Custom, Excise & Service Tax Appellate Tribunal (CESTAT), Hyderabad: In a case wherein, appeal filed against the allegation of the Department that the appellant-Hindustan Aeronautics Ltd. (HAL) had imported “Scientific or Technical Consultancy Services” (STC) from a provider located outside India and therefore the appellant was required to pay service tax under reverse charge mechanism (RCM), the Division Bench of A.K. Jyotishi (Technical Member)* and Angad Prasad (Judicial Member) set aside the service tax demand holding that demand under the category of Scientific and Technical Consultancy Service could not be sustained. The Tribunal upheld the demand on management, maintenance and repair services (MMR).
Background
The appellant had entered into an agreement with Federal State Unitary Enterprise Rosoboronexport, Moscow, Russia (hereinafter referred to as, “Rosoboronexport”) in conformity with the inter-governmental agreement (IGA) between the Government of India and the Government of Russia Federation, for transfer of licence and technological documentations for production of SU-30 MKI aircrafts in India and for technical assistance in the setting up production setup. As part of the deal, the appellant brought in technology, and for technology transfer it also required transfer of technical documents, technical assistance for setting of manufacture facility, supply of parts from the project, training of employees, etc. and for these services/activities, payment were made to Rosoboronexport, Moscow. Department felt that they have received the service of STC from a provider located outside India and therefore, they are required to pay service tax under RCM. The Department also noticed that they have provided certain MMR to DRDO, which would fall under MMR and no service tax was paid thereon.
In 3 appeals filed by the HAL common issue involved was that the Department alleged that they had imported STC from a provider located outside India and therefore appellant was required to pay service tax on RCM basis. In Department’s appeal, they had only challenged the waiver of penalty imposed under Sections 76 and 77, by allowing the benefit of Section 80, Finance Act, 1994 in the facts of the case.
The appellant submitted that Rosoboronexport, Moscow, is a government organisation, acting as sole Russian State intermediary agency, for export of dual use technology and therefore the said entity cannot termed as a “Scientist or Technocrat or as a Science or technology institution” and hence the said activity could not be classified under the head of STC.
Analysis, Law and Decision
The Tribunal observed that in the appellant’s own case, in respect of various agreements entered by them with certain foreign entities including Rosoboronexport, Moscow for technology transfer and technical assistance, etc. for manufacture of aircraft in India under IGA, the same was the subject-matter of demand of service tax under various categories, namely, Scientific and Technical Consultancy Service, consulting engineer service, intellectual property rights service, etc. The coordinate Bench examined the scope of the service and, inter alia, took into account the nature and status of the Company Rosoboronexport, Moscow and also other company located outside India and the circumstances in which the agreement was entered by the appellant.
The Tribunal relied on CCE v. Hindustan Aeronautics Ltd., (Final Order No. A/999-1000/2015, dt. 9-4-2015, CESTAT-Mum) wherein, similar factual matrix and status of same Rosobornexport were involved. The Tribunal found the case relevant and applicable to factual matrix of present appeals in as much as, the agreement entered between the appellant and Rosoboronexport, Moscow was in terms of IGA entered between Government of India and Government of Russia Federation and it also involved transfer to the Indian party certain licence and technology documentation, etc. for production of SU-30 MKI, etc.
The Tribunal held that from the agreement and from the CCE v. Hindustan Aeronautics Ltd., it was obvious that Rosoboronexport, Moscow was a governmental organisation and therefore, the said entity could not be termed as a Science or Technocrat or scientific or technology institution or organisation and hence, the activity could not fall under the category of “Scientific and Technical Consultancy Service”. There was no other evidence on record to support that the appellant had received any service by way of any advice, consulting or technical assistance by any individual scientist or technocrat and payments were made to them in individual capacity. The Tribunal denied the argument of the respondent explaining that in this case individual experts and technicians were posted to the unit for imparting various advice, consultancy, etc. and therefore it should be covered within the definition of STC. The Tribunal held that impugned orders could not be sustained on merit to that extent it related to the demand of service tax under STC and imposition of penalty thereon. Confirmation of demand of service tax on MMR and penalty thereon sustained. Thus, the Appeal Nos. ST/257/2012, ST/20264 and 20265/2014 were allowed partly. Further, the appeal filed by Department would not sustain where, the waiver of penalty in relation to MMR by invoking Section 80, Finance Act, 1994 as it was held to be rightly invoked.
[Hindustan Aeronautics Ltd. v. CGST & CCE, FINAL ORDER No. A/30293-30296 of 2026, decided on 15-5-2026]
*Order by A.K. Jyotishi, Technical Member
Advocates who appeared in this case:
For the Appellant (s): Ms. Disha Gursahaney, Advocate
For Respondent(s): M M. Anukathir Surya, Authorised Representative
