2009 (6) TMI 204 - AT - Service Tax

Demand is confirmed on the ground that Applicant received consulting engineer s service from Foreign Service provider. The contention is that the payment made by the Applicant to the foreign collaborator is in respect of royalty for use of technology and know-how and the same is intellectual property and with effect from 18-4-06. Service Tax was imposed on the transfer of intellectual property and the present demand is prior to that date, hence not sustainable - find that as the Foreign Service Provider has provided the services in respect of civil design, construction technique and complete thermal and hydraulic process design for cooling tower and such related services. In these circumstances, prima facie, the Applicant has not made out a case for total waiver of the Service Tax. stay granted partly

Summary

Issues:
Application for waiver of pre-deposit of Service Tax and penalties for receiving consulting engineer's service from a foreign service provider.

Analysis:
The Applicants filed an Application seeking waiver of pre-deposit of Service Tax and penalties amounting to Rs. 16,93,871.00. The demand was confirmed on the basis that the Applicant received consulting engineer's service from a foreign service provider. The Applicant argued that the payment made to the foreign collaborator was for royalty for the use of technology and know-how, which constituted intellectual property. The Applicant contended that since the Service Tax was imposed on the transfer of intellectual property effective from 18-4-06, the demand predating that date was not sustainable.

The Revenue, on the other hand, contended that the Applicant received various services from the foreign service provider, including civil design, construction technique, and complete thermal and hydraulic process design for cooling tower, among others. It was argued that these services constituted consulting engineer's services.

The Tribunal observed that the foreign service provider had indeed provided services related to civil design, construction technique, and thermal and hydraulic process design for cooling tower, among others. Consequently, the Tribunal found that the Applicant had not established a strong case for a total waiver of the Service Tax. Considering the facts and circumstances of the case, the Tribunal directed the Applicant to deposit an amount of Rs. 6.00 lakhs within six weeks. Upon such deposit, the pre-deposit of the remaining Service Tax and penalties would be waived, and the recovery of the same stayed during the pendency of the Appeal. The Applicant was required to report compliance by 4-8-2009.

In conclusion, the Tribunal partially allowed the Application for waiver of pre-deposit of Service Tax and penalties, directing the Applicant to deposit a specified amount within a stipulated timeframe. The Tribunal's decision was based on a consideration of the services received by the Applicant from the foreign service provider and the applicability of Service Tax on such transactions.