Relief To HAL | Technology Transfer for SU-30 MKI Project Not Taxable as ‘Scientific and Technical Consultancy Service’: CESTAT

The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has granted major relief to M/s Hindustan Aeronautics Ltd. (HAL), held that payments made to Russian entity Rosoboronexport for technology transfer and technical assistance relating to SU-30 MKI aircraft production in India cannot be subjected to service tax under the category of “Scientific and Technical Consultancy Service” (STC). The bench of Angad Prasad (Judicial Member) and A.K. Jyotishi (Technical Member) has observed that Rosoboronexport functioned as an exclusive state intermediary for Russian defence exports and could not be characterised as a scientific or technological institution merely because technology transfer formed part of its activities. There was no evidence showing that any individual scientist or technocrat had provided consultancy services directly to HAL for consideration. The dispute arose from a series of appeals involving allegations by the Department that HAL had imported “Scientific or Technical Consultancy Services” from a foreign service provider and was therefore liable to pay service tax under the Reverse Charge Mechanism (RCM). The Department argued that HAL received technical documentation, technology transfer, training assistance and manufacturing support from Rosoboronexport, Moscow, under an inter-governmental agreement between India and Russia concerning SU-30 MKI aircraft production. According to the Department, the technical support received by HAL amounted to consultancy or technical assistance rendered by a foreign entity, attracting service tax liability under reverse charge provisions. In addition, the Department also raised a smaller demand concerning “Management, Maintenance and Repair Service” (MMR) provided by HAL to DRDO. HAL challenged the service tax demand by arguing that Rosoboronexport was not a scientist, technocrat, scientific institution or technology organisation as required under the statutory definition of “Scientific and Technical Consultancy Service.” The company submitted that Rosoboronexport was a government-controlled intermediary agency responsible for export of defence technologies and military equipment and therefore did not fit within the scope of the taxable category. HAL further relied on previous tribunal decisions involving its own units at different locations where identical issues arising from similar agreements with Rosoboronexport had already been decided in its favour. It pointed out that the Mumbai Bench had earlier ruled that Rosoboronexport could not be treated as a scientific or technological institution and therefore no service tax could be levied under STC provisions. HAL also highlighted that the Department's appeal against that earlier order before the Supreme Court had eventually been disposed of as “not pressed,” thereby allowing the ruling to attain finality. After examining the facts and earlier precedents, the Tribunal agreed with HAL's submissions. The Bench noted that the statutory definition of Scientific and Technical Consultancy Service specifically requires consultancy or technical assistance to be rendered either by a scientist, a technocrat, or a science and technology institution or organisation. The Tribunal also noted that the agreements were executed pursuant to inter-governmental arrangements for technology transfer and aircraft manufacturing rather than for obtaining consultancy services in the ordinary commercial sense. It emphasized that transfer of technology and associated documentation under such agreements could not automatically be equated with taxable consultancy services. Rejecting the Department's arguments, CESTAT held that previous coordinate bench decisions involving identical facts and the same foreign entity were directly applicable and binding. Since those rulings had consistently held that Rosoboronexport was not a scientific or technical organisation within the meaning of the law, the Department could not raise fresh arguments without substantive evidence. Consequently, the Tribunal set aside the service tax demand raised under “Scientific and Technical Consultancy Service” and also quashed penalties connected with that demand. However, the Bench upheld the service tax demand relating to “Management, Maintenance and Repair Service” as HAL had not disputed that issue before the authorities or during the hearing. Case Details Case Title: M/s Hindustan Aeronautics Ltd. Versus Commissioner of Central Tax Citation: JURISHOUR-1287-CES-2026(HYD) Case No.: Service Tax Appeal No. 527 of 2012 Date: 15.05.2026 Counsel For Appellant: Disha Gursahaney, Advocate Counsel For Respondent: M. Anukathir Surya, Authorized Representative Click Here To Read Order Read More: Legal Notice Alone Can’t Establish Tax Liability: CESTAT

Relief To HAL | Technology Transfer for SU-30 MKI Project Not Taxable as ‘Scientific and Technical Consultancy Service’: CESTAT

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