2006 (12) TMI 448 - AT - Service Tax

Summary

Issues involved: Determination of Service Tax liability on royalty paid for technical know-how received from a foreign company.

Summary:

Issue 1: Classification of service for Service Tax liability
The appellants received technical know-how from a foreign company and paid royalty for the service. The lower authorities treated this as "Consulting Engineer's Service" and demanded Service Tax. The appellants argued that transfer of technology is distinct from Consulting Engineer's Service as per the Finance Act, 1994. They contended that no tax was payable as the service recipient was not liable u/s the Act at the time of service receipt. The appellants relied on a Tribunal decision in a similar case.

Issue 2: Relevant date for tax liability
The Tribunal examined the case without considering any amendments to the Service Tax Rules, 1994. It determined that the service in question, transfer of technology, occurred on 6-5-1997, while the royalty payment was made on 5-9-2002. Referring to the Matsushita TV & Audio India Ltd. case, the Tribunal held that the relevant date for tax liability is the date of service receipt. As Consulting Engineer's Service and transfer of Intellectual Property were not taxable on 6-5-1997, the appellants were not liable to pay Service Tax on the royalty.

Decision:
The Tribunal ruled in favor of the appellants, stating they are not liable to pay Service Tax on the royalty paid for the service received in May 1997. The impugned order demanding tax was set aside, and the appeal was allowed.