TMI Blog2014 (2) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) ORDER Stay was granted vide Order No. GOA/CEX/GSK/02/2011, dated 20-7-2011. Main Appeal taken up for final disposal. 2. Appellant submits as follows : They are a Government of India Undertaking under the Ministry of Defence, Department of Defence Production and Supplies. They are engaged in shipbuilding, ship repair and engineering for the Indian Navy Coast Guard. They are registered with the Department and are holder of Service Tax Code No. AAACG7569. 3. On 31-3-2006, they placed a purchase Order No. 101648 on M/s. Maritime Research Institute, Netherlands. The Purchase order was for the Model Testing of 90M OPV. The break up of the order was as under : a) Sea Keeping test program - 103500 EURO (b) Maneuvering test program - 36000 EURO (c) Calm water test program (d) Hull for optimization - 9500 EURO (e) Manufacture of two model including all appendages - 25000 EURO (f) Manufacture of two CP propellers - 13500 EURO (g) Stock propeller test program - 52000 E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service received by them. The Additional Commissioner passed the following order : 1. Confirmed the demand of Rs. 19,46,012/- as per proviso to Section 73(1) of the Finance Act, 1994; 2. Appropriate the sum of Rs. 13,96,894/- paid by us vide Challan No. 002/06-07, dated 2-12-2006 and demanded the balance service tax of Rs. 5,49,118/-; 3. Interest was demanded under Section 75 of the Finance Act, 1994; 4. Penalty of Rs. 19,46,012/- was demanded under Section 78 of Finance Act, 1994. 8. Being aggrieved by the impugned order they have filed the appeal on the following ground. Each ground is being made without prejudice to each other. 9. They submit that the entire demand is barred by limitation. They submit that during the course of audit, the revenue vide their letter dated 29-2-2008 had raised audit objection on the issue of leviability of service tax on service received from M/s. Maritime Research Institute under the reverse mechanism. They, vide their letter dated 10-3-2008 had clarified the issue giving justification for non-applicability of Service Tax on the service received from M/s. Maritime Research Institute under the reverse mechanism. Hence al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly or indirectly, renders any advice, consultancy or technical assistance in any manner to a client in one or more disciplines of engineering. Section 65(105)(g) of the Act defines taxable service at the relevant time as under, Taxable service means an service provided or to be provided to a client, by a consulting engineer in relation to advice, consultancy or technical assistance in any manner in one or more discipline of engineering, but not in discipline of computer hardware engineering or computer software engineering . 15. They submit the word technical assistance is preceded by the words advice and consultancy , the term should be read ejusdem generic with the preceding word viz advice and consultancy . They submit that Supreme Court in the case of Rohit Pulp Paper Mills Ltd v. CCE, 1990 (47) E.L.T. 491 has laid down the principle regarding interpretation of the words. As per the said judgment the meaning of the word is required to be judged by the company it keeps. The Supreme Court relied upon the following observation made in the case of State of Bombay v. Hospital Mazdoor Sabha - (1960) 2 SCR 886 : This rule, according to Maxwell, means that, when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived by the appellants can be classified under the category of technical testing analysis service : They are giving below the definition of TECHNICAL TESTING ANALYSIS SERVICE as given under Section 65(106) of the Finance Act, 1994 at the relevant time, technical testing and analysis means any service in relation to physical, chemical, biological or any other scientific testing or analysis of goods or material or any immovable property, but does not include any testing or analysis service provided in relation to human beings or animals. Explanation. - For the removal of doubts, it is hereby declared that for the purposes of this clause, technical testing and analysis includes testing and analysis undertaken for the purpose of clinical testing of drugs and formulations; but does not include testing or analysis for the purpose of determination of the nature of diseased condition, identification of a disease, prevention of any disease or disorder in human beings or animals. Thus under the above definition all the services involved in technical testing and analysis is taxable under this category. The definition does not restrict the scope of the service only to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication means inspection or examination of goods or process or material or any immovable property to certify that such goods or process or material or immovable properly qualifies or maintains the specified standards, including functionality or utility or quality or safety or any other characteristic or parameters, but does not include any service in relation to inspection and certification of pollution levels. 23. As per Webster s Ninth New Collegiate Dictionary, the word inspection and examination means, checking or testing of an individual against established standards. As per Law Lexicon the word inspection and examination means, to look, to view and examine for the purpose of ascertaining the quality or condition or a things. 24. As per Webster s Ninth New Collegiate Dictionary, the word certification means a document certifying that one has fulfilled the requirement of and may practice in a field . As per Law Lexicon the word certification means a writing by which an officer or other person bears a testimony that a fact has or has not taken place . The word process simply means the activities performed for the purpose of achieving the desired obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us and verification of the correctness of technical data provided by with data available in the M/s. Maritime Research Institute, database and with International Maritime Organization standard. The above referred service was to be received by us in Netherlands. No part of the service is performed by M/s. Maritime Research Institute, Netherlands, in India. As per Annexure A to the purchase order our officers will visit Netherlands for witnessing the test carried out by M/s. Maritime Research Institute. We also submit that M/s. Maritime Research Institute, Netherlands, have office in USA and agent in Spain and Brazil only. The said contract was entered on 31-10-2006 and was to be executed by 2008. 32. Hence in view of the above we are not liable to pay Service Tax under the reverse mechanism. 33. In view of the above grounds we submit that they are not liable to pay any service tax on the service rendered to them by M/s. Maritime Research Institute, Netherlands. Hence an amount of Rs. 13,96,894/- (including education cess) may be refunded as consequential relief. 34. They submit that no penalty is imposable on them for the following reasons, (i) No Service Tax is payab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a technical or venial breach of the provisions of the act or where the breach flows form the bona fide belief that the offender is not liable to act in the manner prescribed in the statute. 35. They submit that the ground stated above shows the reasonable cause to pay the Service Tax if any under the reverse mechanism. Hence it is prayed that the penalty imposable if any may not be imposed on them under the provision of Section 80 of the Act. 36. They submit that the calculation of the duty demanded is not correct. In this connection we are giving below the calculation of duty if any payable by, 1. Entire value of the purchase order (in Euro) 287,500 Less : Discount of 4% 11,500 Net amount 276,000 Less : Cost of manufactured goods after providing Discount of 4% 36960 Cost towards service received 239040 Conversion Rate at the relevant time 55 Total cost for the service received in Rs. is 1,31,47,200 Service Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by them and had paid part of the amount during the time of audit, yet they deliberately did not pay the said amount and the balance till the detection of the offence of the evasion of Service Tax by the audit. This is tantamount to deliberate suppression/evasion on the part of the assessee. Para 5. Consequent to the act of suppression/evasion, penalty has to follow. This is not a case of technical or venial bridge as claimed by the assessee, as prior to detection by Audit, the Assessee had not approached the department on their own to ascertain the Service Tax liability. Para 6. Section 66(A) was introduced in the Finance Act, 1994 to bring in the taxable services provided outside India and received in India within the ambit of Service Tax. The Hon ble Supreme Court in the case of CCE v. Hindustan Zinc Ltd. - 2009 (14) S.T.R. J125 (S.C.) and the High Court in the case of UOI v. Aditya Cement - 2008 (10) S.T.R. 228 (Raj) have held that where taxable service is provided by a non-resident, not having any office establishment in India, Service Tax is payable on reverse charge basis w.e.f. 1-1-2005 by the recipient of these service. Assessee s contention, therefore, is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to be done. 1. Sea keeping test programme 2. Maneuvering test programme 3. Calm water test programme 4. Hull form optimization 5. Manufacture of a ship model incl. all appendages 6. Manufacture of two CP propellers 7. Stock propeller Test programme 8. Design propeller test programme 41. Revenue is seeking to place reliance on Section 66A, wherein, when any service is specified in clause 105 of Section 65 is : (a) Provided or to be provided by a person who have been established a business or has a fixed establishment from which the service is provided or to be provided or has his permanent address or usual place of residence, in a country other than India, and (b) received by a person (hereinafter referred to as a recipient) who has his place of business, fixed establishment, permanent address or usual place of residence, in India. 42. Such service shall for the purpose of this section, be taxable service and such taxable service shall be treated as if the recipient had himself provided the service in India and accordingly all the provisions of this chapter apply and thereby concluded that consequently as M/s. MARIN ..... X X X X Extracts X X X X X X X X Extracts X X X X
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