2024-VIL-382-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax – Payment towards Technology Transfer Agreement - Demand under Reverse Charge Mechanism towards expenses incurred in foreign currency on account of Licence Fee, Documentation charges and Foreign Technician Fees - Whether the Appellant is liable to pay service tax on the license fees and other incidental expenses paid to overseas company towards transfer of technical knowhow and technical assistance for manufacture of aircraft & engines under the category of Intellectual Property Services – HELD – the Ld. Commissioner has relied upon the stay order to confirm the demand. However, it would be inappropriate to rely on a stay order as it is merely an interim order and cannot be taken as laying down any enunciation in law and is bereft of any precedent value - technical knowhow provided by a foreign company to an Indian company under a licence for consideration of Royalty equal to a percentage of net sale price of the goods, was nowhere registered or patented in India as an IPR service and therefore, the recipient of such service was not liable to pay Service Tax under RCM as IPR service - the transfer of technology by foreign company to the appellant would not qualify as “intellectual property right” within the meaning of Section 65(55a) of the Finance Act, 1994 and therefore, would not be covered under the definition of “intellectual property service” within the scope of Section 65(55b) of the Act - the impugned order is set and the appeal is allowed - Repair of MIG Engines - Service tax demand on amount received from the Malaysian company against repair of MIG Engines – HELD – appellant has characterized this service of repairs / rectifications provided by them as Export of Service not liable to tax - It is undisputed that the activity of repairs and maintenance was carried out within the jurisdiction of India and therefore was liable for tax under Section 65(105)(zzg) as “management, maintenance or repair” service and was liable for payment of duty in terms of Rule 3(1)(ii) of the Export of Services Rules, 2005 - The Ld. Commissioner vide the impugned order has categorically held that the provision of service having took place in India, there is a breach of Rule 6A of the Service Tax Rules, 1994 and Rule 3(1)(ii) of the Export of Services Rules, 2005. To this extent, agree with the findings of the Ld. Commissioner on the aspect. However, demand for the extended period cannot be sustained as there is nothing on record to establish mala-fides on the part of the appellant - Extended period of limitation – HELD - In view of the fact that the appellant is a public sector company completely under the control of the Ministry of Defence and owned by the Government of India, it is rather unacceptable and quite improper to assume intent to evade payment of duty on the part of the organization – Not in agreement with the findings of the Ld. Commissioner that the appellant had deliberately suppressed material information, wrongly classifying as ‘Export of Service’ with intent to evade duty – No merit to impute the charge of suppression to a government organization owned by the Ministry of Defence, for the non-payment of duty / tax with intent to evade the same by suppressing the material information, more so when it is depicted inappropriately and construed accordingly - the demand for the extended period cannot be sustained
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