Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

Comments

Print   |    |  Comment

PJ/Case law/2014-15/2259

Transfer of technical know-how is not covered ‘Consulting Engineer’s Service’.

Case:-COMMISSIONER OF SERVICE TAX, MUMBAI Vs LEIBERT CORPORATION
 
Citation:- 2014 (33) S.T.R. 161 (Tri. - Mumbai)

Brief facts:-This was Revenue’s appeal filed against Order-in-Appeal No. AT/679/M-III/2005, dated 26-12-2005 passed by the Commissioner of Central Excise (Appeals), Mumbai Zone-II.

The respondent, M/s. Leibert Corporation, USA, entered into a technical know-how agreement with M/s. Emerson Power Network (I) Pvt. Ltd. for supply of technical know-how and licence to the service-recipient in India for the rights to manufacture, sell and distribute and use licensed product and the technology in India. In consideration thereof, the service-recipient agreed to pay a lumpsum amount of US $ 3,00,000/- and a running royalty of 5%/8% on the domestic sale price of the product for a period of 7 years from the date of commencement of production. The Revenue was of the view that the service rendered by the foreign service provider was liable to Service Tax in India under the category of ‘Consulting Engineer’s Service’ and, therefore, a show cause notice dated 26-3-2003 was issued demanding Service Tax of ` 19,04,143/- for the services rendered during the period July, 1997 to December, 2001 along with interest thereon and also proposing to impose penalties. The notice was adjudicated vide order dated 13-9-2004 wherein the demands were confirmed along with interest and also penalties were imposed under the provisions of the Finance Act, 1994 on M/s. Leibert Corporation, USA. On appeal, the lower appellate authority held that, in view of the decisions of this Tribunal in the case of Navinon Ltd. v. Commissioner of Central Excise, Mumbai-VI - 2004 (172)E.L.T.400 = 2006 (3)S.T.R.397 (Tribunal), Yamaha Motors (India) Pvt. Ltd. v. Commissioner of Central Excise, Delhi-IV - 2005-TIOL-598-CESTAT-DEL = 2006 (3)S.T.R.665 (Tri.-Del.) = 2005 (186)E.L.T.161 (Tri.-Del.),the services rendered cannot be classified under heading ‘Consulting Engineer’s Service’ and accordingly allowed the appeal. The Revenue was aggrieved of the same and is before Tribunal.
 
Appellant’s contention:-It has been urged that the technical know-how provided by Leibert Corporation to Indian entity appears to be advice and technical assistance provided to a client and was liable to Service Tax under the category of ‘Consulting Engineer’s Service’. It was also stated that the Revenue has gone in appeal against the decision in the case of Navinon Ltd. (supra) before the Hon’ble High Court of Bombay and the matter was pending before the High Court [2008 (9) S.T.R.J114 (Bom.)] and, therefore, the lower appellate authority was wrong in his conclusions.
 
Respondent’s contention:-The learned counsel submits that the transaction involved in the present case was one of supply of technical know-how which includes supply of patents, trade secrets and other technical information and services has been rendered not in terms of any advice, consultancy or technical assistance and, therefore, the transaction does not attract provisions of ‘Consulting Engineer’s Service’. He relies on the decisions of this Tribunal in the case ofKinetic Engineering Ltd. v. Commissioner of Central Excise, Pune-I - 2012 (25)S.T.R.26and Aravind Fashions Ltd. v. Commissioner of Service Tax, Bangalore - 2007 (7)S.T.R.178 (Tri.-Bang.)affirmed by the Hon’ble Karnataka High Court [2012 (27)S.T.R.J112 (Kar.)], in support of his submissions. Accordingly, he prays for dismissing the Revenue’s appeal.
                                                                                                                    
Reasoning of judgment:-On careful consideration of the submissions made by both sides, ‘Consulting Engineer’s Service’ relates to rendering of advice, consultancy or technical assistance in any branch of engineering to a client by a consulting engineer or an engineering firm. The said service does not, in any way, relate to supply of technical know-how which the respondent has undertaken in the present case. They have supplied to the client in India know-how by way of patents, trade secrets, processes, etc. so that the recipient in India can undertake manufacture of licensed products. In consideration thereof, royalties/licence fees had been paid by the recipient to the service provider. This activity, by no stretch of imagination, can be considered as coming within the purview of ‘Consulting Engineer’s Service’. This Tribunal in the case of Aravind Fashions Ltd. which has been affirmed by the Hon’ble High Court of Karnataka, and in the case of Kinetic Engineering Ltd. (cited supra) has clearly held that transfer of technical know-how does not come within the purview of ‘Consulting Engineer’s Service’. The same view was held by the Tribunal in the case of Navinon Ltd. (supra), which is pending before, the Hon’ble High Court. It is informed by the learned counsel for the respondent that the said decision of this Tribunal has not been stayed. In view of the above, we are of the considered view that the activities undertaken by the respondent in the case is not exigible to service tax under the category of ‘Consulting Engineer’s Service’.

In view of the above findings, the appeal filed by revenue is dismissed as being devoid of any merits.

Decision:-Appeal dismissed.

Comment:-The analogy drawn from the case is that payment of royalties, licence fees by service recipient to service provider for transfer of technical know-how are not covered by the service of ‘Consulting Engineer’s Service’ and therefore the demand of service tax was quashed.

Prepared by: Pooja Mehta
 
 
 
 
 

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com