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2013 (3) TMI 228
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....g and design, supervision of activities on site and of detailed engineering in India. From these four agreements, Revenue has not disputed two agreements relating to design, manufacture and supply of imported plant, machinery and equipment and also for design, manufacture and supply of indigenous plant, machinery and equipment for setting up of the said SPM. The department has disputed the Agreements No. CRMP/COM/SPM/3, dated 31-3-1998 (Offshore drawing/supervision) and Agreement No. CRMP/COM/SPM/4 dated 6-6-1998 (Onshore Drawings & Designs). These agreements are as below : Sl. No. Name of the Party Agreement No & Date Contract's Clause Scope/Details of work Amount involved 1. M/s Mitsui & Co. Ltd., 2-1, Ohtemachi 1- Chrome, Chiyoda- Ku, Tokyo, Japan CRMP/COM/ SPM/03 dated 16-7-1998 Supply of imported design & drawing to be delivered in India at Purchaser's & Engineer's Office J. YEN 211200000 2.2.1 1. Supervision of Detailed Engineering, Design & Drawing Originating in India J. YEN 1511400 2. Supervision of Manufacture of I....
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....respect of Agreement No. CRMP/CON/SPM/04 dated 6-6-1998, the relevant Clause of the Schedule 2 of the Agreement for contract price is reproduced below : "All indigenous design and drawings shall be delivered by the to Purchaser's and Engineer's Office (s) in India, after duly completing all required formalities at the expense of the Contractor". 2.4 On the basis of the said stipulations in the relevant agreements, the Department has issued show-cause notice alleging that the services rendered under the said two Agreements by the Appellant to M/s. TISCO fall under the category of "Consulting Engineer". The definition of "Consulting Engineer" as was in existence at the relevant time reads as follows : "Consulting Engineer means any professionally qualified engineer or an engineering firm who, either directly or indirectly, renders any advice, consultancy or technical assistance in any manner to a client in one or more disciplines of engineering". 2.5 Consequently, the demand of Rs. 76,34,577/- was issued to the appellant for the period from 1-4-1999 to 30-11-2001 invoking extended period of limitation on 20-10-2004. The said demand notice was confirmed by the Co....
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....lant procured indigenous designs and drawings from Indian sub-suppliers and supplied to M/s. TISCO. Regarding supervision activities of the said SPM, he has submitted that the foreign technicians had visited India to ensure that the activities relating to erection, installation, commissioning of SMP were being performed in conformity with the technical specifications provided by the contractor. It is his plea that the appellant's job was only to supervise the activity of installation, commissioning. It his submission that the activities carried by the appellant are not liable to Service tax under the heading "Consulting Engineering Services" as defined under Section 65(31) of the Finance Act, 1994 during the relevant period. 3.2 The ld. Advocate has assailed the impugned Order on four counts. At the first instance, he has submitted that since the Customs Authorities have assessed the imported drawings and designs as 'goods' and appropriate Customs duty was paid under Chapter 49 of the Customs Tariff Act, 1975 by M/s. TISCO, the same cannot be treated as services in view of the specific findings recorded by this Tribunal in the first round of litigation. In support, he has r....
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....rporate providing the services of consulting engineer; the body corporate were made liable to Service tax only after 1-5-2006. 3.4 Thirdly, the ld. Advocate have argued that the services of erection, installation and commissioning, became taxable only w.e.f. 10-9-2004 i.e. the date from which the said services were introduced in the Finance Act. The C.B.E. & C. in its Circular No. 79/9/2004-S.T., dated 13-5-2004 clarified that erection and installation activities are not covered under the head Consulting Engineer's services. 3.5 The learned Advocate has further submitted that the appellant is a company based and incorporated under the Laws of Japan in Tokyo and hence, no Service tax can be levied on such service either under the head Consulting Engineer or any other head during the period in dispute since the charge/levy of Service tax on services provided from outside India and received in India was introduced for the first time by inserting Section 66A w.e.f. 18-4-2006 in the Finance Act, 1994. Thus prior to that date no tax could be levied on any service provided from outside India. In this connection, he has referred to the judgment of the Hon'ble Bombay High Co....
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.... by C.B.E. & C. vide letter No. 43/5/97-TRU, 2-7-1997. 4.4 Rebutting the argument of the appellant, that installation and commissioning services are made taxable only from 10-9-2004, he has submitted that the said services are separately made taxable under a new entry and accordingly not taxable under consulting engineer service from that date. But, that does not invalidate the earlier position of taxing it under consulting engineer services, but it only modifies the earlier position as is clear from Para 4 of C.B.E. & C. Circular No. 49/11/2002-S.T., dated 18-12-2002. 4.5 Further countering the arguments that the amendment to Consulting Engineering service in the year 2006 brought within its scope the corporate body which was not earlier in the said definition, he has submitted that the amendment is only clarificatory in nature and that from the very beginning consulting engineer included a natural or juristic or corporate person and hence firm and a corporate body was ab initio included in the scope of the said service. In support of his submission he has referred to the ratio of the Hon'ble High Court of Karnataka in the case of Tata Consultancy Services v. Union....
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....cription in the agreement/contract, it is clear that they are all leviable to Service tax under heading "Consulting Engineer" as held by CESTAT in the case of Nokia (I) Pvt. Ltd. v. Commr. of Customs, Delhi [2006 (1) S.T.R. 233 (Tri. - Del.)]. Further he has submitted that the scope of "Consulting Engineer" service includes assistance by supplying drawing and design prepared by engineering division as held by the Tribunal in the case of Rampur Engineering Co. v. Commissioner of Central Excise, Jaipur - 2006 (3) S.T.R. 650 (Tri.-Del.). Further he has submitted that in the total taxable value of Rs. 15.26 crores, the sum of Rs. 8.82 crores represents the value of basic engineering or system engineering originating outside India and delivered to TISCO. Further he has submitted that even if the imported drawing and designs be treated as goods and charged to customs duty, it does not mean that the same cannot be charged to other taxes like excise duty in the form of CVD or sales tax in the form of special additional duty. He has referred to the judgment of the Hon'ble Supreme Court in the case of Tamil Nadu Kalyana Mandapam Association v. Union of India reported in 2004 (167) E.L.T. 3 (....
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....rk i.e. setting up and startup of SPM, which involved physical activities and not just supervision or advisory activity. Further, he has referred to the judgments of the Tribunal in the cases of Turbotech Precision Engineering Pvt. Ltd. - 2010 (18) S.T.R. 545 (Kar.) and ABB Ltd. reported in 2011-TIOL 748-CESTAT Bang. = 2011 (24) S.T.R. 199 (Tri.-Bang.) wherein it was categorically held that the services like design, development, installation, commissioning and technology transfer would not fall under the Head "Consulting Engineer" services. Similar view was also taken by the Hon'ble High Court of Karnataka in the case of Commissioner of Service Tax, Bangalore v. Araco Corporation reported in 2010 (19) S.T.R. 169 (Kar.) and by the Tribunal in the case of Nypro Forbes Products Ltd. - 2008 (10) S.T.R. 595. He has referred to the C.B.E. & C. Circular bearing No. 137/38/2003-CX., dated 13-5-2004, wherein it was clarified by the Board that the charges of errection, installation & commissioning are not covered under the category of Consulting Engineer Services. Further he has submitted that the errection, installation and commissioning services were taxable only from 10-9-2004, which has ....
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.... that as a major part of the demand is in respect of supply of imported designs and drawings for which the appellants filed Bill of Entry at the time of its import treating it as 'goods' under the Customs Act, 1962 (similar plea was also raised in respect of designs & drawings originating in India) and the designs and drawings which form part of the contract, being treated as 'goods' by the Customs Authorities and were assessed under the Customs Act and accordingly, the same as service is not sustainable and requires re-consideration. No appeal was filed against the said remand Order of the Tribunal. 7.3 In the de novo proceeding, the appellant had submitted copy of the Bill of Entry bearing No. 25 dated 2nd January, 2001. The ld. Adjudicating authority instead of examining the said bill of entry whether it relates to the import of designs and drawings relevant to the Agreements in question and assessed as 'goods' falling under Chapter 49 of the Customs Tariff Act, 1975 observed that the said Bill of Entry was assessed by the Customs pursuant to the Tribunal's Order No. A-602/Cal/2000, dated 12-5-2000 [2001 (130) E.L.T. 327 (Tribunal)] and at no stage, it was an issue befor....
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....y the Customs authorities. It is immaterial whether it is assessed as 'goods' under the direction of the Tribunal in the determination of value of the machinery or otherwise. 7.6 We find that in the case of Solitz Corporation v. Commissioner of Service Tax, New Delhi - 2009 (14) S.T.R. 642 (Tri.-Del.) where the facts are more or less similar to present one, following an earlier decision viz. Kirloskar Electric Co. Ltd. v. Commissioner - 2007 (6) S.T.R. 173, the Tribunal has held that drawing and designs ought to be treated as 'goods' and the said finding cannot be considered unreasonable. The Hon'ble Supreme Court in the case of Associated Cement Companies Ltd. v. Commissioner of Customs reported in 2001 (128) E.L.T. 21 (S.C.), has held that drawings, plans, manuals, etc., specified in Chapter 49 of the Tariff Act are thus statutorily regarded as goods attracting a specified rate of Customs duty on their import into India. For better appreciation, the relevant portion of the said Order is reproduced below : "27. Drawings, plans, manuals, etc., specified in Chapter 49 of the Tariff Act are thus statutorily regarded as goods attracting a specified rate of customs duty....
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....form part of the taxable value for the purpose of levy of Service tax. It is held that SIM Cards are not sold as goods independently from the services provided. They are considered as part and parcel of the services provided and the dominant position of the transaction is to provide services and not to sell the material i.e. SIM Cards which on its own but without the service would hardly have any value at all. In the present case, we find that the appellant entered into four different contracts with M/s. TISCO for setting up of a Skin Pass Mill. This project included supply of equipments against two contracts which are not disputed by the Department, whereas the third contract related to supply of designs & drawings procured from Japan and also procured indigenously, had been disputed. The designs & drawings are prepared in Japan and sold to the appellant independently as is evident from the fact that the same are assessed as 'goods' under the Customs Act. Similarly, the designs and drawings procured in India are assessable as goods under the Central Excise Act. Hence, the said ratio is not applicable to the facts of the present case. 7.8 In view of the above, and as observ....
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....ant time, which reads as under : "Provided further that, in the case of a person who is a non-resident or is from outside India, does not have any office in India and is liable to pay Service tax on taxable services provided in India,- (i) the service tax thereon shall be paid by such person or on his behalf by any other person authorized by him, who shall submit to the Commissioner of Central Excise in whose jurisdiction the taxable services have been rendered, a return, containing the following details,- (a) name and address; (b) name and address of the client to whom the taxable services were rendered; (c) nature of taxable services rendered; (d) value of taxable services rendered; (e) service tax liability on the taxable services rendered. along with a copy of the bill raised on the client to whom services have been rendered, a copy of the contract or agreement regarding the provision of such services to the client, and a demand draft payable to the Commissioner of Central Excise towards his Service tax liability; and (ii) the return along with the demand draft shall be submitted....
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....whereas in the present case, the services were received inside the India from the person having his office in India. We do not find any merit in the above distinction being made by the Revenue. Section 66A having been inserted in the Finance Act with effect from 18-4-2006 clearly laying down that recipient of services in India from outside India shall be liable to pay tax, cannot be made applicable retrospectively. We find no merits in the Revenue's contention. Accordingly, the appeal is rejected. Stay Petition also gets disposed off." 7.15 We find that on a plain reading of the ratio of the Hon'ble Bombay High Court, which has been later confirmed by the Hon'ble Supreme Court, it is clear that levy of Service tax cannot be enforced on the basis of a Rule in absence of a charging Section in the Finance Act supporting the said Rule. Accordingly, levy and collection of Service tax on the receiver of services in India rendered by a foreign service provider enforced through Rule 2(1)(d)(iv) of Service Tax Rules, 1994 has been held to be unsustainable and invalid in law. The Tribunal in the Bosch Rexroth (India) Ltd.' case (supra) rejected the argument of the Department that the....