M. Veeraiyan, Technical Member. - This is an appeal against the order of the Commissioner No. 22/BKG/2007, dated 13-8-2007 insofar as the same relates to demand of Rs. 2,79,30,192 on foreign design and drawings along with interest and imposition of penalty under sections 76 and 77 of the Act.

2. Heard both sides. The learned Advocate also filed a written submission at the time of hearing which has been taken into account.

3. The relevant facts, in brief, are as follows :

(a)The appellant is a company incorporated in Japan and has a project office at Jamshedpur. They entered into agreement with TISCO to supply the design and drawing to the office of TISCO/their consultant M/s. M.N. Dastur Co. Ltd., Calcutta in connection with installation of their "Coupled Pickle Line and Tandem Cold Mill". As per the contract the drawings and designs are required to be as per the technical specifications given by TISCO.

(b)The relevant portion of the sample contract relating to supply of design and drawing is as follows :

"CRMP/CON/PL-TCM/04, dated 24-6-1998

the clause 1.4 of the Schedule-1 of Agreement of CRMP/CON/PL-TCM/04, dated 24-6-1998

1.4 Supply of imported designs and drawings

1.4-1 Supply of foreign design & drawings

1.4-1-1 In consideration of the payments made by the purchaser, the contractor shall supply imported designs and drawings.

The services to be provided by the contractor shall ensure a co-ordinated design and drawing for PL-TCM in order to satisfy purchaser’s requirement as per Technical Specification,

"2.2-2 All foreign designs and drawings shall be delivered to purchases and engineers office (s) in India."

(c)The Commissioner held that the supply of foreign design and drawing is covered under the consulting engineering service; that the service which originated in Japan had travelled to India; that drawings and designs are prepared/originated in Japan but such designs and drawings were delivered to TISCO in India either at Engineer’s place or office of M/s. M.N. Dastur & Co. or at the office of TISCO at Jamshedpur. He held that the requisite technical information is part and parcel of the said designs and drawings; the rendering of services was completed by supplying the design and drawing and the technical information to the plant at Jamshedpur. The advices, the consultancy or technical assistance were given in the form of drawings and designs. He, accordingly, confirmed the demand of duty under the head ‘consulting engineering service’.

(d)The Commissioner’s order relates to demand of duty on other services also and the total demand of tax confirmed is Rs. 4,55,10,464. However, the dispute is restricted to the demand under the category of ‘consulting engineer’ relating to design and drawing supplied from Japan. The prayer in the appeal is ". . . accordingly, the alleged service tax demand of Rs. 2,79,30,192 on foreign designs and drawings along with interest and penalty under sections 76 and 77 of the Act be set aside/dropped."

4. The learned Advocate contests the demand on the following grounds :

(a)The drawings and designs have been prepared in Japan and they were provided/delivered in a media and would thus qualify as supply of goods. Such drawings and plans and manuals are considered as goods falling under Chapter 49 of the Schedule to the Indian Tariff Act. Such supply of goods cannot be considered as providing of service.

(b)He relies on the decision of the Tribunal in the case of Kirloskar Electric Co. Ltd. v. CCE [2007] 9 STT 128 (Bang. - CESTAT) wherein it has been held that transferring the rights by supply of drawing/designs and technical data cannot be considered as an activity under ‘consulting engineers services’. For attracting consulting engineering service, there should be professional advice, consultancy and technical assistance to the customers.

(c)Alternatively, he submits that even if providing such drawing and design is treated as rendering of services then such services have been rendered outside the taxabl