2007 (8) TMI 102 - AT - Service Tax

Stay/Dispensation of pre-deposit - Department demanded service tax under two head previously charged under one head without there is any alteration in the Technical Collaboration Agreement -Stay application filed by appellant allowed

Summary

Issues:
1. Service tax liability on consulting engineer services for two companies.
2. Classification of services under consulting engineer or intellectual property rights category.
3. Application of penalties under Sections 75, 76, and 78 of the Act.
4. Opportunity to submit details for quantifying service tax liability.
5. Compliance with principles of natural justice in determining tax liability.

Analysis:
1. The Commissioner confirmed service tax liabilities for M/s. DEERE and M/s. JDEPL under the 'consulting engineer' category for specific periods. Penalties were imposed for non-payment of service tax on taxable services rendered by both companies.

2. The dispute arose from a technical collaboration agreement between the companies for manufacturing agricultural tractors. The Commissioner issued show cause notices alleging that services provided and received fell under the 'consulting engineer' category, necessitating service tax payment. However, a separate order by the same Commissioner classified similar services under 'intellectual property rights services' for a later period.

3. The appellants argued that the Department previously accepted service tax for intellectual property rights services, making it inconsistent to now classify part of the services as consulting engineering. The Tribunal found merit in this argument, noting the lack of material for the Department to change the classification. The Commissioner's splitting of services for tax liability calculation without providing an opportunity for submission of details was also criticized.

4. Upon review, the Tribunal observed that the Technical Collaboration Agreement remained unchanged, leading to a discrepancy in treating services differently for pre and post periods. The violation of natural justice principles in determining tax liability was acknowledged. As a result, the Tribunal waived the pre-deposit of service tax and penalties pending appeal disposal, citing provisions of the Central Excise Act and the Finance Act.

This detailed analysis highlights the issues of service tax liability classification, penalties, and procedural fairness in the judgment, emphasizing the Tribunal's decision to dispense with the pre-deposit requirement based on the inconsistencies and lack of opportunity for the appellants.