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2016 (1) TMI 821 - CESTAT NEW DELHI

2016 (1) TMI 821 - CESTAT NEW DELHI - TMI - Import of IPR services - reverse charge - Levy of service tax on Technology Transfer fee paid to Whirlpool, USA - Non payment of service tax on Brand Fee - Cenvat Credit - non-maintenance of separate records for taxable and exempted services - Held that:- It is evident that the agreement is entered for the purpose of supply of technology/technical assistance/information by Whirlpool, USA to the appellant and the remuneration received by Whirlpool, USA .....

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x on Brand fee - Held that:- service tax on IPR service is exempt only to the extent of the R&D cess paid towards the import of technology under the provisions of Section 3 of the R&D Cess Act, 1986 in relation to such intellectual property service (emphasis added). It is admitted that no service tax was paid under IPR service on the amount paid for such technology transfer which means that the appellant also was of the view that such technology transfer was not in relation to IPR service. Indee .....

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y the orders of the superior adjudicating authority like CESTAT and the observations of the Committee of Chief Commissioners are of administrative nature and not of quasi-judicial nature to have any binding effect on adjudicating authority. Thus there is no doubt that even in the opinion of the adjudicating authority, component of demand confirmed on account of non-maintenance of separate accounts of taxable and exempted services is not sustainable.

Extended period of limitation - It .....

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ssee. - Appeal No. ST/277/2012-CU(DB) - Final Order No. 53908/2015 - Dated:- 3-12-2015 - MR. G. RAGHURAM, PRESIDENT AND MR. R.K. SINGH, MEMBER (TECHNICAL) For the Petitioner : Shri Tarun Gulati, Advocate And Shri Kishore Kumar, Advocate For the Respondent : Shri Amresh Jain, DR ORDER PER R.K. SINGH : Appeal is filed against order in original dated 29/11/2011 in terms of which service tax demand of ₹ 77,56,528/- for the period April 2005 to March 2008 was confirmed along with interest and p .....

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ion 75 of the Act; (iii) Cenvat credit of ₹ 22,29,753/- for non-maintenance of separate records for taxable and exempted services under Rule 14 of Cenvat Credit Rules, 2004 (CCR) and Section 73 of the Finance Act, 1994 ( the Act ) along with appropriate interest under Section 75 of the Act. 3. The appellant, apart from manufacturing goods, is also engaged in providing taxable services. It is also registered as input service distributor. The adjudicating authority confirmed the impugned dem .....

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services and has not maintained separate accounts for dutiable and exempted services. b. The exception provided under Rule 6(6) of the CCR is not applicable in case services are cleared for export under the Export of Services Rules, 2005. c. The Appellant is not authorised to avail credit of more than 20% of Service Tax payable on taxable services for the period April 207 to March 2008. (iii) The deduction of R&D cess by the Appellant from service tax paid on brand fee under IPR services for .....

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egory of intellectual property rights service. (iv) Commissioner did not take into account that the benefit of notification 17/2004 - ST was admissible in respect of R&D cess paid on technical transfer fee. (v) Extended period is not invocable as there was no suppression or wilful misstatement and there is no finding that there was any wilful mis-statement or suppression with intent to evade service tax. (vi) An order passed without taking into account the contentions of the appellant is bad .....

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sions of the appellant were not taken into account while confirming the demand under this head. The agreement between Whirlpool Corporation, USA and the appellant clearly shows that it was an agreement for technology transfer and not for intellectual property. As per the agreement the purpose was supply of technology/information available with Whirlpool USA and therefore does not fall within the scope of intellectual property right. It was paying service tax on the brand fees under intellectual .....

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al transfer fee and relating to R&D cess were similarly raised earlier in a show cause notice dated 17/10/2008 for the period 2005 06 and 2006 07 and therefore the extended period cannot be invoked as in respect of these two components of demand, Revenue was already aware of the facts. The appellant cited several judgements in support of its proposition which will be duly adverted to in due course. 5. Ld. Department representative contended that: (1) In the ST 3 returns filed by the appellan .....

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he brand fees paid by the appellant. 6. We have considered the contentions of both sides. As regards the component of demand pertaining to excess utilisation of CENVAT credit (beyond 20%) on the ground that the appellant provided taxable as well exempted services and did not maintain separate accounts, and therefore utilisation of CENVAT credit to the extent of ₹ 22,29,753/- was in excess of what was permitted in terms of Rule 6 of the CENVAT Credit Rules 2004, the appellant has vehemently .....

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eferred to by the appellant, the appellant maintained that it was not providing any exempted service and the Revenue could not show copies of the ST3 returns referred to in the show cause notice to substantiate its contention. We may however hasten to add that an ST -3 return cannot be a conclusive evidence of providing/not providing exempted service. The adjudicating authority in its order has recorded the following finding with regard to this issue: The SCN has not specified as to which servic .....

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ating authority has not been accepted in review in noticees similar case for previous period. In view of the foregoing and guided by the principal of judicial discipline, I am bound to adopt the views taken in review by the Committee of Chief Commissioners and hold that the notice is providing exempted service along with taxable services and hence, they were not permitted to avail/utilise in excess of 20% of Service Tax paid on taxable services since they were not maintaining separate records. .....

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Commissioners are of administrative nature and not of quasi-judicial nature to have any binding effect on adjudicating authority. Thus there is no doubt that even in the opinion of the adjudicating authority, component of demand confirmed on account of non-maintenance of separate accounts of taxable and exempted services is not sustainable. 7. As regards the demand under IPR service on technology transfer fee, we have perused the agreement relating thereto entered into between Whirlpool Corporat .....

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or convenience: ARTICLE 1 6. The term Technical Assistance shall mean the supply by WHIRLPOOL to WOI of specific information and services relating to a Product based on the Technology supplied under Article II so as to allow WOI to design, manufacture and service such appliance or sub-assembly, and to have the WOI parts suppliers make Parts or Sub-Assemblies, therefore, Technical Assistance includes, but is not limited to, the items set forth in EXHIBIT B attached hereto. 7. The term Technology .....

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er programs and processes, trade secrets, know-how, drawings specifications, lists of materials and other written or machine readable technical or business information relating to the design, manufacture or service of the Products. ARTICLE-II Supply of Technology 2.1 Subject to the limitations set forth below in Article IV and Section 2.3 of the Article II, WHIRLPOOL agrees to make available to WOI, all of its Technology, whether developed or acquired, and hereby grants to WOI an exclusive licen .....

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therefore, and to have WOIs parts suppliers make Parts or Sub-Assemblies for WOI to be assembled into Products by WOI, or for sale by WOI as repair parts for Products manufactured or assembled by WOI. ARTICLE VII Royalties 8.1The products shall be deemed to have been sold, and royalties as specified in this Section shall accrue, when the Products are billed by WOI, if any Products are sold by WOI to any affiliated or related persons, then the royalties payable hereunder shall be computed on th .....

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ns made therefrom for determining the net ex-factory sales price and such other particulars as WHIRLPOOL may reasonably request to enable it to determine and verify the royalties payable to it under this Agreement. Each statement, together with the total amount of the royalties due, shall be delivered to WHIRLPOOL within forty five (45) days from the end of the quarter covered by such statement. 8.3 WOI shall, during the term of this Agreement and for one year after expiration or termination her .....

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ted States Dollars at such place as may be designated by WHIRLPOOL from time to time. WOI shall apply to the Reserve Bank/Authorised Dealer in Foreign Exchange for permission to remit the sums due to WHIRLPOOL as soon as possible and shall pursue all such applications diligently. It is evident that the agreement is entered for the purpose of supply of technology/technical assistance/information by Whirlpool, USA to the appellant and the remuneration received by Whirlpool, USA is only for the use .....

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t;intellectual property service" means, - (a) transferring, 3[temporarily;] or (b) permitting the use or enjoyment of any intellectual property right;] The appellant is also paying to Whirlpool, USA brand fee on which it is discharging service tax. The amount on which service tax has not been paid relates to technical assistance and supply of technology by Whirlpool USA in terms of the said agreement. Transfer of technology and technical assistance do not fall in the ambit of intellectual p .....

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ertain Intellectual Property Rights (i.e. IPRs) such as patents, copyrights, trademarks and designs. The definition of taxable service includes only such IPRs (except copyright) that are prescribed under law for the time being in force. As the phrase law for the time being in force implies such laws as are applicable in India, IPRs covered under Indian law in force at present alone are chargeable to service tax and IPRs like integrated circuits or undisclosed information (not covered by Indian l .....

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nt between the Noticee and Whirlpool, USA with a reading of the above mentioned definitions clearly establishes that Technical Transfer Fee is eligible to Service Tax under Intellectual Property Service and accordingly Service Tax on the same is recoverable from the Noticee. As is evident, the Commissioner has not taken into account the contentions of the appellant and has come to summary conclusion that technology transfer fee is liable to service tax under Intellectual Property Service. We fin .....

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the ambit of intellectual property service as there is no law governing trade secrets/confidential information in India. 8. Coming to the demand on account of deduction of R&D cess from service tax paid on brand fee under IPR service, we notice that notification No. 17/2004 dated 10/09/2004 states as under: On exercise of the powers conferred by sub-section (1) of Section 93 of the Finance Act, 1994 (32 of 1994), the Central Government being satisfied that it is necessary in the public inte .....

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