NOKIA (I) PVT. LTD. Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) THIS appeal is directed against the order of the Commissioner of Central Excise (Appeals), Delhi, made on 29.10.2004 to the extent that it upholds the demand of service tax of Rs. 3, 40,63, 905/ - with interest and the reduced penalty of the like amount and upholds the demand of interest under the provisions of the Finance Act, 1994.

(2.) ON an information that the appellant Nokia India Ltd., New Delhi was providing taxable services as consulting engineers without getting registered with the Service Tax Department and were not paying the service tax, the officers of the Anti Evasion Branch of the Central Excise Commissionerate, Delhi, visited the premises of the appellant at Commercial Plaza, Radisson Complex, New Delhi on 7.2.2001 to ascertain the nature of services provided by the appellant to their customers. It transpired from the statement of Financial Controller of the appellant, who was conversant with the functioning of the company, that the appellant was a 100% subsidiary of Nokia Networks Oy Finland and that it was implementing and commissioning the GSM equipment purchased by various cellular operators in India; that the customers of Nokia India Ltd., i.e. the appellant were, BPL Cellular Ltd., Tata Cellular Ltd., Skycell, Spice Cell, Facel etc.; that there were contracts between the customers and the appellant for implementing and commissioning of the equipment; that these were service contracts; that the cellular equipment consisted of Mobile Switching Centre (MSC) installed at the operators premises and Base Station Controller (BSC) installed at different locations; that the equipment was implemented and commissioned by qualified engineers who were their employees and most of them were degree holders; that implementing one switch normally took 3 to 4 weeks; that as per the service contract, the main services being provided by them for installing and commissioning included system design, Page 0074 installation, supervision, training of operator's engineers, consultancy and technical assistance services; that the customers used to enter into another agreement known as technical support agreement for the maintenance of equipment purchased from Nokia Networks Oy; that whenever the customer was faced with any problem in the equipment, their help desk received a call which was directed to a qualified engineer; that the engineer would suggest a remedy and when it did not work, the engineer had to visit the premises of the customers to rectify the fault; that if the contract covered replacement of card modules and the fault was actually found in the cards, those were replaced by them out of the spares; that problems relating both to hardware as well software were covered under the technical support agreement and that the engineers sometimes had to find the exact problem and rectify it, and that most of the technical agreements were for one year or above. It was also stated by him that whenever the customers used to upgrade or expand the existing system, service contracts were entered into for the purpose of providing them implementation and commissioning services. A copy of service contract with Facel and technical support agreement with Facel was produced by him.

(3.) THE Commissioner (Appeals), in the appeal filed by the present appellant, while dealing with the contention that the order in original was passed without jurisdiction, held that the appellant was having its registered office at Commercial Plaza, Radisson Complex, New Delhi, which was under the jurisdiction of Delhi -1 Commissionerate and the authority that had issued the show cause notice was working in that Commissionerate and was, therefore, empowered to issue the same being a proper officer for the area of the appellant which fell within his jurisdiction. Likewise, the Additional Commissioner of Central Excise, Commissionerate Delhi -II, was the proper officer to decide the case of the assessee whose registered office fell under the Central Excise Commissioner, Delhi -II after the bifurcation of Delhi -I Commissionerate into Delhi -I and II with effect from November 2002. It was observed that the law provided facility for decentralized registration to those who came forward for registering themselves voluntarily, but the law did not give any facility to a person who did not come forward for registration and was detected and was given a show cause notice. It was held that such person cannot utilize or exercise the option of decentralized registration. It was further held that the show cause notice had been issued by the appropriate authority, and that the adjudicating authority was competent to decide the matter on the basis of the show cause notice and the proceedings held against the appellant. He then held that on the perusal of the service contract and the technical support agreement, it was evident that the nature of services provided by the appellant, namely, training, consultancy, technical assistance and other activities of work -services provided for Page 0076 consideration, fell under the category of technical assistance and that these were within the category of services of "consulting engineer". Taking into consideration the break -up of the demand given by the appellant, it was held that the appellant was entitled to a relief on the basis that service tax was payable on the amount actually realized towards the services provided in the particular period and not on the amount of consideration which was not realized for the service rendered. As regards the amount of consideration billed for goods sold, it was held that no service tax could be imposed on such transactions. It was further held that service tax was not payable in respect of services which were outside the purview of the category of consulting engineering services and, therefore, the demand of service tax confirmed on account of installation, erection and commissioning was liable to be dropped. As regards the consideration charged for training of personnel, it was held that since the amount of consideration for training was distinctly ascertainable, it was subject to service tax in view of the circular dated 2.7.97. As regards hardware repair and software support, operation and maintenance and assistance, Help Desk and emergency support, the Commissioner (Appeals) rejecting the contention that these were within the scope of repair and maintenance and therefore, not liable to service tax, held that all these services were definitely in the nature of providing technical assistance. It was held that the consideration amount of Rs. 8,16,46,525/ - which was classified under the head "unexplained" by the appellant and the amount of Rs. 3,18,79,965/ - which was tabulated under the head "others" showed that the amounts pertained to charges under Help Desk, O&M assistance and emergency support, technical consultancy etc. which were also in the nature of providing technical assistance, and hence chargeable to service tax. It was observed that the words "technical assistance in any manner" incorporated in the definition of consulting engineers given in the Act were of a wide dimension, and their meaning was not bogged down to intellectual advice, but rather involved technical assistance in actual execution of job, training of personnel so as to make them technically competent to handle the sophisticated telecommunication equipment. It was held that the services provided by the appellant, as set out in the chart qualifying the service tax were highly technical in nature which could be accomplished by highly trained, competent and qualified engineers. The assistance provided by the appellant to their clients was of highly technical nature falling within the purview of "consulting engineer" as defined under the Act. It was noted that huge amount of fee/charges was collected by the appellant which was not commensurate with the wages paid to an ordinary technician. It was further held that the appellant having failed to inform the department about their activities by not getting themselves registered, rendered themselves liable to penal action and that the extended period of five years, was rightly invoked. It was, however held that the imposition of penalty of Rs. 14,00,00,000/ - and Rs. 3,00,000/ - on the appellant was excessive. The demand of service tax was accordingly reduced to Rs. 3,40,63,905/ - and the penalty to the like amount.