Tribunal rules against Service Tax on technical know-how, finding supply not taxable as Management Consultancy Service.

The Tribunal set aside the Order-in-Original, ruling that the demand for Service Tax on technical know-how supplied by a foreign entity to an Indian company was not legally sustainable. It was held that the supply did not constitute Management Consultancy Service and the liability of Service Tax should not fall on the recipient. The Tribunal found that the foreign entity was not under Indian jurisdiction and had not provided services in India, thus overturning the tax demand against both the service provider and recipient.

---

---

Issues:
The issue involves whether the supply of technical know-how amounts to Management Consultancy Service and the liability of Service Tax on the service provider and recipient.

Summary:
The appeal was against the Order-in-Original passed by the Commissioner of Central Excise regarding the payment for technical know-how received by M/s. Iftex Oil & Chemicals Ltd. from M/s. Ethyl Petroleum Additives Inc., USA. A show cause notice was issued for levying Service Tax under "Management Consultancy Service." The demands were initially dropped but later confirmed by the Commissioner, leading to the appeal.

The appellant argued that the activity is not taxable under Management Consultancy Service and technical know-how involves Intellectual Property Right, which was not taxable during the impugned period. They contended that any liability of Service Tax should be on the service provider, not the recipient.

The Revenue reiterated the findings of the Review Authority, supporting the Service Tax demand. However, the Tribunal observed that confirming the demand against both the service provider and recipient was not sustainable in law. They also noted that the liability of Service Tax on the recipient came into force at a later date, making the demand on M/s. Iftex Oil & Chemicals Ltd. not legally sustainable.

Regarding M/s. Ethyl Petroleum Additives Inc., USA, the Tribunal found that they did not come under the jurisdiction of Indian Service Tax authorities and had not rendered any service in India. The supply of technical know-how did not fall under Management Consultancy Service, making the liability on the foreign entity for services rendered from abroad also not sustainable.

Consequently, the Tribunal set aside the impugned order as illegal and incorrect, allowing the appeal.

---