2006 (6) TMI 9 - AT - Service Tax

Service Tax - Consulting Engineer service - Work contract - Contract for supply of turbo power pack and spares along with design installation and commissioning service - Not liable to service tax as composite contract

Summary

Issues:
1. Applicability of Service Tax on services provided by the appellant without obtaining Registration under the category of 'Consulting Engineer'.
2. Classification of activities like design development, design review, installation, commissioning, and technology transfer for study and design of oil-free compression systems.
3. Whether the activities amount to the transfer of Intellectual Property Rights (IPR) and if IPR is liable to Service Tax.
4. Whether the activities undertaken by the appellant under the contracts are liable to Service Tax under the category of 'Consulting Engineers'.
5. The impact of excise duty payment on the goods cleared under the contracts on the liability for Service Tax.

Analysis:
1. The Revenue proceeded against the appellant for providing services without obtaining Registration under the category of 'Consulting Engineer'. The Assistant Commissioner confirmed the demand of Service Tax, interest, and imposed penalties for failure to take registration, pay Service Tax, and file returns. The Commissioner (Appeals) differentiated between activities like installation and commissioning and technology transfer, holding that only certain activities fell under the 'Consulting Engineer' category for Service Tax purposes. The appellant challenged the order.

2. The appellant argued that the activities undertaken, such as the supply of turbo power pack and spares, did not fall under 'Consulting Engineer' services but were part of works contracts. The Tribunal agreed, stating that the contracts involved multiple activities and could not be vivisected to levy Service Tax on different components. The Tribunal considered the excise duty paid separately on the goods cleared and relied on relevant case-laws to support its decision. Consequently, the Tribunal set aside the impugned order, ruling that the activities were not liable to Service Tax under the category of 'Consulting Engineers'.

3. The appellant contended that the activities amounted to the transfer of Intellectual Property Rights (IPR), which became taxable only from a specific date. However, the Tribunal did not find the activities to fall under the purview of Service Tax for 'Consulting Engineers' during the relevant period, thereby rejecting the argument related to IPR taxation.

4. The Tribunal's decision focused on the nature of the contracts entered into by the appellant with clients, emphasizing that the activities performed did not align with the definition of services under the 'Consulting Engineer' category for Service Tax. The Tribunal's analysis considered the contractual obligations, the works contract nature of the activities, and the absence of liability for Service Tax based on the specific services provided.

5. The impact of excise duty payment on the goods cleared under the contracts was crucial in determining the liability for Service Tax. The Tribunal's decision highlighted that excise duty payment on the goods cleared separately supported the conclusion that the activities under consideration were not subject to Service Tax under the 'Consulting Engineers' category.

In conclusion, the Tribunal allowed the appeal, setting aside the impugned order and ruling in favor of the appellant based on the analysis of the contractual activities and their alignment with the 'Consulting Engineer' category for Service Tax purposes.