2018 (4) TMI 669 - AT - Service Tax

Scientific Technical Consultancy Service - Reverse Charge Mechanism - services received from foreign firm namely, M/S Rosoboronexport, Russia - Held that - in the appellant s own case in an identical issue reported as Commissioner of Central Excise, Nashik Vs. Hindustan Aeronautics Ltd. 2015 (5) TMI 668 - CESTAT MUMBAI , this Tribunal has decided the matter in favor of the assessee, where relying in the case of R.M. Dhariwal (HUF) vs. CCE Pune III - 2014 (1) TMI 409 - CESTAT MUMBAI , it was held that that transfer of trade name and formulae transferred for a consideration cannot be services which would fall under Scientific or Technical Consultancy Service . Appeal allowed - decided in favor of appellant.

Issues involved:
Appeal against Order-in-Original confirming demand, interest, and penalty on recipient of Scientific Technical Consultancy Service from foreign firm - Interpretation of "scientific and technical consultancy service" - Application of reverse charge mechanism - Definition under Section 65 of the Finance Act, 1994 - Analysis of agreements for transfer of technology and intellectual property - Classification of services rendered - Consideration of agreements for transfer of brand names, know-how, and technical information - Determination of whether services fall under "scientific or technical consultancy" - Comparison with previous tribunal decisions - Dispute resolution on merits.

Analysis of Judgment:

1. Interpretation of "scientific and technical consultancy service":
The Tribunal analyzed the definition of "scientific or technical consultancy" under Section 65 of the Finance Act, 1994, which requires advice, consultancy, or scientific/technical assistance to be rendered by a scientist, technocrat, science/technology institution, or organization in one or more disciplines of science or technology. The Tribunal emphasized the need for specific elements to bring a service within this ambit, such as the nature of advice/consultancy/technical assistance and the involvement of intellectual property transfer.

2. Application of reverse charge mechanism:
The case revolved around the discharge of Service Tax liability on services received from a foreign firm for the transfer of technology and intellectual property. The Tribunal examined the agreements for the transfer of brand names, know-how, and technical information, emphasizing that these transactions did not merely involve advice or consultancy but permanent transfers of intellectual property, falling under "intellectual property service" rather than "scientific or technical consultancy."

3. Analysis of agreements and services rendered:
The Tribunal scrutinized the agreements between the parties, focusing on the nature of services provided, including the transfer of brand names, trademarks, know-how for manufacturing, and technical information. It was highlighted that these transactions did not align with the definition of "scientific or technical consultancy," as they primarily involved intellectual property transfers rather than scientific or technical assistance.

4. Comparison with previous tribunal decisions:
The Tribunal referenced previous decisions, including Commissioner of Central Excise, Nashik Vs. Hindustan Aeronautics Ltd., and Universal Pharmacy, to support its interpretation of the definition of "scientific or technical consultancy service." These precedents emphasized the need for services to be rendered by a science or technology institution or organization in specific disciplines to fall under this category.

5. Dispute resolution on merits:
Based on the analysis of the agreements, services rendered, and comparison with previous decisions, the Tribunal concluded that the services received did not constitute "scientific or technical consultancy" as defined under the Finance Act, 1994. Consequently, the impugned order confirming demand, interest, and penalty was set aside, and the appeal was allowed in favor of the appellant.

6. Final decision and outcome:
The Tribunal pronounced the judgment on 21/03/2018, setting aside the impugned order and allowing the appeal filed by the assessee-appellants. The decision highlighted the importance of aligning services with the specific criteria outlined in the legal definition of "scientific or technical consultancy service" to determine tax liability under the reverse charge mechanism.

This detailed analysis of the legal judgment provides a comprehensive overview of the issues involved, the Tribunal's interpretation of relevant legal provisions, the application of precedent decisions, and the ultimate resolution of the dispute on the merits.

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