2015 (1) TMI 187

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..... y Licensing Agreement with Schenectady International Inc (SII) for supply of technical knowhow and technical services. Under the Agreement, SII was to render certain technical services under Article 5. The appellants were to pay a lump sum of US$ 500000 for transfer of technical knowhow under Article 7.1 and royalty at the rate of % of Net sales under Article 7.2 for receiving technical services from SII. Initially, the show cause notice had also demanded duty on the technical knowhow. However, Commissioner dropped this amount of the demand. He confirmed the demand on royalty for the years 1999-2000, 2000-2001, 2001-2002 and on the development expenses incurred in India for converting the know how into manufacturing facility. The demand on .....

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..... fact that these expenses were incurred by the appellant in India and were not paid to SII, proves that no service has been rendered to the appellant. There is no finding whatsoever by the Commissioner as to why service tax should be demanded on these expenses. At paragraph 33 of the order, the Commissioner himself while referring to the licensing agreement states that the expenses are to be borne by the assessee for the development of the products as per the technical know-how. On the other hand, the appellants have furnished a certificate from the Chartered Accountant certifying that the amount relates to expenses for completing the technology into manufacturing facility and the same have been incurred by the appellants and no payment has .....

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..... ons under the Service Tax Rules, 1994, as applicable during the period in dispute, clearly provided that service tax is payable when the value of taxable services is received. The relevant provisions in law was Rule 6(1) which stated that service tax is payable when payments are received towards the value of taxable services. Therefore, clearly service tax was not leviable on royalty paid for the years 2000-2001 and 2001-2002. Having held that the royalty was on account of providing technical services in India and such technical services are clearly covered under the Consulting Engineering Services, tax is leviable for the year 1999-2000 agreed to by both sides. The amount of service tax payable at the rate of 5% which was the prevailing ta .....

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