2007 (10) TMI 226 - AT - Service Tax

Tribunal upholds appellant's appeal, rejects revenue's classification of services

The Tribunal rejected the revenue's appeal in a case involving the classification of services provided by the appellant. The Commissioner's decision to ... Plea that transfer of technical know-how does not come under the category of ‘Consulting Engineering Services’, is acceptable - revenue has not established as to how the rendering of services to the labs, would come within the category of ‘Scientific or Technical Consultancy Services’ and the Commissioner (Appeals) is justified in holding the charge as unsubstantiated - Procuring orders and receiving commission would not come within the ambit of ‘Clearing and Forwarding Agent’ services Issues:1. Classification of services provided by the appellant under 'Consulting Engineer Service', 'Clearing and Forwarding Agents', and 'Scientific or Technical Consultancy Service'.2. Allegations of revenue regarding the nature of services provided by the appellant.3. Examination of agreements and activities to determine the applicability of service tax categories.4. Adequacy of the show-cause notice and the Order-in-Original in justifying the allegations.Analysis:1. The appellant was involved in manufacturing and clearing pharmaceutical products under different brand names. The revenue alleged that the appellant's activities fell under 'Consulting Engineer Service', 'Clearing and Forwarding Agents', and 'Scientific or Technical Consultancy Service'. The revenue considered the receipt of commercial consideration for transfer of technical know-how as 'Consulting Engineers'. The appellant contended that the transfer of technological know-how did not fall under 'Scientific or Technical Consultancy Services' and provided legal precedents to support their argument.2. The Commissioner (Appeals) examined the agreements and activities of the appellant. The findings indicated that the appellant had sold outright the ownership of technical know-how for products, ceasing to have any hold over them. The Commissioner concluded that the appellant did not render any service as a Consulting Engineer. The revenue's allegations regarding the appellant acting as Clearing and Forwarding Agents and providing Scientific or Technical Consultancy Services were also refuted due to lack of substantiation.3. The judgment highlighted the inadequacy of the show-cause notice and the Order-in-Original in explaining how the appellant's activities aligned with the alleged service tax categories. The Commissioner criticized the lack of proper investigation and drafting in the notice, indicating a lack of supervision and non-application of mind by the adjudicating authority. The Commissioner set aside the Order-in-Original and allowed the appeal filed by the appellant.4. The revenue sought to uphold the Order-in-Original, but the Tribunal rejected the appeal. The Tribunal concurred with the Commissioner's findings that the transfer of technology did not fall under 'Consulting Engineering Services'. The appellant's activities did not qualify as Clearing and Forwarding Agent services, and the revenue failed to establish how the services provided to labs fit under 'Scientific or Technical Consultancy Services'. The Tribunal found no merit in the revenue's appeal and rejected it.