By TIOL News Service

MUMBAI, DEC 23, 2016. DURING the period January 1998 to March 2002 appellant had received consideration from Kampala Pharma LLC and Global Pharma LLC who are situated abroad, for the transfer of technology/technical collaboration in respect of the technology it was developed by them in pharmaceutical field.

SCN was issued demanding service tax under "Consulting Engineer Services" and this was confirmed by the lower authorities along with penalties and interest.

Before the CESTAT, the appellant submitted that having not received the amount of approximately Rs.88 lakhs from Kampala Pharma LLC and Global Pharma LLC , they are not required to discharge the service tax liability as during the relevant time, service tax liability needs to be discharged only when they received the payment for the services rendered. It is further argued that since appellant is a manufacturer of pharmaceutical and bulk drugs and the technology which has been transferred by the appellant is in respect of bulk drugs, the same cannot be covered under "Consulting engineer Services" as the appellant is not an Engineering Firm or any professionally qualified engineer. Reliance is placed on the decision in Turbotech Precision Engineering Pvt. Ltd. - 2010-TIOL-498-HC-KAR-ST for the proposition that in order to get covered under the category of "Consulting Engineers", the services should have been provided by an engineer or Engineering firm.

The Bench while agreeing with the submission of the appellant that an amount of Rs.88 lakhs since not received from Kampala Pharma LLC and Global Pharma LLC (and which fact not contradicted by Revenue) tax liability would not arise, observed further -

++ During the relevant period in question, the definition of "Consulting Engineer", as per Section 65 (13) of the Finance Act, 1994 reads as under:

"Consulting Engineer" means any professionally qualified engineer or an engineering firm who, either directly or indirectly renders any advice, consultancy or technical assistance in any manner to a client in one or more disciplines of engineering."

++ It can be seen from the above reproduced definition that in order to get covered under the said definition, a person should be professionally qualified engineer or an Engineering firm. This definition was amended in the year 2006 wherein engineering firm has been substituted with the wordings "anybody as corporation or any other firm."

++ Since we are concerned with the issue prior to amendment of definition, it has to be held that the appellant's services of rendering/transferring technical know-how in respect of pharmaceutical and bulk drugs may not get covered under the definition of "Consulting Engineer Services." Our this view is fortified by the judgment of the Hon'ble High Court of Karnataka in the case of Turbotech Precision Engineering Pvt. Ltd. (supra)…

Holding that the impugned order is unsustainable, the same was set aside and the appeal was allowed with consequential relief.

(See 2016-TIOL-3308-CESTAT-MUM)