Relief for BHEL as CESTAT rejects excise dept's duty demand

Country's largest power generation equipment maker Bharat Heavy Electricals (BHEL) got relief after a tax tribunal rejected a duty demand raised by excise officials over its agreement with global giant Siemens for manufacturing instruments. Quashing the duty demand, the Custom Excise and Service Tax Appellate Tribunal held that BHEL's manufacturing agreement with Siemens was for March 2003 to March 2004 and the government made such technology transfer taxable only after September 2004. "We, therefore, hold that the appellants (BHEL) have not received any taxable service and the impugned order upholding the service tax demand against the appellant and imposing penalty on them is not sustainable. The impugned order is, therefore, set aside," said a CESTAT bench comprising S S Kang and Rakesh Kumar. The excise officials had demanded service tax from BHEL which had entered into an agreement with Siemens for manufacturing certain products in India by using technology developed by the global giant. As per their agreement, BHEL had paid one time payment to Siemens for supply of manufacturing and technical documentation, training of its personnel and 2 per cent royalty charges for the produced goods. However, the excise department demanded a duty of around Rs 3 crore, contending that BHEL has received engineering consultancy service from a foreign-based company and it would have to pay service tax for that. It also slapped penalty on the PSU firm. This was challenged before the tribunal by BHEL, which contended that its agreement with Siemens was an agreement only for transfer of patented technology and brand name and was not engineering consultancy and hence it would not attract any service tax. It also submitted that during that period IPR service were not even taxable. By Ms.Bobby Aanand, Metropolitan Jury

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