2010 (1) TMI 392 - AT - Service Tax

Consultancy engineering service- Revenue claims that service provided by Japanese concern was consultancy engineering service. But there was mere transfer of technical knowhow on payment of royalty and licence fee. Reading of the entire agreement throws light that technical knowhow was supplied to the appellant by the Japanese concern. Held that- the impugned order shows that there was provision of technical assistance, guidance, advice and training to the engineers and personnel of the appellants specifically as per provisions made in Article 3 of the agreement between the parties. Further, observation of the Commissioner (Appeals) shows that there was no technical support. Unless the facts meet proper test according to the relevant statutory provisions which can only be done in the course of regular hearing, nothing can be opined at this stage. Therefore waive pre-deposit of service tax and stay recovery of demand during pendency of appeal.

Summary

Issues: Classification of service as consultancy engineering service or transfer of technical knowhow; Pre-deposit of service tax; Stay of recovery of demand during appeal

The judgment dealt with the issue of the classification of the service provided by a Japanese concern to the appellant. The appellant argued that the service was for sharing technical expertise achieved by the Japanese concern, involving the transfer of technical knowhow on payment of royalty and license fee. The Revenue, however, contended that the service provided was consultancy engineering service. The Tribunal examined the agreement between the parties and concluded that technical knowhow was indeed supplied to the appellant by the Japanese concern, supporting the appellant's stance.

Another issue addressed was the pre-deposit of service tax. The Revenue objected, citing a previous Tribunal decision and requesting a pre-deposit based on the case's similarity. However, the Tribunal, after reviewing the Order-in-Original and the Commissioner (Appeals) decision, found that the appellant should not be required to pre-deposit the service tax. The Tribunal noted that the appellant would face genuine hardship if forced to make the pre-deposit, especially considering the lack of technical support as observed by the appellate authority.

The judgment also discussed the stay of recovery of demand during the appeal process. The Tribunal refrained from expressing any opinion on the ongoing dispute, emphasizing that a proper assessment of the facts according to relevant statutory provisions could only be done during the regular hearing. Consequently, the Tribunal waived the pre-deposit of service tax and stayed the recovery of the demand while the appeal was pending. The Tribunal acknowledged that there was no initial insistence on pre-deposit from the appellant during the first appellate stage, leading to the allowance of the stay petition as requested by the appellant's counsel.

This comprehensive analysis of the judgment highlights the key issues of service classification, pre-deposit of service tax, and the stay of recovery of demand during the appeal, providing a detailed overview of the Tribunal's decision and reasoning in each aspect.