TMI Blog2015 (1) TMI 1052X X X X Extracts X X X X X X X X Extracts X X X X ..... and has clubbed the entire service as Intellectual Property Right service. Charge of service tax is under Section 66 but the appellant being the receiver is liable to pay under Section 66A. The Commissioner's reasoning is not correct and is rejected. The appellants are eligible to benefit from notification No. 17/2004. - Commissioner has not analyzed the case on merits. He has not justified that the royalty amount is paid entirely for import of Intellectual Property Right services. He has wrongly disallowed the benefit of notification No. 17/2004. Section 78 provides that where the service tax has not been paid because of fraud, collusion, willful misstatement or suppression of facts or contravention of any of the provisions with intent to evade payment of duty, the liability of penalty will be equal to the amount of service tax not paid. We fail to understand how Commissioner has come to the conclusion that the ingredients of both the sections are different. If the reason for waiving penalty under Section 78 in terms of the provisions of Section 80 are that there was confusion about the scope of leviability on service receivers under reverse charge mechanism, then, it is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erwise generally used by ROCHEM AG pertaining to the assembly, use and sale of the said Products as stated in Article 3. d. Intellectual Property Rights means any rights under patents, utility models, designs, and trademarks and application thereof presently or hereafter acquired by Licensor and/or which Licensor has or may have the right to control or grant license thereof during the term hereof and which are applicable to cover the Technical Information supplied to RSS'. Article 3. Scope of Technology to be supplied The technical Information that Rochem AG will supply related to the products will be as follows: (a) All Technical Information and the related technical support necessary to use such Technical Information which are owned and used by ROCHEM AG at the date of signing of this Agreement and which are necessary, adequate and useful for the assembly, testing, installation, commissioning, use of maintenance of the said Products as carried cut by ROCHEM AG. (b) System, unit and component specifications. (c) Design information and standards for main and sub system if any. (d) System engineering data and applications engineering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the Technology and the intellectual Property Rights furnished by ROCHEM AG tp RSS hereunder, RSS shall pay to ROCHEM AG as follows: a. A onetime Royalty of Indian ₹ 60 (Sixty) Million in 3 equal instalments as stated hereinafter. (i) Indian ₹ 20 (Twenty) Million on receipt of the first instalment of the stated data or within 30 days of signing this agreement whichever is earlier. (ii) Indian ₹ 20 (Twenty) Million on producing the first system based on ST/PT Membrane Module or on completion of three months from fir payment whichever is later. (iii) Indian ₹ 20 (Twenty) Million on producing the first system based on FM Module or three months after the second payment whichever is later. SHARE PURCHASE AGREEMENT Rights 3.1 ROCHEM AG undertakes not to compete with RSS, either directly or indirectly, including whether as principal or agent either in the manufacture, sale, service, commission or distribution of Products in the Territories for-all applications industries, for a period of 15 years from the date of this agreement. 3.2 RSS undertakes not to compete with Rochem AG, either directl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermitting the use or enjoyment of, any intellectual property right;] His contention is that the technology is defined under the Technology Transfer and License Agreement to mean technical knowledge, know-how, standard calculation data and information developed or generally used by Rochem AG Switzerland pertaining to the assembly, use and sale of the products manufactured by them. He argued that payment of royalty for transfer of technology (technical know-how) will not fall under the category of Intellectual Property Right Service as is apparent from the definition. He also stated that the share Purchase Agreement never came into force and, therefore, it cannot be relied upon to say that royalty has been paid by the appellants to Rochem AG Switzerland for the use of the trademarks. In any case, according to him, the service in relation to Intellectual Property Right Service under Section 65 (105) (zzr) can only be applied to Intellectual Property Right registered in India. The Ld. Counsel also contended that neither the show cause notice nor the impugned order set out the basis on which the services are sought to be classified under Intellectual Property Right Service and Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 65(105) (zzr) on reverse charge basis. 7. We have considered the rival contentions. There are two issues to be decided namely (i) the nature of service provided by Rochem AG Switzerland to the appellant - that is, whether it is covered under Indian Property Right Service falling under clauses (zzr) of Section 65 (105); (ii) whether the provisions of extended time period laid down in Section 73(i) are invokable. 8. We have seen the various clauses of the two Agreements. We find it is clear from Article 3 of the Agreement that Rochem AG Switzerland have passed all technical information necessary for assembly, testing, installation, commissioning etc. of the products. The technology transfer involves various aspect such as engineering data, troubleshooting manuals, drawings, quality control data sheet, procedures etc,. The transfer of technology is certainly not related to service provided in relation to Intellectual Property Right service which involves the transfer or use of any Intellectual Property Rights. However, the agreement also refers to transfer of right to use the trade name etc, under Article 4(b). Even the Article 10 which refers to payment states that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No 17/2004 was issued on 10.9.2004. It appears that the law makers slipped on bringing an amendment to the notification because the intention of the notification is very clear, that is, not to levy service tax on cess paid towards the import of technology. Careful reading of the notification indicates that what is exempted is taxable service provided by the holder of the Intellectual Property Right to any person........... Service Tax Rule 2(r) defines Provider of Taxable Service to include a person liable for paying service tax. Therefore, this rule read with notification No. 17/2004 can be interpreted only to mean that the appellant being the person liable to pay service tax under Section 66A will also be eligible for exemption. It must not be forgotten that the charge of service tax on Intellectual Property Right under Section 65(105) (zzr) is actually made under Section 66. What Section 66A does is only to fasten the liability to the receiver of services in India while receiving services from abroad. In the present case the charge of service tax is under Section 66 but the appellant being the receiver is liable to pay under Section 66A. The Commissioner's reasoning is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same confusion because of which the appellants had not declared the fact of receiving service by way of import. In fact, the appellants case is even stronger because it has not even been established convincingly by the Commissioner that the service receive is entirely covered under the category of Intellectual Property Right Services. We are supported in our view by the decision of the Hon'ble High Court of Andhra Pradesh in the case of CCE Vs. Indian Institute of Chemical Technology - 2012 (26) STR 97 (AP) wherein the Hon'ble High Court held that. 7. There is also no dispute that if any service tax has not been levied or has been short levied or short paid or erroneously refunded, within a period of one year from relevant date, the competent Central Excise Officers can serve a notice on the person chargeable requiring him to show cause as to why he should not pay the amount. In this case, the proceedings were initiated with the issue of show cause notice dated 21-2-2006 requiring IICT to pay the service tax for the period from 16-7-2001 to 9-9-2004. As per sub-section (1) of Section 73 of the Act the period of one year would expire by September, 2005. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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