2008 (1) TMI 228 - AT - Service Tax

Manufacturing firm granted waiver and stay in service tax dispute

The Appellate Tribunal granted a waiver of predeposit and a stay of recovery in a case where a manufacturing firm contested the demand for service tax on ... Appellant is a manufacturer & allowed use of its infrastructural facilities such as the R&D Division and the testing facility by M/s. S&S Metplast, Bangalore – appellant-firm contended that it is not an engineering firm & had not rendered any technical assistance to any person – assessee rightly pointed that as per Rule 6(1) STR, tax is payable on the gross amount received by the service provider – but dept. has no case that the impugned amount was received by the appellants - stay granted Issues: Application for waiver of predeposit and stay of recovery of service tax under the category of 'Consulting Engineer' for services rendered during 2001 & 2002.Analysis:1. The appellant, a manufacturing firm, contended that they did not provide any consulting engineering services as defined under Section 65(31) of the Finance Act, 1994. They argued that allowing another firm to use their infrastructural facilities and supplying manpower did not constitute consulting engineering services. The appellant highlighted that service tax is payable on the gross amount received for services provided, and since the disputed amount was not received, the demand was unwarranted. The appellant sought to set aside the demand based on these grounds.2. The department, represented by the learned SDR, argued that by providing R&D and testing facilities, the appellant had indeed provided technical assistance, which falls under the purview of consulting engineering services. The department contended that it was not necessary for the service provider to be a qualified engineer or engineering firm, and the non-receipt of the taxable amount by the appellant did not invalidate the demand. The lower authorities had upheld the demand, stating that the orders were passed in accordance with the law.3. The Member (T) of the Appellate Tribunal considered the arguments presented by both sides. The Tribunal noted that consulting engineer services are typically rendered by a professionally qualified engineer or an engineering firm. Referring to Rule 6(1) of the Service Tax Rules, 1994, which mandates that service tax is payable on the gross amount received by the service provider, the Tribunal observed that the department had not established that the disputed amount was actually received by the appellant. Consequently, the Tribunal found merit in the appellant's contention and held that they had made a prima facie case against the demand and penalties. As a result, the Tribunal granted a waiver of predeposit and a stay of recovery concerning the disputed dues as per the impugned order.This detailed analysis of the judgment highlights the key arguments presented by both parties and the Tribunal's reasoning in granting the waiver and stay of recovery based on the absence of evidence regarding the receipt of the disputed amount by the appellant.