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2015 (1) TMI 187 - AT - Service TaxDemand - Consulting Engineer Service - levy of tax on Development expenses - Taxability of royalty amount on receipt basis - Held that:- As regards the development expenses, the fact that these expenses were incurred by the appellant in India and were not paid to SII, proves that no service has been rendered to the appellant. - The Commissioner's order is very vague and without reasoning. We have no hesitation in holding that service tax is not payable on the development expenses. Regarding royalty - Held that:- Measure of taxation does not determine the nature of taxation. But the pertinent fact of this case is that whereas the show cause notice was issued in September 2003, the royalty on account of technical services for the years 2000-2001 and 2001-2002 was paid in 2004. This fact has been also certified by the Chartered Accountant and not controverted by Revenue. The service tax provisions under the Service Tax Rules, 1994, as applicable during the period in dispute, clearly provided that service tax is payable when the value of taxable services is received. The relevant provisions in law was Rule 6(1) which stated that service tax is payable when payments are received towards the value of taxable services. Therefore, clearly service tax was not leviable on royalty paid for the years 2000-2001 and 2001-2002. Having held that the royalty was on account of providing technical services in India and such technical services are clearly covered under the Consulting Engineering Services, tax is leviable for the year 1999-2000 agreed to by both sides. The amount of service tax payable at the rate of 5% which was the prevailing tax rate at that time, works out to ₹ 2,89,777/-. - Decided partly in favour of assesse.
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