Consulting
engineer
CESTAT,
NEW DELHI BENCH
Eicher
Motors Ltd.
v.
Commissioner
of Central Excise, Indore
S.
S. KANG, VICE PRESIDENT
AND
DR. T. V. SAIRAM, TECHNICAL MEMBER
STAY
ORDER NO. 581 OF 2007
APPLICATION
NO. ST/STAY/2189 OF 2007
IN
APPEAL NO. ST/573 OF 2007
November
26, 2007
Section 65 of the Finance Act, 1994 - Consulting engineer - Period from 1999 to 2003 - Service tax demand was confirmed against assessee on ground that it received consulting engineer services from foreign service provider - Assessee contended that service received by it was not consulting engineer service, but it was receiving technical know-how in form of drawing and design - As per terms and conditions of agreement, there was no consideration regarding transfer of licensing rights in respect of know-how, which was to be kept confidential - Further as per terms of payments laid down in agreement, liability of payment to taxes had been casted upon assessee by increasing bill amount to extent by foreign company providing taxable services - Whether, prima facie, instant case was not a case for total waiver of amount of service tax and, therefore, assessee was to be directed to deposit 50 per cent of tax amount confirmed by adjudicating authority - Held, yes [Para 10]
The adjudicating authority conformed service tax demand against the assessee on the ground that the assessee received consulting engineer services from the foreign service provider.
On appeal, the assessee contended that the service received by it was not a consulting engineer service, but it was receiving technical know-how in form of drawing and design’ that prior to 16-8-2002, the service recipient was not liable to pay any tax in respect of the service received by him from a foreign consulting engineer; and that after 16-8-2002 also in absence of any notification notifying the services regarding which service recipient was made liable to pay service tax, liability could not be fastened upon the assessee. The Commissioner (Appeals), however, confirmed the demand holding that as per the terms of payments laid down in the agreements, the liability of payment to taxes had been casted upon the assessee by increasing the bill amount to the extent by the foreign company providing taxable services.
On appeal:
As per the terms and conditions of the agreement, there was no consideration regarding transfer licensing rights in respect of know-how, which was to be kept confidential.
There was a consolidated amount of consideration in respect of the service provided by the service provider and it could not be said that in each drawing and design was only in respect of transfer of technical know-how. [Para 9]
Under the terms and conditions of the technical assistance agreement, if due to any applicable provision of law, any amount was required to be deducted by the assessee by making any remittance to the service provider; this amount payable to service provider would be increased to such an amount that after deduction of applicable tax, the net amount payable would be the same as per the terms of agreement. Further, in reply to the show-cause notice where the assessee gave the details of the payments made to the service provider, it was specifically mentioned that the same was in respect of technical consultancy fees for design and drawing. No financial hardship was pleaded. In those circumstances, prima facie, it was not a case for total waiver of amount of service tax. The assessee was directed to deposit 50 per cent of the tax amount confirmed by the adjudicating authority. [Para 10]