2013 (2) TMI 271 - AT - Service Tax

Waiver of pre-deposit - Stay of recovery - Intellectual property service - Appellant had obtained technical information and technical assistance from the foreign company under a Technology Transfer and Licence Agreement - Pay royalty @ 3% on the net sales of the products manufactured in India - Held that - Following the decision in case of G.B. ENGINEERING ENTERPRISES PVT. LTD.(2009 (7) TMI 1005 - CESTAT, CHENNAI) that the party was directed to pre-deposit, roughly, 30% of the total demand. Therefore, we direct the appellant to pre-deposit an amount of Rs.5 lakhs

Issues:
1. Waiver of pre-deposit and stay of recovery sought by the appellant for the adjudged dues.
2. Applicability of service tax and education cesses on intellectual property services received by the appellant.
3. Interpretation of the Technology Transfer and Licence Agreements entered into by the appellant with a foreign company.
4. Prima facie case on merits against the demand of service tax.
5. Comparison of the present case with cited case laws.
6. Direction for pre-deposit based on a precedent case.
7. Amount and compliance timeline for pre-deposit set by the Tribunal.

Analysis:
1. The appellant filed an application seeking waiver of pre-deposit and stay of recovery for the adjudged dues, including service tax and education cesses amounting to Rs. 16,67,197. The demand was related to intellectual property services received from a foreign company under a Technology Transfer and Licence Agreement. The appellant had been paying royalty to the foreign company for the technical knowhow transferred, as per the agreements.

2. The demand period for service tax was from 01/05/2006 to 31/03/2007, following the introduction of Section 66A of the Finance Act. The Tribunal noted that the appellant was receiving intellectual property services and paying royalty, indicating a commercial consideration. Hence, the appellant lacked a prima facie case against the service tax demand.

3. The Tribunal reviewed previous case laws cited by the appellant's counsel, such as OEN India Ltd. and Nypro Forbes Products Ltd., but found them factually distinguishable from the present case. Therefore, the cited case laws did not support the appellant's position.

4. The Additional Commissioner (AR) supported the appellate authority's findings and requested a pre-deposit direction based on a similar case, G.B. Engineering Enterprises Pvt. Ltd. vs. CCE, Trichy, where the party was directed to pre-deposit 30% of the total demand.

5. Despite finding no prima facie case for the appellant, the Tribunal directed the appellant to pre-deposit Rs. 5 lakhs within six weeks, following the precedent set in the G.B. Engineering Enterprises case. Compliance was to be reported to the Assistant Registrar by a specified date. Upon compliance, there would be a waiver of pre-deposit and stay of recovery for penalties, service tax, education cesses, and interest.

This detailed analysis covers the issues raised in the legal judgment, including the interpretation of agreements, applicability of service tax, comparison with cited case laws, and the Tribunal's decision regarding pre-deposit and stay of recovery.

← Previous Next →