2009 (8) TMI 391 - AT - Service Tax

Scientific or technical consultancy services- Royalty- The Commissioner of Central Excise has demanded service tax from the appellant for the period 2001-2003 under the head Scientific or Technical Consultancy Service and has imposed penalties on them. The demand of service tax is on the royalty received by the appellant from M/s. Dhariwal Tobacco Products Ltd. ( DTPL for short) as consideration for transfer of the trade name Manikchand and certain formulae to be used for the manufacture of Pan Masala, Gutka, etc. Held that- the Commissioner has not rendered any finding on the status of the appellant, except making an averment to the effect that the appellant is a Technocrat . This finding appears to be unsupported by evidence and transfer of technical know how, brand name, etc. is covered by intellectual property right services w.e.f. 10.09.2004 while the disputed period is 2001-2003. thus there will be waiver of pre-deposit and stay of recovery in respect of the amounts.

Summary

The appellate tribunal CESTAT, Mumbai, consisting of P.G. Chacko and A.K. Srivastava, heard the case between Mayur Shroff for the appellant and R.K. Mahajan for the respondent. The Commissioner of Central Excise demanded over Rs. 64 lakhs in service tax from the appellant for the years 2001-2003 under "Scientific or Technical Consultancy Service." The tax was imposed on royalties received from M/s. Dhariwal Tobacco Products Ltd. for the trade name 'Manikchand' and formulae used in manufacturing. The appellant argued that the transaction was not taxable under this category, as they were registered for 'Intellectual Property Right Service' from 2004 onwards. The tribunal noted that service tax was not leviable on such transactions before September 10, 2004, based on previous decisions. The tribunal found the Commissioner's findings unsupported by evidence and agreed that the transaction should be taxed under 'Intellectual Property Right Service.' The appellant made a prima facie case against the tax demand and penalties, leading to a waiver of pre-deposit and stay of recovery for these amounts. The tribunal also criticized the Commissioner for imposing penalties and making changes through a corrigendum.