2010 (6) TMI 169 - HC - Service Tax

Import of Service- The assessee, is a Foreign Company, which entered into a technical assistance agreement with one M/s.STI Private Limited, Bangalore, (Indian Company) and provided consultancy/technical assistance and transfer of technical know-how relating to the manufacture of automobile components to the Indian Company. Held that- the assessee being a foreign company and service provider, service recipient not liable during impugned period prior to relevant amendments. Thus the question answered against revenue.

Summary

Issues:
1. Whether technical know-how and technical information/technical assistance fall under taxable service 'Consulting Engineer Service'?
2. Whether the services provided are liable for service tax based on the Board's clarification and a larger Bench's decision?
3. Whether past decisions cited by CESTAT are applicable in the present case?

Analysis:

Issue 1:
The appeal challenged the CESTAT's decision regarding the taxability of technical know-how and assistance under the category of 'Consulting Engineer Service.' The respondent, a foreign company, provided consultancy and technical assistance to an Indian company. The revenue argued that these services were taxable under the Finance Act, 1994. The CESTAT dismissed the revenue's appeal, leading to the current challenge.

Issue 2:
The appellant contended that the respondent, as a service receiver, was liable to pay tax under the Finance Act, 1994. However, the Court considered the amendments to the Act, specifically Section 65(31) and Section 66-A, which clarified the liability for service tax. It was established that prior to the amendments, the service receiver was not liable for tax for the period in question. Relying on previous decisions, the Court held that the substantial questions of law favored the assessee, dismissing the appeal.

Issue 3:
The Court referenced previous orders related to similar appeals and highlighted the amendments to the Finance Act, 1994. It emphasized that the liability for service tax shifted to the service receiver only after the specified amendments. As the respondent was a foreign service provider, the Court concluded that the service receiver was not liable to pay tax for the period before the amendments. Consequently, the Court ruled against the revenue, in line with its previous decisions, and dismissed the appeal.