2008 (4) TMI 260 - AT - Service Tax

Respondents a manufacturer of motor vehicle components supplied technical know-how to Hitech Arai against payment of royalty - held that royalty payment for the use of the technology and know-how cannot be subjected to service tax as Engineering Consultancy appeal filed by the Revenue is dismissed as devoid of merits

Summary

Issues:
1. Whether the provision of technical assistance by the respondent-company amounted to Engineering Consultancy and attracted service tax.
2. Whether the payment of royalty for the use of technology and know-how could be subjected to service tax.

Analysis:
1. The appeal was filed by the Revenue against an order vacating a demand of service tax and penalties imposed on the respondents. The original authority found that the appellants, a Japanese company, provided technical know-how to another company for manufacturing licensed products. The Dy. Commissioner categorized this as a service under "Consulting Engineer." However, the Commissioner (Appeals) set aside this order based on a precedent where it was held that payment for disclosure of technical know-how would not attract the provisions of "Consulting Engineer's Service."

2. The Revenue argued that the provision of technical assistance by the respondent-company constituted Engineering Consultancy, and the royalty paid was compensation for services rendered. They contended that the payment of lump sum and running royalty should attract service tax as it involved the provision of technical know-how, designs, and drawings, falling within the realm of Consulting Engineer services. However, the Tribunal, after considering various precedents, including cases like Navinon Ltd. v. CCE and Toyota Motors Corpn. v. CCE, held that royalty payment for the use of technology and know-how cannot be subjected to service tax as Engineering Consultancy.

In conclusion, the Tribunal dismissed the appeal filed by the Revenue, stating that based on the judicial authorities and precedents cited, there was no reason to interfere with the impugned order. The Tribunal found the appeal devoid of merits and upheld the decision setting aside the demand for service tax and penalties on the respondents.