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Issues:
Waiver of pre-deposit of service tax, penalty under sections 77 and 78 of the Finance Act, 1994. Analysis: The judgment by the Appellate Tribunal CESTAT Mumbai, delivered by Mrs. Jyoti Balasundaram, Vice-President, pertained to an application for the waiver of pre-deposit of service tax amounting to Rs. 69,70,343 and penalties under sections 77 and 78 of the Finance Act, 1994, arising from a Commissioner's order regarding "consulting engineer's service" provided to IOCL, Gujarat. After hearing both parties and examining the records, the Tribunal found a strong prima facie case for waiver based on previous decisions. The Tribunal referenced cases such as Commissioner of Central Excise v. Reichie De Massari Ag Switzerland and Bajaj Auto Ltd. v. Commissioner of Central Excise and Customs, which established that royalty payments for technology transfer are not subject to service tax as technology transfer itself is not a taxable service. The Tribunal noted that the adjudicating authority had distinguished certain cited decisions on the basis that the payments were fees, not royalties. However, the Tribunal observed that the payment for license fees and PDBEP fees in the present case was for technology transfer, whether considered as royalty or a fee. Relying on the cited Tribunal decisions, the Tribunal concluded that the service tax demand and penalties were prima facie unsustainable. Consequently, the Tribunal granted the waiver of pre-deposit of tax and penalties, staying the recovery pending the appeal. The judgment emphasized the importance of analyzing the nature of payments in agreements to determine the applicability of service tax, highlighting the distinction between royalty and technology transfer fees in the context of taxable services.
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