2018 (5) TMI 216 - AT - Service Tax

Scientific and Technical Consultancy Service - in-house training at M/s SMC, Japan of employees of the appellant - appellant has reimburse the expenses of the said training - demand of tax with interest - Held that - M/s SMC, Japan has not provided any advice consultancy, scientific or technical assistance to the appellant. Moreover, the M/s SMC Japan is not scientist or technocrat or Science technology institution/organization in the disciplines of science or technology. Therefore, for in-house training M/s SMC, Japan does not covered under Scientific and Technical Consultancy Service in terms of Section 65 (95a) of the Finance Act, 1994, therefore, the appellant are not liable to pay service tax under the said category. During the impugned period the assessee was required to pay service tax on the receipt of the payment of service provided and not from the date of service provided - the appellant is not liable to pay interest for the intervening period i.e. date of service provided till its realization. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against demand of service tax under Scientific and Technical Consultancy Service for the period 2005 to 2010, 2011-2012.

Analysis:
The appellant entered into an agreement with M/s Suzuki Motor Corporation (SMC), Japan for manufacturing engines and transmission parts. The appellant reimbursed expenses to M/s SMC, Japan for organizing training and seminars but did not pay service tax as per Service Tax Rules, 1994. Additionally, the appellant received IPR services from a foreign entity and deposited service tax late, resulting in interest payment discrepancies. The demand for service tax under Scientific and Technical Consultancy Service was confirmed, along with interest and penalties. The appellant challenged these orders.

The appellant argued that the services received did not fall under Scientific and Technical Consultancy Service, as they were related to in-house training and reimbursement of expenses. They contended that interest demands were unjustified, as they paid service tax based on the receipt of payment for services provided, following a precedent set by the High Court of Delhi. The appellant sought to set aside the impugned orders.

After considering submissions, the Tribunal noted that the services provided by M/s SMC, Japan did not qualify as Scientific and Technical Consultancy Services as per the Finance Act, 1994. The definition of Scientific or technical consultancy under Section 65(92) includes advice, consultancy, or technical assistance, which was not provided by M/s SMC, Japan. Therefore, the demand for service tax under this category was set aside.

Further, the Tribunal agreed with the appellant's argument regarding the payment of service tax based on the receipt of payment for services provided, not the date of service provision. Citing a previous case, the Tribunal ruled that the appellant was not liable to pay interest for the period between service provision and realization of payment. Consequently, the demand for interest was also set aside.

In conclusion, both appeals were allowed, and the demands for service tax under Scientific and Technical Consultancy Service and interest were set aside.