2018 (8) TMI 424 - AT - Service Tax

Levy of Service tax - royalty paid to M/s Unisys Corporation, USA - whether taxable under Intellectual Property Right Service or not? - Held that - Identical issue decided in the case of TATA CONSULTANCY SERVICES LTD. VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI 2015 (11) TMI 236 - CESTAT MUMBAI , where it was held that the technical know-how received by the appellant and the royalty payment made by the appellant to Unisys is nowhere established to result from the use of any Intellectual Property Right and is not taxable under the head - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether service tax can be levied on royalty paid by the appellant to a foreign corporation under the category of "Intellectual Property Right Service"?

Analysis:
1. The appeals were directed against an order upholding the demand of service tax on royalty paid by the appellant to a foreign corporation. The agreements involved the use of technical information and knowhow for manufacturing Document Processing Systems, with royalty payments based on product sales.

2. The appellant, a joint venture company, later merged with another entity. Amendments to the agreement required royalty payments on all products. Show cause notices were issued proposing service tax on the royalty payments, which were confirmed in the adjudication and upheld by the Commissioner (Appeal).

3. The appellant argued that previous decisions favored the assessee in similar cases, citing judgments like Chambal Fertilizers & Chemicals Ltd. vs Commissioner C Ex Jaipur I and Tata Consultancy Services Ltd. vs Commissioner Of Service Tax Mumbai. The Authorized Representative for the revenue reiterated the order.

4. The tribunal noted that a previous decision by the same tribunal had already considered a similar issue in favor of the appellant. As no new arguments were presented, the tribunal followed the precedent and set aside the order of the Commissioner (Appeal), allowing the appeals.

In conclusion, the tribunal ruled in favor of the appellant, setting aside the order imposing service tax on royalty payments. The decision was based on the precedent set by a previous judgment of the tribunal that had considered a similar issue in favor of the appellant.