R.K.ABICHANDANI, J. - (1.)THE applicant seeks stay of the order dated 1.6.2005 passed by the Commissioner (Appeals) upholding the Order -in -Original made by the Deputy Commissioner under which demand of Rs. 14,26,231/ - of service tax under the provisions of Section 73, Chapter V of Finance Act, 1994, was confirmed, a penalty of equal amount was imposed and payment of interest ordered.
(2.)THE authorities below held that the said amount of service tax was payable by the applicant on account of services which were rendered as Consulting Engineer under the agreement in question. The authorities below have considered the terms of the agreement and come to the conclusion that the taxable service viz. Consulting Engineering Service was provided for the consideration mentioned in the agreement.
(3.)A copy of the Agreement dated 29.10.2003 is on record from which it appears that the applicant desired to obtain from M/s. Haldor TOPSOE, Certain engineering for the redesign, modification, and operation of the Aonla Plant as required for the Aonla -I Energy Saving Project Phase -I. Haldor TOPSOE had the experience of design, construction and modification of ammonia plants and had the right to grant process licence as may be required for use and practice of TOPSOE technology. It had a right to grant sub -licences for a carbon dioxide removal process owned and licenced by Giammarco Vetrocoke, Venice, Italy. Under the agreement, Haldor TOPSOE agreed to provide Engineering Design Package and other engineering services and assistance for the Aonla Energy Saving Project Phase -I to the appellant. A tripartite agreement was contemplated between GV, Haldor TOPSOE and IFFCO. The construction of the plant was to be carried out under the contracts with Indian Engineering consultants selected by the appellant and approved by Haldor TOPSOE and Haldor TOPSOE was to enter into a separate agreement with engineering consultant engaged by IFFOCO as contemplated in the preamble to the agreement. Under the agreement clause (2), the applicant was granted a non -exclusive, non transferable right and licence by Haldor TOPSOE to have the project designed and implemented by using TOPSOE technical information and engineering services of TOPSOE to be supplied by TOPSOE under the said agreement. The appellant was obliged by TOPSOE processes, as may be required for the operation of the project Phase -I and use of energy consumption after modification. The appellant was licenced to sell the products of the said plant. As regards supplies, it was stipulated in clause 3 of the agreement that an Engineering Design Package was to be prepared and supplied by TOPSOE for the said project Phase -I comprising of technical documentation specified in clause -1 of Appendix -2 to the agreement and prepared in accordance with the design basis as specified in Appendix IV to the agreement, and shall be supplied to IFFCO in accordance with the delivery schedule specified in Appendix III. TOPSOE was required to review the technical documentation for the Aonla Energy saving Project Phase -I prepared by the appellant in order to see whether the process and design requirements of TOPSOE were satisfied. Technical assistance was to be provided in India as stipulated in clause 3.3 which related to review of the engineering supplied by TOPSOE and to detailed engineering and procurement carried out by the appellants. Technical assistance also related to construction, pre -commissioning, commissioning, start -up and text run of the revamped Aonla Plant as well a technical assistance for demonstration of the design capacity. It was estimated that 50 man -days of TOPSOE technical assistance will be required for the plant. Clause 4 stipulated fees for engineering referred to in sub -clause 3.1, technical documentation referred to sub -clause 3.2, technical assistance referred in sub -clause 3.3 as also for technical assistance by GV for which payment was to be directly made by the appellants. The terms of payment were stipulated in clause 5 and 6 in which it is, inter -alia, stated that the amounts under sub -clause 4.2. would be paid within 45 days after the end of each month in which the technical assistance services were rendered, on the basis of monthly invoices issued by the appellants. TOPSOE gave performance guarantee under clause 13 of the agreement which, inter -alia, provided that guarantee test runs will be conducted as soon as possible after mechanical completion and commissioning of the Aonla Plant in the present of engineers of TOPSOE. TOPSOE was to be relied of all the obligations in respect of process performance guarantees and under the agreement, when the plant had passed a successful guarantee test run as defined in sub -clause 2.5 of Appendix VII to the agreement. In clause 14.4 of the Agreement, the total liability of the TOPSOE under clause 12.0 (Engineering Guarantees) of the agreement was limited to Euros 38,000/ -.
Show cause notice was sent on 10.9.2004 to the appellants calling upon them to show cause why service tax amounting to Rs. 14,26,231/ - should not be demanded and recovered from them under Section 73B(it should be under Section 73(1) Chapter V) of the Finance Act, 1994 along with interest and penalty under the relevant provisions of the said Act. Admittedly, the applicants had not filed the returns a contemplated by Section 73 of the Act. The Deputy Commissioner taking into consideration the definition of "Consulting Engineering Services" under Section 65(31) of the said Act and the Government Circular Dated 2nd July 1997 which clarified the scope of a consultant by including, construction, supervision, project management, supervision of commissioning and initial and post operation and management and the terms of the agreement found that the appellant had received the engineering services including technical assistance in connection with energy saving project for their unit from Haldor TOPSOE through transfer of technology which cannot be termed as know -how nd thus the service tax was chargeable under the category of 'Consulting Engineer' in view of the government circulars. The appellate commissioner confirmed this order after considering the relevant material on record afresh.