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2011 (2) TMI 872 - AT - Service TaxTax liability - whether service tax is leviable on the technical know-how fees and royalties paid by the respondent to their foreign collaborators, under the head consulting engineer service for the period 7.7.1997 to 15.8.2002 - These include Betts UK Ltd. vs. CCE, Goa 2006 -TMI - 775 - CESTAT, MUMBAI , wherein it was held that transfer of technology and technical assistance by a foreign company to the Indian company against payment of royalty was not liable to service tax under Section 65 of the Finance Act, 1994 - Decided in favour of assessee.
Issues: Whether service tax is leviable on technical know-how fees and royalties paid by the respondent to foreign collaborators under the head "consulting engineer service" for the period 7.7.1997 to 15.8.2002.
Analysis: 1. The main issue in this appeal before the Appellate Tribunal CESTAT, Mumbai was to determine whether service tax was applicable on the technical know-how fees and royalties paid by the respondent to foreign collaborators under the category of "consulting engineer service" for the period from 7.7.1997 to 15.8.2002. The Tribunal examined the nature of transactions between the respondent and the foreign agencies and noted that the respondent received technical know-how and assistance for manufacturing motor vehicles in India. It was observed that the transactions involved intellectual property rights (IPR) services, which were not taxable before 10.9.2004. The Tribunal referred to previous decisions in similar cases where it was held that such transactions were not chargeable to service tax during the relevant period. 2. The Tribunal considered the arguments presented by both sides. The Revenue contended that the Tribunal's decisions in previous cases were under appeal at the Bombay High Court and should not be considered as precedents. However, the learned JCDR confirmed that there was no stay on the operation of the Tribunal's orders in those cases, allowing them to be followed as precedents. On the other hand, the respondent's counsel cited various decisions, including Betts UK Ltd. vs. CCE, Goa and Ispat Industries Ltd. vs. CCE, Raigad, where it was held that payments for transfer of technology and technical assistance were not subject to service tax. The Tribunal found merit in these precedents and decided to sustain the impugned order, rejecting the Revenue's appeal. 3. In reaching its decision, the Tribunal emphasized the importance of following established precedents in the absence of a stay on their operation. By considering the relevant legal principles and previous judgments, the Tribunal concluded that the respondent was not liable to pay service tax under the category of "consulting engineer service" for the transactions in question during the specified period. Therefore, the impugned order was upheld, and the appeal by the Revenue was dismissed. 4. Additionally, the Tribunal clarified that the order-in-original, which was entirely set aside by the Commissioner (Appeals), should be understood as only partially set aside concerning transactions with M/s. Camtek. The order-in-appeal, as interpreted by the Tribunal, was upheld except for the specific aspect related to M/s. Camtek. This clarification was provided to ensure the proper understanding and implementation of the decision. (Pronounced in Court)
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