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of <h1>CESTAT Chennai: Services classified as 'Scientific and Technical Consultancy' not taxable pre-16-7-2001.</h1> <h3>COMMISSIONER OF CENTRAL EXCISE, CHENNAI Versus MRF LTD.</h3> The Appellate Tribunal CESTAT (CHENNAI) upheld the decision of the Commissioner (Appeals) in a case concerning the classification of services received ... Service Tax – Consulting Engineers – Scientific and Technical Consultancy Services are not element of the “Consulting Engineer Service” Issues:- Appeal against dropping of Service Tax demand on the respondents.- Classification of services received from a foreign company as 'Consulting Engineer Service' or 'Scientific and Technical Consultancy Service'.- Interpretation of relevant circular and agreement terms.- Applicability of Service Tax based on the nature of services provided.- Effect of the introduction of 'Scientific and Technical Consultancy Service' as a new taxable service.Analysis:The appeal before the Appellate Tribunal CESTAT (CHENNAI) concerns the dropping of a demand for Service Tax on the respondents, who had paid charges to a foreign company, M/s. Tyreign Inc., USA, for services received. The original authority classified the services as 'Consulting Engineer Service' under Section 65 of the Finance Act, 1994, and imposed penalties. However, the Commissioner (Appeals) reversed this decision, stating that the services were actually 'Scientific and Technical Consultancy Service,' taxable from 16-7-2001, whereas the payments were made prior to that date. The main issue revolves around the nature of services provided and the applicable tax category.The appellant argued that the services provided by M/s. Tyreign Inc., USA, included technical support, training, field engineering, material purchase support, and equipment inspection, falling under the scope of a 'Consulting Engineer' as per a relevant circular. However, the Commissioner (Appeals) viewed the services as 'Scientific and Technical Consultancy Service,' not taxable before 16-7-2001. The agreement between M/s. MRF Ltd. and M/s. Tyreign Inc., USA, highlighted services related to research and development activities for automotive tires, which were not typical of Consulting Engineer Services as per the Board's Circular.The Tribunal noted that the services provided by M/s. Tyreign Inc., USA, were more aligned with 'Scientific and Technical Consultancy Service' rather than 'Consulting Engineer Service' due to the nature of the tasks performed and the qualifications of the individuals involved. The description of services in the invoice as 'Technical Consultancy and other related services' further supported this classification. Additionally, the introduction of 'Scientific and Technical Consultancy Service' as a new taxable category from 16-7-2001, distinct from Consulting Engineer Service, reinforced the argument that the services in question were not taxable during the disputed period of 2000-01.In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) and rejected the appeal of the Revenue, emphasizing the distinction between 'Consulting Engineer Service' and 'Scientific and Technical Consultancy Service' based on the specific nature of services provided and the timeline of taxable categorization.
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