2017 (9) TMI 878 - AT - Service Tax

Erection, commissioning and installation services - equipments supplied by the appellants to its customers - Held that - As all the agreements have not been examined by the adjudicating authority to give clear finding, therefore, the said demand is not sustainable in eyes of law - matter is remanded back to the adjudicating authority to decide the issue afresh. IPR service - royalty income pertaining to licensing of technical information/knowhow under the category of business auxiliary services - Held that - As all the agreements entered by the appellant prior to 10.9.2004, therefore, on the basis of said agreements, the royalty is not chargeable to service tax - demand under the category of IPR service is not sustainable. Marketing support services - sale promotion and marketing services to UOP LLC and other overseas companies - Held that - the service has been received by the service recipient located outside India and used outside India - the demand in respect of marketing support service under the category of business auxiliary service is not sustainable against the appellant. Charges paid to the company s overseas entities in respect of maintenance of software - Held that - it is fact on record that the software is located in a server outside India, therefore, the service has been provided outside India and used outside India only - the demand against the appellant on account of maintenance of software is not sustainable. Appeal allowed in part and part matter on remand.

Summary

Issues involved:
1. Demand confirmed on erection, commissioning, and installation services.
2. Demand confirmed on royalty income for licensing of technical information/knowhow.
3. Demand confirmed on sale promotion and marketing services.
4. Demand confirmed on charges paid for maintenance of software.

Analysis:
1. Erection, Commissioning, and Installation Services:
The appellant contested that the demand was based on random scrutiny of only 5 out of 38 agreements, arguing that most agreements were for other services. The Tribunal agreed, setting aside the demand of ?48,72,77,071 and remanding the matter to examine all 38 agreements for a fresh decision.

2. Royalty Income for Licensing of Technical Information/Knowhow:
The appellant argued that services were received before the introduction of service tax on IPR services. Citing precedent, the Tribunal ruled in favor of the appellant, stating that payments made after service provision should not be taxed based on payment dates. Thus, the demand on royalty income was deemed unsustainable.

3. Sale Promotion and Marketing Services:
The appellant contended that the service was used outside India, invoking relevant precedents. The Tribunal found the demand unsustainable under business auxiliary services due to the service being utilized outside India.

4. Charges for Maintenance of Software:
The appellant argued that the software was located outside India and used there, making the demand unsustainable. The Tribunal concurred, stating that the service provided and utilized outside India did not warrant taxation.

In conclusion, the Tribunal set aside the demands on erection, commissioning, and installation services, royalty income, and marketing support services, remanding the matter for further examination. The demand on charges for maintenance of software was also deemed unsustainable. The adjudicating authority was instructed to decide the issues on merits based on the observations provided.