Technology-transfer payments under a government arrangement do not attract consulting engineer service tax on reverse charge.

Payments made under an inter-governmental technology-transfer arrangement were held not to constitute Consulting Engineer Service, because the foreign counterpart was not rendering advice, consultancy or technical assistance in engineering to a client within the charging provision. The Tribunal also found that the service was not received in India for use in relation to business or commerce, which negatived taxability under the reverse charge mechanism. Service tax was therefore not leviable, and the demand, penalty and consequential confirmation failed.

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Issues: Whether service tax was payable under Consulting Engineer Service on amounts paid for transfer of technology and technical assistance under the inter-governmental agreement, and whether the extended period, interest and penalties were sustainable.

Analysis: The payment was for transfer of technology under an inter-governmental arrangement and not for receipt of consulting engineering services in relation to any client. The activity did not constitute advice, consultancy or technical assistance in one or more disciplines of engineering within the meaning of the charging provision relied upon. The Tribunal also noted that the services were not received in India for use in relation to business or commerce, which further negatived taxability under the reverse charge framework invoked in the notice.

Conclusion: Service tax was not leviable under Consulting Engineer Service on reverse charge basis, and the demand, penalty and consequential confirmation failed.

Ratio Decidendi: A payment made for transfer of technology under a governmental technology-transfer arrangement, where the foreign counterpart is not rendering consulting engineering advice or technical assistance to a client in the statutory sense and the service is not received for use in business or commerce, does not attract service tax under Consulting Engineer Service on reverse charge basis.

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