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Consulting engineering services
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Posted on 22-07-2006 23:53
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Where certain amounts were paid to foreign collaborator for various activities such as Technical assistance in improving product technology, training, advice (in India) testing and evaluation, engineering services etc., the tribunal held that the payment was in effect a payment of "royalty" for transfer of technical know-how and not for a service. Accordingly it was held that no service tax is payable on the royalty paid. [CCE vs. J. K. Industries Ltd. 2006 (2) S.T.R. 116(Tri-Del); Amco Batteries vs. CCE (2006) 2 STR 346 (Tri-Bang.)].
The appellant provided services of consultancy in respect of design, supervision of installation and commissioning to two main contractors, who were not consulting engineers. The Tribunal held that the two main "contractors" would be the clients of the appellant and his services would be liable for service tax. Further the benefit of sub-contracting (i.e., where the sub-contractors need not levy service tax on the services provided to the main contractor) would be available only if the "main contractor" was a "consulting engineer". [Air Conditioner Company of India vs. CCE 2006 (2) STR 123 (Tri-Del.)]
The respondents paid an amount of royalty for technical know how for manufacture of seemless tubes to a foreign collaborator. The Revenue sought to tax the respondents in respect of the amounts paid by them under the category of consulting engineering services arguing that the appellants were required to remit all the fees "net of taxes" and therefore should have deducted service tax and paid it to the Government. Following the case of Navinon Ltd vs. CCE (2004) 172 ELT 400 (T) and Bajaj Auto Ltd vs. CCE (2005) 179 ELT 481 (Tri-Chennai) the Tribunal quashed the demand, set aside the penalties and inter alia held that the respondents could have deducted only that tax which is deductible at source under the Indian laws e.g. the Income-tax Act, 1961. Further the services in the present case being provided prior to 28-2-1999 the recipient could not be made liable for service tax. Lastly, there was no authorisation from the foreign collaborators to pay tax on their behalf. Accordingly, no liability for payment of service tax could be fastened on the respondents [CCE vs. Printotech Global Ltd. (2006) 2 STR 133 (Tri-Del.) see also CCE vs. Brakewel Auto Components (I) P. Ltd. (2006) 2 STR 199 (Tri-Del.)].
Amounts received towards transfer of technology is not liable for service tax under the category of consulting engineering services [India Pistons Ltd. vs. CCE (2006) 2 STR 216 (Tri-Chennai).]
Photography Services
Deduction of value of materials used and consumed in providing photography services cannot be denied on the ground that value of inputs is not indicated in the bills / invoices so long as the assessee has maintained records of the inputs used [Adlabs vs. CCE, 2006(2) STR 121 (Tri-Bang.)]. |
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Posted on 22-07-2006 23:57
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Posts: 129
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Charges for erection, installation and commissioning of plant and equipment would not be liable under the category of consulting engineer. [Sanghi Oxygen (Bombay) P. Ltd. vs. CCE (2006) 2 STR 486 (Tri-Mum.); CCE vs. Universal Instruments Mfg. Co. Ltd. (2006) 2 STR 512 (Tri. – Bang.)].
The appellants a foreign company supplied to an Indian company technology pertaining to design, engineering and technical specifications of Hot Water Generation System. It was issued a SCN through the Indian Embassy dated 31-7-2002 served on 10-10-2002 as to why its services should not be liable for service tax under the category of consulting engineering services. Repelling the contentions of the Revenue, the Tribunal held that the appellants were not liable in view of the following –
Firstly, supply of technology against payment of royalty is not a consulting engineering service;
Secondly, the recipient of know how is not an authorized representative of the foreign company in India and hence could not be fastened with the service tax liability under rule 6(1) prior to 16-8-2002.
Thirdly, the services were provided outside India and as per circular No. 36/4/2001 dated 8-10-2001 services provided beyond territorial waters of India was not liable for service tax.
[Coen Company vs. CCE (A) (2006) 2 STR 488 (Tri. – Bang.)]. |
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Posted on 23-07-2006 00:00
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Super Administrator
Posts: 129
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The assessee in pursuance of an agreement paid certain amounts towards transfer of technology and trademark, for the period 1997-98 to February, 2002. Repelling the contention of the department that the assessee is liable as a receiver to pay tax under consulting engineering services, the Tribunal held that the assessee was not liable since such a transaction is not a service but a transfer of property and secondly, the recipient was not liable to pay service tax prior to 16.8.2002 [M & B Footwear Ltd. vs. CCE (2006) 2 STR 46 (Tri-Del.)] |
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Posted on 23-07-2006 00:05
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Super Administrator
Posts: 129
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Royalty charged by a foreign company for supply of technical know-how and use of brand name is not a consideration of service but a fee between two contracting parties to be paid for sharing mutual benefits / profits. Hence royalty is not liable for service tax under the category of consulting engineering services. [CCE vs. Pinnacle Industries Ltd. (2006) 1 STR 258 (Tri- Del.); CCE vs. Daylight Electronics Pvt. Ltd. (2006) 1 STR 264 (Tri-Che.)].
Transfer to technical know-how not liable [CCE v. Micro Finish Valves (p) Ltd (2006) 1 STR 283 (Tri- Bang.); CCE vs. Rubco Sales International P. Ltd. (2006) 1 STR 291 (Tri-Bang.)]. |
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Posted on 23-07-2006 00:09
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Posts: 129
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Charges for erection and commissioning prior to 1.7.2003 not liable for service tax under consulting engineers. [CCE v. Air Stream Systems Pvt. Ltd. (2006) 1 STR 133 (Tri-Bang.)]
Royalty paid to a foreign company for use of technology and know how is not liable for service tax under the category of 'consulting engineering services'. Further, for the period prior to 16.8.2002 the recipient cannot be fastened with the liability if they are not the agents or authorised representatives of the foreign company [Essel Propack Ltd. v. CST (2006) 1 STR 150(Tri- Mumbai); Samsung Electronics Co. Ltd. v. CCE (2006) 1 STR 217 (Tri-Del.) [Royalty for Trademarks, patents and know-how]; CCE v. Travancore Cochin Chemicals Ltd. (2006) 1 STR 219 (Tri-Bang.)].
Where the assessees had entered into a turnkey contract for construction of a bottling plant which included detailed engineering, commissioning etc. it was held that the contract cannot be vivisected to tax a portion of it as consulting engineering services [CCE v. Shapoorji Pallonji and Co. Ltd. (2006) 1 STR 164 (Tri-Del.); See also CCE v. Flex Engineering Ltd. (2006) 1 STR 208 (Tri-Del.) (modification of equipments and process plants) Daelim Industries v. CCE (2003) 155 ELT 457 (Tri-Del.) followed]. |
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Posted on 23-07-2006 00:17
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Super Administrator
Posts: 129
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Consulting Engineering services - AMC for machines
The Tribunal observed "advice" and "consultancy" services in a discipline of engineering envisage an intangible service. Further, the words "technical assistance" which follows the words "advice" and "consultancy" are required to be interpreted ejusdem generis with "advice" and "consultancy" and would also mean an intangible service. Thus, services of repairs and maintenance of machines which is a tangible service inasmuch as they are physically carried out would not be liable for service tax under the category of consulting engineering services. These services became taxable only from 1-7-2003. [Roots Multiclean Ltd. vs. CCE (2006) 1 STR 17 (Tri-Chennai)] |
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Posted on 23-07-2006 00:21
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Super Administrator
Posts: 129
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Ircon International Ltd. vs. CCE, Mumbai - IV (2005) 71 RLT 417 (CESTAT-Del.)
Where the appellant entered into a contract with Air India for rendering project management services for construction of a hanger in Mumbai which involved locating various experts for the work, getting drawings etc. prepared and procuring materials and supervising construction, the Tribunal held that the contract is not for obtaining the appellant's expertise as a consultant and hence such construction contracts cannot be subjected to service tax as consulting engineering service, either as a whole or in part [Daelim Industrial Co. Ltd. vs. CCE (2003) 155 ELT 457 (T) - relied on]. |
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Posted on 23-07-2006 00:32
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Posts: 129
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In consideration for supply of technical know-how of patented processes, technical assistance including training and knowledge and expertise in connection with marketing management by M/s. Pfizer, New York who were engaged in manufacture and marketing of medicaments the appellants paid certain sums and also a royalty. The lower authorities sought to tax the appellants in respect of the amounts paid by them under the category of consulting engineering services. The Tribunal quashed the demand and held as follows :
(i) The New York based company cannot be treated as a consulting 'engineering firm' as understood by a common man;
(ii) The said payments cannot be treated as being for rendering of any services by Pfizer New York.
(iii) Payments towards Technical know how / royalty is not liable for service tax [Navinon Ltd. vs. CCE (2004) 172 ELT 400 (T) and Aviat Chemicals vs. CCE (2004) 170 ELT 466 (T) followed]
(iv) Management and marketing services cannot in any case be treated as consulting engineering services.
(v) The recipient of services cannot be made liable for service tax or the period prior to the amendment in rule 2(1)(d) in August 2002. [See also Cadbury India Ltd. vs. CCE, Mumbai (2005) 188 ELT 166 (Tri. -Mumbai)].
Pfizer Ltd. vs. CCE, Mumbai (2005) 188 ELT 456 (Tri. - Mumbai) |
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Posted on 23-07-2006 00:33
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Posts: 129
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Design and development charges received by the appellants for development of tooling which were necessary for the manufacture of the rubber components cleared on payment of excise duty (cost of tooling included in the value of the components) would not come within the ambit of term 'service rendered by a consulting engineer'.
M/s. Metzeler Automotive Profiles India (P) Ltd. vs. CCE, Ghaziabad (2005) 187 ELT 244 (Tri-Del.) |
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Posted on 23-07-2006 00:38
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Super Administrator
Posts: 129
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Royalty paid in connection with the transfer of technology is not liable for service tax under the category of consulting engineering services
Turbo Energy Ltd. v. CCE, Chennai - III (2005) 187 E.L.T. 47 (Tri.-Chennai) |
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Posted on 23-07-2006 00:38
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Super Administrator
Posts: 129
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On facts the Tribunal held that the respondent is not liable to service tax as consulting engineer since they do not have any professionally qualified person so as to bring them within the scope of an engineering firm within the meaning of section 65(13).
CCE Meerut - I vs. Jain Steel (2005) 187 ELT 33 (Del.) |
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Posted on 23-07-2006 00:45
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Super Administrator
Posts: 129
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Calibration of measuring instruments not being advice, consultancy or technical assistance, is not liable for service tax under "consulting engineering services".
Roots Industries vs. CCE Coimbatore (2005) 187 ELT 379 (Tri-Che.)
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Posted on 23-07-2006 00:47
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Posts: 129
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In pursuance of an agreement between Kerala State Electricity Board ("KSEB" and M/s. SNC Lavalin ("SNC", a foreign company, the latter provided consulting engineering services to KSEB. Under the agreement KSEB was to pay SNC's fees net of taxes. Further, KSEB was also to provide air-conditioned office to the personnel of SNC with security, technical, secretarial and administrative support staff services, etc. The period of dispute was August 1998 to September 2002. The lower authorities demanded service tax from KSEB. However, the Tribunal quashed the demand and held as follows :
There being no provision like in the Income-tax Act, 1961 to deduct the tax at source in case of service tax and in absence of such provisions the appellants were not required to deduct service tax and pay it to the Government. Accordingly, no liability for payment of service tax could be fastened on the appellants.
Prior to 16-8-2002, the person liable to pay tax in respect of services provided by non-residents or persons from outside India was such person or his authorized representative / agent. KSEB is the service receiver and hence not the agent of SNC. Further KSEB is not SNC's authorised representative since it does not represent SNC in India. Hence KSEB could not be fastened with the tax liability.
After 16-8-2002, in case of services provided by non-residents or persons from outside India who do not have an office in India the person liable to pay service tax is the recipient of the services in India. However, it was held that the office provided by KSEB was SNC's office and hence KSEB was not liable for service tax.
[See also Moser Baer India Ltd. vs. CCE NOIDA (2005) 187 ELT 123 (Del.)]
Kerala State Electricity Board vs. CCE, Thiruvananthapuram (2005) 187 ELT 111 (Tri-Bang) |
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Posted on 23-07-2006 00:48
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Posts: 129
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During the period under dispute, 1998 to 1999 (prior to 28-2-1999), the appellants paid know-how fees for technical assistance and consulting services, to M/s Woco Franz Wolf & Co., Germany. The lower authorities sought to tax the appellants in respect of the amounts paid by them under the category of consulting engineering services placing reliance on the agreement with the non-resident company which stipulates that the appellants shall deduct tax from the payments by them to the non-resident company. The Tribunal held that during the period under dispute it was only the service provider who was liable to pay service tax and not the person authorized by him or the service receiver and hence no tax liability could be fastened on the appellants.
CCE Noida vs. Motherson Auto Component Engg. Ltd. (2005) 186 ELT 96 (Tri-Del.) |
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Posted on 23-07-2006 00:49
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Super Administrator
Posts: 129
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By a Technical Collaboration Agreement M/s. Yamaha Co. Ltd., Japan granted the right to use Technical information (including Intellectual Property Rights such as designs, patents, utility models, etc.) and the use of their Trademarks to M/s. Yamaha Motor India Pvt. Ltd. for the manufacture of YBX model motorcycles in India. As part of the agreement certain teaching services which covered personal instruction and training was also to be given by the Japanese company. The lower authority sought to tax the transaction under the category of Consulting Engineering services. Allowing the appeal the Tribunal held -
(i) the consideration is not for any consultancy service rendered;
(ii) it is for the transfer of intellectual property;
(iii) the relationship between the parties is not one of consultant and client, but seller and buyer of assets;
(iv) the value of incidental advice, if any, cannot be cut out and subjected to service tax.
Yamaha Motors (I) Pvt. Ltd. vs. CCE, Delhi-IV (Faridabad) (2005) 186 E.L.T. 161 |
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Posted on 23-07-2006 00:53
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Super Administrator
Posts: 129
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Relying on Board Circular No. 79/9/2004-ST dated 13-5-2004 which is binding on the department the Tribunal held that commissioning or installation services would not be covered under the category of consulting engineers effective from 7-7-1997 and the Tribunal decision in Transweigh (India) Ltd. vs. CCE (2004) 170 ELT 527 (Tri-Mum) would not hold field since it was rendered prior to the above Board Circular.
Yokogawa Blue Star Ltd. vs. CCE, Bangalore (2005) 186 ELT 601 (Tri-Bang.) = 69 RLT 609 (CESTAT-Bang.) |
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Posted on 23-07-2006 00:58
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Posts: 129
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Where the appellant only supplied technical (engineers/technicians) manpower to certain organizations for working under their instructions and did not render any technical advice, consideration received therefor is not liable for service tax under the category of consulting engineering services.
SPIC - SMO Ltd. vs. CCE Channai (2005) 184 ELT 151 (Tri - Chennai) |
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Posted on 23-07-2006 00:59
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Super Administrator
Posts: 129
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Consideration received for transfer of technology is not liable for service tax under the category of 'consulting engineering services'.
CCE Madurai vs. Reiche De Massari AG Switzerland (2005) 184 ELT 260 (Tri - Chennai) |
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Posted on 23-07-2006 00:59
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Posts: 129
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'Architects' valuing immovable properties are not be liable for service tax under the category of 'consulting engineering services'.
In Re: Sthapatya Rachana (2005) 184 ELT 334 (Commr. Appl.) |
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Posted on 23-07-2006 01:00
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Super Administrator
Posts: 129
Joined: 01.05.06
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Following India Trade Promotion Organisation vs. CE (2004) 164 ELT 163 (Tri-Del.) the Tribunal held that renting of space for conducting trade fair/exhibition is not liable for service tax under the category of mandap keeper since the space is used for organising business activity and not for organising business function.
CCE Chennai vs. Tamil Nadu Trade Promotion Organisation (2005) 184 ELT 370 (Tri - Chennai) |
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