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2013 (3) TMI 228 - AT - Service TaxConsulting Engineer - By the Agreement dated 16-7-1998 the appellant was to supply imported designs and drawings to be delivered in India at purchaser s and Engineer s Office valued at Japanese YEN 211,200,000 (Rs. 8.86 crores). The said Agreement also stipulates services of supervision of detailed engineering, design and drawing originating in India, supervision of manufacture of indigenous equipment at Indian works, supervision of erection and start-up & commissioning. - The second Agreement dated 6-6-1998 relates to supply of indigenous design & drawing to be delivered in India at purchaser s & engineer s office valued at ₹ 1,75,79,000/-. Held that - In the case of Solitz Corporation v. Commissioner of Service Tax, New Delhi - 2008 (10) TMI 35 - CESTAT NEW DELHI where the facts are more or less similar to present one, following an earlier decision viz. Kirloskar Electric Co. Ltd. v. Commissioner - 2006 (10) TMI 26 - CESTAT, BANGALORE , the Tribunal has held that drawing and designs ought to be treated as goods and the said finding cannot be considered unreasonable. - The Hon ble Supreme Court in the case of Associated Cement Companies Ltd. v. Commissioner of Customs 2001 (1) TMI 248 - SUPREME COURT OF INDIA , has held that drawings, plans, manuals, etc., specified in Chapter 49 of the Tariff Act are thus statutorily regarded as goods attracting a specified rate of Customs duty on their import into India. Designs and drawings which were imported and assessed as goods , cannot be subjected to Service tax, hence, no Service tax is chargeable on that part attributing towards the value of designs and drawings. Regarding levy of service tax on import services - Supervision services - held that - levy of Service tax on the service provided by a foreign service provider and availed by an Indian receiver has been introduced by an amendment to Section 66 of Finance Act, 1994 i.e. by inserting a new Section 66A in the Finance Act w.e.f. 18-4-2006. The Service tax, it is held, cannot be charged for services rendered for the period prior to 18-4-2006 by a foreign service provider to a service receiver in India irrespective of the fact whether the service is received in India or outside India on the basis of a Rule prescribed in the Service Tax Rules, 1994. - Decided in favor of assessee.
Issues Involved:
1. Classification of services under "Consulting Engineer" category. 2. Taxability of imported designs and drawings. 3. Taxability of indigenous designs and drawings. 4. Applicability of Service Tax on services provided by foreign entities before the introduction of Section 66A of the Finance Act, 1994. 5. Validity of extended period of limitation for demand of Service Tax. Detailed Analysis: 1. Classification of Services under "Consulting Engineer" Category: The Department alleged that services rendered by the appellant under two agreements with TISCO fell under the category of "Consulting Engineer" as defined under Section 65(31) of the Finance Act, 1994. The appellant contended that their activities, such as supervision of erection, installation, and commissioning, did not qualify as consulting engineering services. The Tribunal noted that during the relevant period, the definition of "Consulting Engineer" did not include corporate bodies, which were only included after the amendment on 1st May 2006. 2. Taxability of Imported Designs and Drawings: The appellant argued that imported designs and drawings were assessed as "goods" under Chapter 49 of the Customs Tariff Act, 1975, and thus could not be subjected to Service Tax. The Tribunal agreed, noting that the Bill of Entry confirmed the classification of these items as goods. This view was supported by past Tribunal decisions in Solitz Corporation and Kirloskar Electric Co. Ltd., where designs and drawings were treated as goods. The Tribunal concluded that no Service Tax could be levied on imported designs and drawings assessed as goods. 3. Taxability of Indigenous Designs and Drawings: The appellant contended that indigenous designs and drawings, classified under Chapter 4906 of the Central Excise Tariff Act, 1985, should also be treated as goods and not subjected to Service Tax. The Tribunal concurred, applying the same principle as for imported designs and drawings, and held that indigenous designs and drawings should be treated as goods and thus not liable to Service Tax. 4. Applicability of Service Tax on Services Provided by Foreign Entities Before the Introduction of Section 66A: The Tribunal examined whether services provided by the appellant, a foreign company, to TISCO were taxable before the introduction of Section 66A on 18-4-2006. The appellant argued that no Service Tax could be levied on services provided from outside India before this date, as supported by the Bombay High Court's decision in Indian National Ship Owners Association, which was upheld by the Supreme Court. The Tribunal agreed, noting that Rule 2(l)(d)(iv) of the Service Tax Rules, 1994, was invalid in the absence of statutory support. Consequently, services rendered by the appellant before 18-4-2006 could not be subjected to Service Tax. 5. Validity of Extended Period of Limitation for Demand of Service Tax: The appellant argued that the extended period of limitation was incorrectly invoked, as there was no suppression of information. The Tribunal did not delve deeply into this issue, given its findings on the non-taxability of the services in question. Conclusion: The Tribunal concluded that the designs and drawings, both imported and indigenous, were to be treated as goods and not subjected to Service Tax. It also held that services provided by the appellant before 18-4-2006 were not taxable under the Finance Act, 1994. Consequently, the Tribunal set aside the impugned order and allowed the appeal with consequential relief.
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