TMI Blog2005 (2) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... ian Company). This joint venture company, which was set up for manufacture, in India, of friction materials for clutch systems for motor vehicles, entered into a 'Technology Licence Agreement' with the French company on 11-2-1998. Under Article 2 of this agreement, the French company was to transfer the required technology to the respondents (joint venture Company) on an exclusive, non-transferable, non- assignable basis for the purpose of manufacture and sale of the aforesaid products in India. Under Article 12 of the agreement, the respondents were to pay to the foreign company a royalty of 3.75% of the annual net sales value of products sold by the company in India during the seven-year period commencing on 1st January 2000, as considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e corpus of the amount paid by the respondents to the foreign company as consideration for transfer of technology by the latter to the former in terms of Articles 2 and 12 of the agreement. These provisions of the agreement did not refer to any service. The show cause notice, obviously, treated the transfer of technology as a service and brought it within the ambit of "consultancy, advice or technical assistance" within the meaning of these terms occurring in Clause 15 of Section 65 of the Finance Act, 1994. Neither Article 2 nor Article 12 made mention of consultancy, advice or technical assistance. They had only provided for transfer of technical know-how from the foreign company to the joint venture company and for payment of considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of this case, Article 5 or Article 6 provide for technical assistance of the kind taxable under Finance Act, 1994. The fact remains that the basis in the show cause notice for demanding service tax from the respondents was the transfer of technology by the foreign company to the respondents and payment of royalty by the latter as consideration for the transfer. This basis has apparently been given a go-by in the present appeal, wherein a new basis founded on Articles 5 and 6 of the agreement has been made out in support of demand of service tax on the royalty paid by the respondents to the foreign company. This cannot be countenanced for the reasons already noted. The decision of the Commissioner (Appeals) has to be sustained. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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