Hindustan Aeronautics Ltd. Vs Commissioner of Central Tax (CESTAT Hyderabad)
CESTAT Quashes Service Tax Demand Because Rosoboronexport Is Not a Scientific Consultancy Organization; CESTAT Holds Russian Defence Agency Does Not Qualify as Scientific or Technical Institution; Reverse Charge Service Tax Demand Set Aside Because Foreign Entity Was Government Agency; Aircraft Technology Transfer Agreement Not Covered Under Scientific Consultancy Service.
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad, heard multiple appeals filed by Hindustan Aeronautics Ltd. (HAL) against Orders-in-Original dated 28.11.2011 and Orders-in-Appeal dated 27.09.2013 and 18.10.2013. The Department also filed an appeal challenging waiver of penalties under Sections 76 and 77 of the Finance Act by granting benefit under Section 80.
The primary issue before the Tribunal was whether HAL was liable to pay service tax under the Reverse Charge Mechanism (RCM) on alleged import of “Scientific or Technical Consultancy Services” (STC) from a foreign service provider. Another issue concerning “Management, Maintenance and Repair Service” (MMR) was not contested by HAL during adjudication or before the Tribunal.
HAL had entered into an agreement with Federal State Unitary Enterprise Rosoboronexport, Moscow, Russia, pursuant to an inter-governmental agreement between the Governments of India and Russia. The agreement related to transfer of licence and technological documentation for production of SU-30 MKI aircraft in India and technical assistance for setting up manufacturing facilities. As part of the arrangement, HAL received technical documents, assistance for setting up manufacturing infrastructure, supply of project parts, training of employees, and related support services from Rosoboronexport.
