ORDER
P.G. Chacko, Member (J)
1. In the impugned order, the Commissioner (Appeals) affirmed the order of the lower authority demanding Service Tax of Rs. 8,50,215/- from the appellants on “Consulting Engineer’s Service” for the period May, 2002 to July, 2004 and imposing penalties on the party under various provisions of the Finance Act, 1994. Hence the present appeal.
2. After examining the records and hearing both sides, we find that the above demand is on the royalty paid by the appellants to their foreign collaborators for transfer of technical know-how for the manufacture and distribution of Mercantile Identification System. It is the appellants’ case that transfer of technical know-how can hardly be termed ‘Consulting Engineer’s Service’ inasmuch as it is “Intellectual Property Service” since recognised as taxable service under the Finance Act, 1994. Even after the introduction of ‘Intellectual Property Service’ under Section 65 of the Finance Act, 1994 as a taxable service, learned Counsel submits, ‘Consulting Engineer’s Service’ continues to be on the statute book, thereby meaning that ‘Intellectual property Service’ is different and distinct from ‘Consulting Engineer’s Service’. Learned Counsel has made an endeavour to bring out the distinction between the two services by relying on the Tribunal’s decision in Pfizer Ltd. v. Commissioner of Central Excise, Mumbai . Counsel has also relied on certain other decisions of the Tribunal:
(i) Commissioner of Central Excise, Mangalore v. Daylight Electronics Pvt. Ltd. 2006 (1) S.T.R. 264 (Tri.-Chennai).
(ii) Navinon Ltd. v. Commissioner of Central Excise, Mumbai-VI etc.
Learned SDR submits that the lower appellate authority affirmed the demand of Service Tax against the assessee for want of evidence of payment of ‘Research and Development cess’. It is submitted that no such evidence is available on record even now. It is also contended that transfer of technical know-how can be reasonably understood to have been an inbuilt ingredient of ‘Consulting Engineer’s Service’ prior to its segregation and insertion under Section 65 of the Finance Act.
3. After examining the submissions, we are not persuaded by the above contention of learned SDR inasmuch as the two services are different in nature. Going by the definition of ‘Consulting Engineer’s Service’, we find that it is a service rendered in the form of advice, technical assistance or consultancy by a professionally qualified engineer or firm of engineers in one or more disciplines of engineering. In order to levy tax on such service, it is incumbent on the Taxman to show that the service was rendered by professionally qualified engineer or engineering firm. This burden has not been discharged in this case. Further, in the orders of the lower authorities, the transfer of technical know-how was equated to rendering of advice, consultancy or technical assistance. This comparison would not stand the test of reasoning inasmuch as transfer of technical know-how is conventionally understood as transfer of Intellectual Property rather than rendering of some advice or consultancy or assistance. As rightly pointed out by learned Counsel, such transfer of Intellectual Property is today covered by the new species of service viz. ‘Intellectual Property Service’ recognised by the law-makers and inserted in the list of taxable services under Section 65 of the Finance Act, 1994. ‘Consulting Engineer’s Service’ continues to be on the list. The two services are distinct and different. Upon acquisition of technical know-how, the assessee is capable of manufacturing and marketing the product on his own, ordinarily without any further advice or consultancy from the supplier of the know-how. Later on, if, in due course of time, they are faced with any technical hitch in applying the know-how, they might consult the supplier of know-how and take their advice, in which event it will be open to the department to levy tax on the service rendered by the know-how supplier, if the latter would fit in the definition of ‘Consulting Engineer’.
4. Now that it is settled law that transfer of technical know-how is not to be treated as ‘Consulting Engineer’s Service’ for the purpose of levy of Service Tax under the Finance Act, 1994, the appeal filed by the assessee is only to be allowed. Accordingly, the impugned order is set aside and this appeal is allowed.
(Dictated and pronounced in open court)