2017 (6) TMI 1070 - AT - Service Tax

Whether service tax have been rightly demanded from the appellant, who are manufacturer of Tractors on reverse charge basis, for alleged know-how received for manufacture of 3600 model tractors transmission from M/s Hema Traktor Sanayi, Turkey during the period 2006-07 - Held that - it was observed from their balance-sheet for the year ended 31st March, 2007 that they have paid an amount of ₹ 20,77,705/- to M/s Hema Traktor Sanayi, Turkey for obtaining Technology, Patent, Design, which appeared to revenue comes under the intellectual property right service and accordingly it appeared that they are liable to pay service tax on reverse charge basis. Whether the SCN dated 12/09/2008, issued invoking the extended period of limitation is sustainable? - Held that - there is no element of suppression or contumacious conduct on the part of the appellant. The transaction was found duly recorded, in the books of accounts maintained in the ordinary course of business. In this view of the matter, the SCN for the extended period of limitation is not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether service tax rightly demanded from appellant for know-how received from M/s Hema Traktor Sanayi, Turkey.
2. Whether show cause notice invoking extended period of limitation is sustainable.

Analysis:
1. The appeal concerns the demand of service tax from the appellant, a tractor manufacturer, for alleged know-how received for the manufacture of '3600 model tractors transmission' from M/s Hema Traktor Sanayi, Turkey during 2006-07. The issue revolves around whether the payment made falls under 'intellectual property right service' and if service tax is correctly demanded on a reverse charge basis. The show cause notice highlighted the payment made to M/s Hema Traktor Sanayi and the lack of disclosure to the Department, leading to the invocation of the extended period for issuing the notice.

2. The Tribunal examined the show cause notice and found no evidence of suppression or contumacious conduct by the appellant. The transaction in question was duly recorded in the appellant's books of accounts maintained in the ordinary course of business. Consequently, the Tribunal held that the show cause notice for the extended period lacked the necessary conditions precedent for sustainability. As a result, the Tribunal allowed the appeal, setting aside the impugned order, while leaving the question of merits open for future consideration.

In conclusion, the Tribunal ruled in favor of the appellant, determining that the show cause notice for the extended period of limitation was not sustainable due to the absence of evidence of suppression or contumacious conduct. The decision highlights the importance of maintaining proper records and transparency in business transactions to avoid potential tax liabilities and disputes.