Appellants held not required to discharge service as consulting engineers, HC

Facts in Brief:

1. Assessee is in appeal.

2. The issue pertains to recovery of Service Tax. The appellant has made certain payments to M/s. Ciba Geigy Limited, Switzerland, in the shape of royalty in pursuance of the Agreement dated 22.11.1996 for technical know-how, equipment, skill, expertise and services for production of VAT Dyes. Show cause notice was issued demanding Service Tax from the appellant under the category of "Consulting Engineer".

3. It is contended on behalf of the appellant that M/s. CIBA Geigy Limited being a manufacturer is not an engineering firm and would not fall under the definition of 'Taxable Service and Consulting Engineer'. On due enquiry, the Additional Commissioner, Central Excise, Thane, confirmed the demand of Service Tax of Rs. 29,15,488/- under Section 73 of The Finance Act, 1994. Interest is also ordered to be recovered.

4. A sum of Rs. 100/- per day is imposed towards penalty from the date the Service Tax was liable to be paid. The Commissioner (Appeals) did not find any grounds to interfere with the Order in Original passed by the Additional Commissioner, Central Excise, and Thane.

5. Hence this appeal.

HC held as under,

6. Since there was no liability on the appellants, who approached the Department as regards service tax consequent to the agreement, there can be no failure on the part of the appellants in having not filed Service Tax Returns.

7. In view of the fact that the second proviso to Rule 6(1) of the Service Tax was enacted with effect from 28.02.1999, therefore, even there is a liability on the part of the appellants to have discharged the obligations under the Service Tax Law for the period prior to 28.12.1999, the appellants cannot be found to be having any intention of misleading the Department and therefore the charges of suppression with an intention to evade payment of tax cannot be invoked.

8. Since no tax liability on the appellants, there can be no interest liability determined on them.

9. The appellants are not required to discharge any service as consulting engineers under the provisions of the Service Tax Law and/or required to file declaration or have any application for discharge of liability to duty. They are, therefore, not liable for any penalty in terms of Section 76.

10. In view of the findings, the order is required to be set aside and appeal allowed. Order accordingly. 

Case Reference - Navinon Ltd. vs Commissioner Of Central Excise .