming that the amount was wrongly paid towards 'Consulting Engineering Services' received from a foreign company, NKK Corporation, Japan. The payment was made under protest through TR-6 Challan No. 01 dated 24-12-2002.

2. Applicability of Exemption Notification No. 18/2002-S.T., Dated 16-12-2002:
The appellant argued that the service tax was exempted under Notification No. 18/2002-S.T., dated 16-12-2002, which exempted service tax to the extent of the amount paid as Research & Development Cess on account of transfer of technology. The appellant contended that the services provided by NKK Corporation, Japan, constituted a transfer of technology and hence were exempt from service tax.

3. Whether the Notification Had Retrospective Effect:
The Assistant Commissioner and the Commissioner (Appeals) both concluded that the exemption notification dated 16-12-2002 did not have retrospective effect. The service tax was paid based on an invoice dated 2-10-2002, and the R&D cess was paid on 18-11-2002, both dates being prior to the issuance of the notification. Therefore, the benefit of the exemption notification was not applicable to the appellant.

4. Liability of the Appellant Under Section 68(2) of the Finance Act, 1994:
The appellant argued that it was not a "person liable to pay" under Section 68(2) of the Finance Act, 1994, as the taxable service was not notified by the Central Government until 7-6-2005. However, the Tribunal noted that this argument was not part of the original refund claim and was being raised for the first time. The appellant had already discharged the service tax liability under a mutual arrangement with the service provider, NKK Corporation.

5. Arguments Regarding the Transfer of Technology Versus Technical Assistance:
The appellant contended that the services provided by NKK Corporation were related to the transfer of technology, which should be exempt from service tax. However, the Revenue argued that the services were technical assistance and not a transfer of technology. The Tribunal found that the appellant had paid the service tax as per the agreement and invoice, and the payment was in accordance with the mutual arrangement between the appellant and NKK Corporation.

6. Validity of the Self-Assessment and the Basis of the Refund Claim:
The Tribunal observed that the appellant's refund claim was based on the exemption notification and not on the ground that the service tax was not leviable. The self-assessment made by the appellant had become final, and there was no need for any regular assessment. The appellant's attempt to shift the basis of the refund claim to a different ground was not permissible.

Final Order:
The Tribunal dismissed the appeal and rejected the miscellaneous application, agreeing with the reasoning and findings of the lower authorities that the exemption notification did not have retrospective effect and that the service tax was validly paid under the mutual arrangement between the appellant and the service provider. The appeal was dismissed, and the refund claim was denied.

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