2007 (8) TMI 177 - AT - Service Tax

Refund Research and Development Cess paid on import of Technology Even if cess is paid after payment of consideration to Foreign Co., exemption under Not. 18/02 cannot be denied Refund cannot be denied on ground of delay in payment of R & D Cess

Summary

Issues:
1. Appeal against Order-in-Appeal No. 76/2005-Central Excise dated 15-3-2005.
2. Service tax liability on "Transfer of Technology" and R & D Cess.
3. Exemption under Notification No. 18/2002-ST.
4. Rejection of refund claim.
5. Payment of R & D Cess after consideration payment.
6. Grounds for rejecting the refund claim.
7. Interpretation of Section 3(2) of the R & D Cess Act 1986.
8. Entitlement for refund under the exemption.

Analysis:
The appeal before the Appellate Tribunal CESTAT, Bangalore was filed against Order-in-Appeal No. 76/2005-Central Excise dated 15-3-2005, concerning the payment of Service tax liability on "Transfer of Technology" and R & D Cess. The appellants received technology from a foreign company and mistakenly paid Service tax liability on R & D Cess as well. The issue revolved around the exemption provided under Notification No. 18/2002-ST dated 16-12-2002, which allows for a waiver of Service tax equal to the cess paid on technology transfer under the provisions of the Research and Development Cess Act 1986.

During the proceedings, it was noted that the appellants paid the R & D Cess after the consideration payment to the foreign company, contrary to the provisions of Section 3 of the R & D Cess Act 1986. However, the Tribunal highlighted Section 3(2) of the R & D Act, emphasizing that the cess should be paid before making any payments towards technology import. Despite the delayed payment of R & D Cess, it was acknowledged that the payment had been made without objection from the relevant authority administering the cess.

The Tribunal concluded that the delay in R & D Cess payment should not be a basis for denying the appellants the exemption under Notification 18/2002-ST. Therefore, the appellants were deemed entitled to the benefit of the exemption and subsequently to the refund claim. The appeal was allowed, granting the appellants the relief sought. The judgment was pronounced in open court on 27-8-2007, setting a precedent for similar cases involving the interpretation of exemption notifications and compliance with cess payment timelines under relevant legislation.