2010 (4) TMI 675 - AT - Service Tax

Waiver of pre-deposit - demand of service tax - the appellant was to be paid by the JVC a fee at the rate of 2 per cent of the total annual net sales turnover of the JVC under a separate technical assistance and management backup agreement. It appears such technical assistance and management backup agreement was also concluded between the appellant and the JVC and thereunder the above fee was received by the appellant from the JVC for the technical assistance provided by the former to the latter. The fee so collected by the appellant from the JVC is a part of the taxable value on which the Commissioner as revisional authority has assessed and demanded service tax. consulting engineers service - the appellant received from the foreign company an amount of US 10 lakhs as consideration for transfer of technical know-how for operating a pharmaceutical manufacturing plant in Dubai - the appellant also received separate consideration at the rate of 0.5 per cent of the Net Invoice Price of products sold within the territory of the Gulf Co-operation Council from M/s. Global Pharma. These amounts collected by the appellant from M/s. Global Pharma have also been subjected to levy of service tax. Export of service which was exempt from payment of service tax under Notification No. 55/98-ST as amended by notification dated 6-10-2009 - contention was raised in the very reply to the SCN but the same was not considered by the learned Commissioner - service should be shown to have been rendered abroad (outside India) so as to qualify as export of service and consequential exemption order set aside and allow this appeal by way of remand to the original authority with a direction to it to pass fresh order of adjudication

Summary

Issues:
1. Appellant seeks waiver of pre-deposit and stay of recovery for service tax and penalties imposed by the Commissioner.
2. Taxability of technical fee collected under agreements with various companies.
3. Levy of service tax on amounts received for transfer of technical know-how under different agreements.
4. Interpretation of "Consulting Engineer's service" under the Finance Act, 1994.
5. Exemption from service tax for export of service based on payment in convertible foreign exchange.
6. Consideration of contentions raised by the appellant in response to show-cause notice.
7. Review of the Commissioner's decision and imposition of penalties.

Analysis:

1. The appellant sought waiver of pre-deposit and stay of recovery for service tax of Rs. 46,02,944 demanded by the Commissioner, along with penalties. The Tribunal found the case fit for summary disposal and proceeded to deal with the appeal after dispensing with pre-deposit.

2. The appellant had collected technical fees under agreements with different companies. One agreement involved the formation of a Joint Venture Company, resulting in the appellant receiving a fee based on the net sales turnover. The Commissioner assessed this fee as part of the taxable value for service tax.

3. Another agreement with a foreign company involved the transfer of technical know-how for operating a pharmaceutical plant, with additional consideration based on product sales. These amounts received by the appellant were also subjected to service tax.

4. The lower authorities considered the demand under the category of "Consulting Engineer's service," which the original authority initially held was not applicable to the appellant. However, the Commissioner issued a show-cause notice seeking to revise this decision, ultimately confirming the demand and imposing penalties.

5. The appellant argued that the transfer of technical know-how did not fall under consulting engineers' service but under Intellectual Property Rights, introduced as a taxable service later. They also claimed exemption for export of service due to payment in convertible foreign exchange, a contention not considered by the Commissioner.

6. The Tribunal noted that certain aspects, including the location of service delivery for export of service, were not examined by the Commissioner. The original authority's decision to drop the demand did not consider the appellant's arguments fully.

7. Consequently, the Tribunal set aside the Commissioner's order, remanding the case to the original authority for fresh adjudication. The direction was to restrict the dispute to agreements involving foreign companies, ensuring all appellant contentions are considered and a speaking order is passed after granting a reasonable opportunity for the appellant to be heard.