Imported as well as indigenous drawings and designs – Once considered as ‘goods’ by customs authorities, cannot be considered ‘services’ by service tax authorities – Import of services cannot be taxed prior to insertion of section 66A.

• Appellant, a company incorporated in Japan, entered into four different contracts with TISCO to set up a Skin Pas Mill at Jamshedpur. Two agreements were for supply of imported as well as indigenous designs and drawings and the other two were for supply of plant, machinery and equipments. A demand of Rs. 76 lakh was made treating supply of drawings and designs as “consulting engineer’s services”.

• Appellant’s appeal before Tribunal was remanded with a direction to consider the bill of entry and determine whether they were goods. The Commissioner after considering the relevant bill of entry, confirmed the demand and also levied equal amount of penalty. Hence, this appeal. According to the appellant, customs authorities had assessed the imported drawings and designs as ‘goods’ and appropriate customs duty was paid under chapter 49 by TISCO, and therefore, the same could not be considered as services by the service tax department for the levy of service tax and that erection, commissioning and installation activities were not covered under the head of “Consulting Engineer’s Services” as per CBEC circular dated 13-5-004.

• Further, the Indian service tax authorities had no jurisdiction to tax the appellant being a foreign company. Moreover, such services became taxable only after 18-4-2006 in the hands of recipient under reverse charge. The impugned activities were carried out much before the same. Whereas according to the revenue, designs and drawings were in essence system engineering or basic engineering and the scope of “consulting engineer’s services” was very wide. Though the appellant was a foreign company, it had a project office as well as representational office in India for more than 15 years which can be considered as fixed establishments.

Held:

• Designs and drawings imported and assessed as ‘goods’ cannot be considered as ‘services’ and be subjected to service tax. The activities purported before the insertion of section 66A, i.e. before 18-4-2006 could not be taxed under service tax.