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2020 (12) TMI 913 - AT - Service TaxLevy of Service tax - Reverse Charge Mechanism - consulting engineer service - amount paid to Honda Japan under the Technical Agreement - contention of appellant is that no services were received by the appellant from Honda Japan and, therefore, no service tax could have been levied - HELD THAT:- The show cause notice only refers to various clauses of the Technical Agreement and the taxing provisions and then alleges that the appellant is liable to pay service tax on the amount paid under the Termination Agreement, without identifying or specifying what particular ‘consulting engineer’ service was rendered by Honda Japan to the appellant. The appellant has stated that the amount of JPY 130,000,000/- was paid to compensate for the work undertaken by Honda Japan towards the commencement of volume production of the new Honda CIVIC Model and details have also been provided, which details clearly indicate that the amount was paid to compensate Honda Japan for the research and allied work it had performed at its end and not towards supply of any technical information to the appellant. In the absence of any evidence to the contrary, the Commissioner (Appeals) could not have concluded that the aforesaid amount was paid by the appellant to Honda Japan for rendering any taxable service. It is, therefore, not possible to accept the contention of the learned authorized representative of the Department that in terms of Article 4.1 of the Technical Agreement, Honda Japan was required to furnish technical information to the appellant on a continuous basis or that the amount was paid for the commencement of the production. It has also been submitted by the leaned counsel for the appellant that the amount paid by the appellant to Honda Japan is actually in the nature of a cancellation fee and, therefore, neither any service was rendered by Honda Japan to the appellant nor any amount was paid for any service. The contention is that the amount was paid by the appellant only to restitute Honda Japan for the cost incurred, once the Model Agreement to provide the service was terminated - This submissions of learned counsel for the appellant also deserves to be accepted. In view of the specific provisions of the Termination Agreement, it is clear that no service, much less ‘consulting engineer’ service, was provided to the appellant. The appellant, therefore, could not have been subjected to service tax on a reverse charge basis. In Ford India [2018 (1) TMI 1219 - CESTAT CHENNAI], a Division Bench of the Tribunal, held that no identifiable service can be attributed for payments made if the agreement is terminated, since the consideration is to make good the loss - In Lemon Tree [2019 (7) TMI 767 - CESTAT NEW DELHI], the Tribunal again held that the amount retained after cancellation cannot be subjected to service tax. The amount paid by the appellant to Honda Japan was not towards any consideration for a taxable service. It is, therefore, not possible to sustain the demand confirmed by the Commissioner (Appeals) - Appeal allowed - decided in favor of appellant.
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