2023 (3) TMI 65 - AT - Service Tax

Demand of interest under Section 75 of the Finance Act, 1994 - Non-payment of service tax - Intellectual Property Rights - it is alleged that the appellant had not discharged Service Tax immediately after making the provision for payment of Royalty and Technical Knowhow fees to their associate companies abroad. HELD THAT - In the orders of the CESTAT Benches in M/s. Tata Consultancy Services Ltd. v. Commissioner of S.T., Mumbai 2015 (11) TMI 236 - CESTAT MUMBAI , M/s. Alstom T and D India Ltd. and Schneider Electric Infrastructure Ltd. v. Commissioner of Central Excise Service Tax, LTU, Chennai ors. 2018 (2) TMI 148 - CESTAT CHENNAI and M/S. AREVA T D INDIA LTD. VERSUS COMMISSIONER OF SERVICE TAX, CHENNAI. 2018 (4) TMI 1944 - CESTAT CHENNAI relied upon by the Learned Advocate for the appellant, it has been held that in order to be categorized for the purpose of Service Tax under Intellectual Property Rights, such rights should have been registered with the Trademark / Patent authority in India as per the law for the time being in force. That is to say, as long as it is not legally recognized by the process under the Act, the same could not be considered as recognized by the law for the time being in force. In the case on hand, the appellant has categorically canvassed, which is also clear from the grounds-of-appeal urged, that wherever Royalty and Technical Knowhow fees were paid to the overseas entities, applicable Service Taxes have been discharged by the appellant and that it is only the interest which is the point of dispute and not the Service Tax. The scope of the appeals is limited, as contended by the appellant, to the demand of interest alone and when the orders of the CESTAT Benches are considered, it is found that since the liability itself was questionable, the Revenue is not justified in demanding the interest also. Appeal allowed.

Summary

Issues:
Appeal against Orders-in-Original demanding Service Tax and interest on Royalty and Technical Knowhow fees paid to foreign companies.

Analysis:
1. Background: The appellant, a manufacturer of various products, paid Royalty and Technical Knowhow fees to foreign companies for Intellectual Property Services. The Revenue issued Show Cause Notices proposing demands for Service Tax, interest, and penalties for not paying tax immediately after making provisions for the payments.

2. Contentions: The appellant argued that the payments were for technical knowledge provided by foreign companies and that Service Taxes were paid accordingly. The main issue for consideration was whether the lower authority was justified in demanding interest under Section 75 of the Finance Act, 1994.

3. Legal Precedents: The appellant cited cases where Intellectual Property Rights were held to be outside the purview of Service Tax domain unless registered with the Trademark/Patent authority in India. The appellant contended that the liability for Service Tax was questionable, focusing only on the interest demanded.

4. Decision: After reviewing the arguments and legal precedents, the Tribunal found that the demands were limited to interest alone, considering the questionable nature of the liability for Service Tax. Citing the CESTAT Benches' orders, the Tribunal concluded that the Revenue was not justified in demanding interest when the liability itself was in question.

5. Outcome: The Tribunal set aside the impugned orders to the extent challenged, thereby allowing the appeals against the demand for interest on the Royalty and Technical Knowhow fees paid to foreign companies for Intellectual Property Services.