2008 (2) TMI 271 - AT - Service Tax

Transfer of technical know-how is not within the ambit of Consulting Engineer s Service - Transfer of trademarks, drawings etc., would, prima facie, come within the scope of the taxable service of Intellectual Property Service, which was introduced after the period of dispute - prima facie not found valid reasons for the Revenue to justify the impugned demand - prima facie case is in favour of appellants - waiver of pre-deposit and stay of recovery in respect of the tax and penalty is granted

Summary

Issues:
Service tax demand on royalty payments for trademarks, drawings, and models; Classification of transaction as "Consulting Engineer's Service" or Intellectual Property Service; Validity of demand under the Finance Act, 1994; Applicability of exemption Notification No. 18/2002-ST; Prima facie case for waiver of pre-deposit and stay of recovery.

Analysis:
The Appellate Tribunal, after examining the records and arguments, noted a service tax demand of Rs. 1,53,481 on royalty payments made to a foreign company for trademarks, drawings, and models related to manufacturing contract products in India. The lower authority classified the transfer as "Consulting Engineer's Service" and imposed the duty. The appellants cited several decisions to contest the demand, emphasizing that transfer of technical know-how does not fall under Consulting Engineer's Service but under Intellectual Property Service, introduced post the dispute period.

The Tribunal found no valid reasons for the Revenue's demand. It clarified that transfer of trademarks and drawings likely falls under Intellectual Property Service, not Consulting Engineer's Service. The agreement mentioning technical assistance does not conclusively prove the transaction's classification. The Notification cited by the Revenue pertains to exemption for Consulting Engineer's Service, requiring the transfer of technology accompanied by technical assistance. However, the Revenue failed to establish provision of technical assistance in the present case, making the Notification inapplicable.

The Tribunal highlighted that the Nokia case cited by the Revenue was irrelevant to the current matter. As a result, a prima facie case was found in favor of the appellants. Consequently, the Tribunal granted a waiver of pre-deposit and stay of recovery for the tax and penalty amounts. The decision was dictated and pronounced in open court by the Tribunal members.