2010 (6) TMI 129 - AT - Service Tax

Consulting Engineer- whether the activity of supply of drawing and designs for modernization and development of seamless pipe plant fall under the category of Consulting Engineer and whether the appellant is required to pay Service Tax on the amount paid by the appellant to foreign based service provider in terms of the provisions of Rule 2(1)(d) (iv) of the Service tax rules 1994? Held that- in the light of the decision of Indian National Shipowners Association Vs. Union of India2009 -TMI - 32013 - HIGH COURT OF BOMBAY, the appellant is able to succeed only on this ground as the supply of drawing & design were obtained by the appellant in January 2003 from their foreign supplier much prior to 18.4.2006 hence impugned order is set aside.

Summary

Issues:
1. Whether the activity of supply of drawing and designs for modernization and development of a seamless pipe plant falls under the category of Consulting Engineer.
2. Whether the appellant is required to pay Service Tax on the amount paid to a foreign-based service provider.

Analysis:
1. The case involved a show cause notice issued to the appellant regarding the classification of obtaining designs and drawings for modernizing a seamless pipe plant as Consulting Engineer services. Initially, the demand was dropped, but on revision, it was confirmed. The appellant contended that obtaining designs does not constitute Consulting Engineer services.

2. The appellant argued that prior to 18.4.2006, the recipient of services from a foreign supplier was not liable for service tax. They cited the Indian National Shipowners Association case upheld by the Supreme Court, which stated that service recipients in India were only liable for service tax from 18.4.2006 after the enactment of Section 66A of the Finance Act, 1994.

3. The Member (Judicial) considered the argument regarding service tax liability before 18.4.2006 as crucial. Referring to the Indian National Shipowners Association case, it was established that recipients in India were not liable for service tax on services received from abroad before 18.4.2006. The Departmental Representative also concurred with this view.

4. Consequently, the judgment set aside the impugned order since the supply of drawings and designs occurred in January 2003, well before 18.4.2006. The appeal was allowed based on this ground, with any consequential relief granted to the appellant. The decision was pronounced by Member (Judicial) Ashok Jindal.