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2024 (8) TMI 1054 - AT - Service TaxClassification and taxability of services related to patent application provided by various foreign companies all located outside India - Service Tax liability in terms of Notification No.36/2004-ST dated 31.12.2004 issued under Section 68(2) of the Finance Act, 1994, read with Rule 2(l)(d)(iv) of the Service Tax Rules, 1994 and in terms of Section 66A of the Finance Act, 1994 - invocation of extended period of demand and penalties for contraventions of various Sections of Finance Act, 1994. Classification and taxability of services related to patent application provided by various foreign companies all located outside India - HELD THAT - As rightly claimed by the Counsel, the services which are purely in the form of professional and patent related services cannot be classified under Business Support Service for operational assistance for marketing. Reliance placed by the Commissioner on the amended version also is not applicable since it cannot be retrospectively applied for the period under dispute. The legal consultancy services was brought to taxable net with effect from 01.09.2009 by amending the Finance Act under Section 65 (105) (zzzzm) which is defined as To a business entity, by any other business entity, in relation to advice, consultancy or assistance in any branch of law, in any manner and there is no dispute of the fact that this classification has been accepted by the department from 01.09.2009 - there are no reason to classify the above services under BSS and also taking into consideration the fact that the payment of Service Tax under Legal Consultancy Service for the above services from 1.9.2009 not being disputed, we set aside the impugned order. Since the services received by the appellant are aptly covered under the Legal Services, the question of classifying them under the Business Support Services does not arise. The learned counsel submission that (successor to Service Tax regime), the Legal services specifically includes Legal documentation and certification services concerning patents, copyrights and other intellectual property as a separate sub-heading emphasises the point that the impugned services clearly fall under the ambit of legal services. Service Tax liability in terms of Notification No.36/2004-ST dated 31.12.2004 issued under Section 68(2) of the Finance Act, 1994, read with Rule 2(l)(d)(iv) of the Service Tax Rules, 1994 and in terms of Section 66A of the Finance Act, 1994 - HELD THAT - The appellant is not liable to service tax during the disputed period under BSS, whether they are liable to pay Service Tax under reverse charge mechanism or not is only academic as there is no denial of the fact that they are liable for payment of Service Tax under Reverse charge mechanism. Invocation of extended period of demand and penalties for contraventions of various Sections of Finance Act, 1994 - HELD THAT - The appellant herein has been rendering various services such as Scientific or Technical Consultancy Service, Technical Testing and Analysis Service, Renting of Immovable Property Service, Business Auxiliary Service etc; on which service tax is discharged regularly. Appellant has also been filing ST-3 Returns regularly and there is nothing on record to show that there is wilful suppression of misstatement of facts. No grounds have been alleged in the impugned order for invocation of suppression and as rightly claimed by the appellant in view of the Hon ble Supreme Court s decision in the case of M/S. UNIWORTH TEXTILES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE. RAIPUR 2013 (1) TMI 616 - SUPREME COURT , the question of invoking suppression without any mala fide intention is proved on the part of the appellant. The demand is set aside for the period from March 2006 to 31.08.2009 along with interest and all other penalties. The demand of service tax from 01.09.2009 under Legal Consultancy service is upheld - Appeal disposed off.
Issues Involved:
1. Classification and taxability of services related to patent applications provided by foreign companies. 2. Service Tax liability in terms of Notification No.36/2004-ST dated 31.12.2004. 3. Invocation of the extended period of demand and penalties for contraventions of various Sections of the Finance Act, 1994. Detailed Analysis: 1. Classification and Taxability of Services Related to Patent Applications: The appellant, an integrated healthcare company, availed services from foreign companies for patent applications and paid 'patent fees' and 'professional charges' for these services. The Commissioner classified these services under 'Business Support Services' (BSS) as per Section 65(104C) read with Clause (zzzq) of Section 65(105) of the Finance Act, 1994. The definition of BSS includes services provided in relation to business or commerce, such as evaluation of prospective customers, telemarketing, and operational assistance for marketing. The Commissioner observed that these services provided operational or administrative assistance, which would be taxable under BSS. However, the Tribunal noted that the definition of BSS was amended with effect from 1.5.2011 to include "operational or administrative assistance in any manner," which was not applicable to the disputed period (May 2006 to March 2010). The Tribunal emphasized that the services received were related to patent applications and were classified as 'Legal Consultancy Services' from 1.9.2009, a classification accepted by the department. The Tribunal concluded that the services were more appropriately classified under 'Legal Consultancy Services' rather than BSS, as the services were purely professional and patent-related. The Tribunal relied on the CBEC clarification and the Bombay High Court's decision in Indian National Shipowners Association vs. UOI, which emphasized that services must have a direct or proximate relation to the subject matter of the taxing entry. Therefore, the services received by the appellant were classified under 'Legal Consultancy Services' and not BSS. 2. Service Tax Liability in Terms of Notification No.36/2004-ST: The Tribunal held that since the services were classified under 'Legal Consultancy Services' and not BSS, the appellant was not liable to pay service tax under BSS during the disputed period. The question of liability under the reverse charge mechanism was considered academic, as the appellant was already liable for service tax under the reverse charge mechanism for 'Legal Consultancy Services' from 1.9.2009. 3. Invocation of Extended Period of Demand and Penalties: The appellant regularly discharged service tax on various services and filed ST-3 Returns. The Tribunal found no evidence of wilful suppression or misstatement of facts by the appellant. The Commissioner did not allege any grounds for invoking suppression. The Tribunal referred to the Supreme Court's decision in Uniworth Textiles v. CCE, Raipur, which held that suppression without mala fide intention cannot be invoked. The Tribunal set aside the demand for the period from March 2006 to 31.08.2009, along with interest and penalties. The demand of service tax from 01.09.2009 under 'Legal Consultancy Services' was upheld. Conclusion: The appeal was disposed of with the Tribunal setting aside the demand for the period from March 2006 to 31.08.2009 and upholding the service tax demand from 01.09.2009 under 'Legal Consultancy Services'. The Tribunal emphasized the correct classification of services and the absence of wilful suppression or misstatement by the appellant.
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