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CCE, Nashik, Hindustan Aeronautics Ltd Versus Hindustan Aeronautics Ltd, CCE, Nashik

2015 (40) S.T.R. 289 (Tri. - Mumbai) - Scientific and technical consultancy services - Reverse charge mechanism - nature of intellectual property services (IPR) rendered by foreign firms - Held that:- The terms of the relevant agreements indicate that these agreements were intended primarily to cover the following transactions, viz., transfer of brand names/trade marks to Cadila against payment of ₹ 70 crores, transfer of know-how for manufacture of bulk drug against payment of ₹ 20 .....

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department as science or technology institutions or organizations vide M.F. (D.R.) Letter dated 9-7-2001 ibid. In the show-cause notice itself, the appellant-company was held out to be manufacturer of excisable goods only. It was not even alleged that it was a science or technology institution or organization. Even assuming that M/s. Kopran Research Laboratories Ltd. are a science or technology organization wholly owned by the appellant-company and that their R&D activities are financially supp .....

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he argument of the counsel that the service rendered by the appellant-company to Cadila under the relevant agreements cannot constitute "scientific or technical consultancy" as defined under Section 65 of the Finance Act, 1994 merits acceptance. - Further, in yet another case R.M. Dhariwal (HUF) vs. CCE Pune III - [2014 (1)409 - CESTAT MUMBAI] has laid down the same ratio that transfer of trade name and formulae transferred for a consideration cannot be services which would fall under "Scientifi .....

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ST/135/09 is filed by the assessee while Appeal No. ST/135/2009 is filed by revenue. 2. The relevant facts that arise for consideration are on the basis of information that Hindustan Aeronautics Ltd. (hereinafter referred to as HAL) had received taxable service from M/s. Rosobornexport of Russia, foreign-based firm who were not having any office in India and hence were liable to pay service tax under reverse charge mechanism as a service recipient. Further enquiry was conducted and it was notic .....

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firm was for rendering technical assistance from an individual. Appellant assessee contested at the show cause notice on merits as also on the limitation. The adjudicating authority granted an opportunity of personal hearing which was availed. Before the adjudicating authority issued an order, there was a change in the authority. The revenue authorities issued addendum to show cause notice dated 13th October 2008. Appellant contested the said addendum. The adjudicating authority after considerin .....

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he limitation period. 3. Heard both sides and perused the records. 4. Learner Chartered Accountant appearing on behalf of the appellant assessee takes us through the entire case records. It is his submission that addendum issued by the revenue is incorrect inasmuch as that the said addendum was issued after considering the written submissions made by the appellant assessee. It is his submission that revenue is trying to improve upon that case after considering the defence raised by the assessee. .....

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ervices can be construed as scientific or technical consultancy services. Learned Counsel would submit that there is no basis to hold that it would fall under the definition of the services "scientific and technical consultancy service" as provided under Section 65 (60) of the finance act 1994. He would submit that said definition would be applicable only in the case of consultation, advice or technical assistance provided by the scientist or a technocrat or science or technology insti .....

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not be covered under scientific or technical consultancy services. 5. Learned departmental representative on the other hand, would rely upon the very same agreement. It is his submission that by virtue of the said agreement technical assistance was provided by the foreign-based company to the appellant-assessee for manufacturing of fighter aircraft. It is his submission that the scope of the agreement is very clear inasmuch as that the agreement provides for visit of technical personnel to the a .....

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essee did not produce the agreement before the authority to come to a conclusion and hence revenue's appeal be allowed and the demands be confirmed for the entire period. 6. We have considered the submissions made at length by both sides and perused the records. 7.1 We find that the issue involved is regarding the discharge of service tax liability on the reverse charge mechanism for the services rendered by order "Rosonbornexport" in pursuance of an agreement entered for licence t .....

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ing of defence-related equipments. ON perusal of the agreement, we find that the said agreement is for transfer of licence technical documentation for the manufacture of fighter aircraft in appellant assessee's facility. As the agreement being confidential and secret, we are not reproducing any of the articles in this order. Suffice to say that on perusal of said agreement we find that the agreement is for transfer of technology for the manufacturing of fighter aircrafts, for the purposes of .....

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tion 65 of the Finance Act 1994 "Scientific or technical consultancy" means any advice, consultancy or scientific or technical assistance rendered in any manner, either directly or indirectly, by a scientific or a technocrat or any science or technology institution or organisation, [to any person], on one or more disciplines of science or technology;" It can be seen from the above reproduced definition, in order to tax the services, it has to be any advice, consultancy or scientif .....

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us indicates the foreign-based company as a joint-stock company, part of the Russian technologies state Corporation which is responsible for import/export of the full range of defence and Dual use end products, technologies and services. It is also noted that the said "Rosonbornexport" only has the right to supply the world market with a full range of arms and military equipments manufactured by the Russian defence industrial complex and approval; the said foreign company is one of the .....

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be applicable in the facts and circumstances of this case. Revenue has not brought on record any evidence to contradict the submissions of the appellant assessee. In the absence of any contrary evidence we have to hold that "Rosonbornexport" is not a science or technology institution or organisation which gives any advise, consultancy or technical assistance in one or more discipline of science or technology. Our view is fortified by the judgment and order of the Tribunal in the case o .....

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any manner, either directly or indirectly, by a scientist or a technocrat or any science or technology institution or organization, to a client, in one or more disciplines of science or technology." As rightly pointed out by the learned counsel, three ingredients should be established to bring a service within the ambit of "scientific or technical consultancy" and these are - (a) advice, consultancy or scientific or technical assistance should be rendered in any manner to a clien .....

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ocess or design, recommending an apt technology, suggestion for improvement in existing technology or process, providing consultation on any technical problem or about new technology etc." We have got to examine the facts of this case in this backdrop. The terms of the relevant agreements indicate that these agreements were intended primarily to cover the following transactions, viz., transfer of brand names/trade marks to Cadila against payment of ₹ 70 crores, transfer of know-how fo .....

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t" is not applicable as the service is classifiable only under one sub-clause of clause (105) of Section 65 of the Act, which is sub-clause (zzr). Each agreement covered the transfer of an intellectual property and, therefore, a combination of the agreements (which was envisaged by JCDR as "package deal") would not make any difference. This rules out the applicability of Andhra Petrochemicals (supra). Moreover, the appellant-company cannot be said to be a science or technology ins .....

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are a science or technology organization wholly owned by the appellant-company and that their R&D activities are financially supported by the appellant-company, we are not inclined to deem the latter to be a science or technology institution or organization. The two companies are distinct legal entities and, therefore, the functional character of one cannot be claimed by, nor infused into, the other. The submissions made in this context by the learned JCDR seemed to suggest that the doctrin .....

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s cannot constitute "scientific or technical consultancy" as defined under Section 65 of the Finance Act, 1994 merits acceptance. This argument also stands fortified by the view taken in Matrix Laboratories case wherein it was held that "scientific or technical consultancy" was not involved in sale of entire technology for a consideration. 7.5 This above view of Tribunal was followed by this Bench in the case of Universal Pharmacy Final Order No. A/204-205/15 dated 23.1.2015, .....

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aments Pvt. Ltd. On this factual matrix, we find that the judgement of the Tribunal in the case of Modi-Mundipharma Pvt. Ltd. (supra) squarely covers the issue in favour of the appellants. We re-produce the paragraph 6: "6. We have carefully considered the submissions from both sides. We also perused the agreement and the show cause notice. In the show cause notice it is alleged that the appellant was granted exclusive right to manufacture, use and sell within the territory, the preparation .....

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