LAKSHMI MACHINE WORKS Vs. COMMISSIONER OF SERVICE TAX

JUDGEMENT

(1.) AFTER examining the records and hearing both sides, I am inclined to dispose of the appeal itself finally. Accordingly, after dispensing with predeposit, I take up the appeal.

(2.) THE appellant -company is engaged in the manufacture of textile machinery. They obtained technical know -how from one Mr. Hubert Hergeth, Belgium under a collaboration agreement dated 11 -10 -1999 for the manufacture of condensers (referred to as "licenced products" in the above agreement) in India. As per the terms of the agreement, they were liable to pay to Mr. Hergeth, as consideration for the above benefit, royalties at the rate of 5% in respect of the sales of the licenced products In India and 8% in respect of the export of the licenced products out of India for a period of 7 years. Accordingly, the appellant -company paid royalties to the Belgium collaborator during the period July, 2002 to March, 2004. The department, in a show -cause notice, demanded service tax on the royalties so paid, in the category of Consulting Engineers' Service. They took the view that Consulting Engineers' Service, as defined under Section 65 of the Finance Act, 1994, was involved in the above transfer of technical know -how. This view was contested and the demand was opposed. In adjudication of the dispute, however, the original authority dropped the proceedings. This order, however, was revised by the Commissioner, who passed the impugned order, demanding service tax of Rs. 9,504/ - under Section 73 of the Finance Act, 1994 from the appellant, with interest thereon under Section 75 of the Act and imposing penalties on them under Sections 76,77 and 78 of the Act.

(3.) AFTER hearing both sides, I note that the main case of the appellant is that the proposal for the above levy is without sanction of law. It is submitted that, under Sub -section (1) of the Section 68 of the Finance Act, 1994, it is the provider of service who is liable to pay service tax. It is, however, conceded that any other person can be made liable to pay service tax, by the Central Government, under Sub -section (2). For this purpose, the taxable services, in respect of which any person other than the service provider is sought to be made liable to pay service tax, should be specified by the Government under a Notification to be issued under Sub -section (2). It is further submitted that the person to pay service tax also should be specified in such Notification. It is submitted by learned consultant that the only Notification relevant to this context is No. 36/2004 -ST dated 31 -12 -2004 issued under Section 68 (2) of the Finance Act, 1994 and that, by virtue of this Notification, a recipient of Consulting Engineers' Service can be said to be liable for payment of service tax on such service only with effect from 1 -1 -2005, i.e., after the period of dispute in the present case. In this connection, learned consultant has relied on the decision in Aditya Cement v. Commissioner of Central Excise, Jaipur -II 2007 (7) S.T.R. 153 (Tri.) : 2007 (218) E.L.T. 116 (Tri.) : [2007] (10) VST 13 (CESTAT - New Delhi)] and also the decision in Ispat Industries Ltd. v Commissioner of Central Excise, Raigad 2007 (8) S.T.R. 282 (Tri. -Mumbai). Learned consultant has also contended that any service of the kind of Consulting Engineers' Service was not involved in the transfer of technical know -how to the appellant under the aforesaid collaboration agreement. In this connection, he has referred to the decision of this Bench in Turbo Energy Ltd. v. Commissioner of Central Excise, Chennai -III . He has also relied on the decision in Aravind Fashions Ltd. v. Commissioner of Service Tax, Bangalore 2007 (7) S.T.R. 178 (Tri. -Bang.).