ST - There is no evidence adduced to show that trademarks, know-how, etc. supplied by foreign collaborators have been registered in India - services received cannot be held to be IPR service: CESTAT
By TIOL News Service
MUMBAI, DECEMBER 06, 2018: THE appellants are manufacturers of plates, chemicals and films required for printing industry and had entered into an agreement with M/s. Agfa-Gevaert NV, Belgium (Agfa) and Hydro Dynamics Products, UK for supply of technical know-how.They have paid royalty to the foreign entities in consideration thereof.
The department opined that the appellants are liable to pay service tax on the aforesaid royalties under the taxable head of "Intellectual Property" service.
SCNs were issued and the demands of service tax were confirmed along with imposition of penalty and interest.
In the first round of proceedings, the appeal filed before the CESTAT resulted in the matter being remanded to the adjudicating authority.
The CESTAT had in its order dated 27.06.2013 held thus –
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ST -Agreement entered into by the appellant with the foreign service providers envisage usage of intellectual property in India by the appellant - it is the requirement of law that intellectual property received by the appellant is first classified under specific category under which they would fall, which has not been done in this case -the SCNs do not specify under what category of IPRs, the technical information received by the appellant would fall - it is for the department to conclusively establish which of the services received by the appellant falls under the IPRs for which a law exists in India - no such examination/analysis has been done either in the SCN or in the adjudication order -In the absence of documentary evidence, it is difficult to accept the claim of the appellant that what they have received are goods and not IPRs - as regards the contention that abatement towards R&D Cess paid should have been granted, this contention merits consideration - in respect of two orders, the Commissioner has granted such abatement however, in the case of first order no such abatement has been considered by the Commissioner - further contention of appellant that entire consideration paid by it should be considered as cum-tax also needs to be examined and findings given - quantification of ST demand also needs to be redone after granting permissible abatement- matter remanded to the original adjudicating authority: CESTAT [para 7.1, 8, 9]
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We reported this order as - 2013-TIOL-2304-CESTAT-MUM.
The appellant is again before the CESTAT against the order passed in denovo adjudication.
It is submitted that the foreign collaborators have physically delivered the aforesaid data, drawings and designs in the form of booklets and the same are classifiable under CH 4906 of CTA, 1975 and exempted in terms of notification 21/2002-Cus; therefore, the drawings, etc. received by them are "goods" and no service tax can be demanded on supply of goods; that Intellectual property rights not recognized under Indian law are not taxable as IPR service; that there is no evidence or even any allegation that the technical information supplied by their collaborators has been patented; that as the agreement has been entered prior to 10/09/2004, the same cannot be charged as intellectual property right service which was introduced only on 10/09/2004; that the case is revenue neutral.
The AR supported the Order-in-original.
The Bench observed that there is no evidence adduced by the department to show that such trademarks, know-how, etc. supplied by their foreign collaborators have been registered in India and, therefore, in view of the clarification issued by CBEC vide Circular 80/2004-ST dated 17 September 2004, above services received by the appellants cannot be held to be intellectual property right service. Inasmuch as the appellants are not liable to pay service tax.
The CESTAT also relied on the decisions in Rochem Separation Systems (India) P. Ltd. - 2015-TIOL-120-CESTAT-MUM and in the case of Tata Consultancy Services Ltd. - 2015-TIOL-2370-CESTAT-MUM and observed that the issue is no longer res integra.
The Bench concluded - "As the said IPRs supplied by the foreign collaborators of the appellant are not registered in India, we are we are convinced that the technical know-how, etc. supplied by the foreign collaborators to the appellants do not fall under the category of "Intellectual Property Right" service thereby liable to pay service tax under Intellectual Property Right service in terms of Finance Act, 1994 ."
The appeal was allowed.
(See 2018-TIOL-3673-CESTAT-MUM)
