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Badve Helmets Pvt. Ltd. Versus Commissioner of Central Excise, Aurangabad

2017 (11) TMI 288 - CESTAT MUMBAI

Intellectual property rights service - scope of service - failure to pay service tax on the provision of technical know-how - time limitation - Held that: - The appellants have relied on the decision of the Tribunal in the case of Mormugao Port Trust Versus Commissioner of Customs, Central Excise & Service Tax, Goa- (Vice-Versa) [2016 (11) TMI 520 - CESTAT MUMBAI] to assert that any payment made by a joint venture to participating company cannot be treated as consideration for the service. It is .....

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nt venture in the ratio of 51%, 35% and 14% respectively. Any share of the profit if distributed has to go to each of the partner in the ratio of their shares. In the instant case, Vemmar SRL, Italy is receiving the said amount. Thus, the payment made to Vemmar SRL, Itay cannot be considered as share of its profit of the joint venture. Thus, the facts are different in the instant case and therefore, the decision of the Tribunal in the case of Mormugoa Port Trust (supra) cannot be applied to the .....

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find that the services received by the noticee includes Product &Process Technology required for manufacture of helmets. The JVA allows transfer of services on temporary basis and those services appears to be provided by a person who has established a business or has a fixed establishment from which the service is provided and his permanent address or usual place of residence is outside India. Under these facts, I hold that the services received by the notice are falling under the category of ta .....

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d that: - availability of credit to the appellant of such duty paid has not been examined by the impugned order. We are of the view that the said issue is an important issue which needs to be examined before any findings on invocation extended period of limitation are given. The revenue neutrality has an implication on the invocation of extended period of limitation. - Penalties - invocation of section 80 - Held that: - the said issue also needs to be decided after examining the issue of rev .....

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nts. However written submissions were given. In the written submissions the only argument is that their case is covered by the decision of the Tribunal in the case of Mormugoa Port Trust - 2016-TIOL-2843-CESTAT-MUM. A perusal of the appeals show that the appellant company is a joint venture between Badve Helmets India Pvt. Ltd. and M/s.Vermmar SRL, Italy and Kalyan Consultants (Madras) Pvt. Ltd. The joint venture companies were floated as per the joint venture agreement dated 29/07/2006 and the .....

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d of service tax was raised. The appellant paid the said amount along with interest also and obtained registration under service tax. It has been argued in the said appeal that since M/s.Vemmar SRL, Italy has subscribed to the share capital of the appellant company it cannot be said that the relations between M/s.Vemmar SRL, Italy and the appellant company is of service provider and service recipient. The demands were confirmed by the lower authorities. The appellant has argued that the Commissi .....

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tellectual Property Rights Service" within the meaning of Section 65 (55b) of the Finance Act, 1994. It has been argued that clause (55b) of Section 65 of the Finance Act, 1994 defines "intellectual property services" means temporarily transferring or permitting the use or enjoyment of any "intellectual property rights". It has been argued that there is not temporary but permanent transfer of technical know-how as detailed in article IX of the agreement. It has been argu .....

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the issue of limitation as the entire demand has been raised beyond the normal period of limitation. It has been argued that the agreement was presented to the Superintendent (Preventive) on 02/01/2008 and in these circumstances, the demand show-cause notice should have been issued before April 2008, i.e. within one year of the knowledge of the department. The show-cause notice in the instant case was issued on 28/03/2010 invoking extended period of limitation. The second show-cause notice was .....

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esign and drawings is not the share of their profit but a consideration for the service provided. It is pointed that share of profit would come on account of share holding of each of the joint venture partners. 4. We have considered rival submissions. The appellants have relied on the decision of the Tribunal in the case of Mormugoa Port Trust (supra) to assert that any payment made by a joint venture to participating company cannot be treated as consideration for the service. It is seen that th .....

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ty services rendered by it and that the royalty earned by it was infact its share of revenue from services which were jointly rendered by the Assessee and SWPL. It was submitted that the principal-client relationship which is the basic tenet for applicability of service tax was not existing between the Assessee and SWPL. Besides resisting the demand on merits, it was also submitted that the entire demand was barred by limitation as the revenue was in the knowledge of the agreement and that anoth .....

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e of the profit if distributed has to go to each of the partner in the ratio of their shares. In the instant case, Vemmar SRL, Italy is receiving the said amount. Thus, the payment made to Vemmar SRL, Itay cannot be considered as share of its profit of the joint venture. Thus, the facts are different in the instant case and therefore, the decision of the Tribunal in the case of Mormugoa Port Trust (supra) cannot be applied to the instant case. 4.2 It is seen that the issue regarding permanent tr .....

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er F.No.82/8/2004-TRU dated 10/09/2004. In this regard I reproduce the said para 9.2 which is also being referred upon by the appellant: "9.2 Permanent transfer of "intellectual property right" does not amount to rendering of service. On such transfer, the person selling these rights no longer remains a holder of "intellectual property right" so as to come under the purview of taxable service. Thus, there would not be any service tax on permanent transfer of IPRs." .....

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one and in any market or geographical location at their own will and convenience. (b) On study of the joint venture agreement, I find that "Article XXIV - Confidentiality of the agreement clearly provides that The parties shall cause an appropriate confidentiality agreement to be entered into with the JVC which would ensure that all such Confidential information shall be treated by the JVC as confidential and shall not be disclosed to any one." Hence it is seen that the vendors have no .....

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laid down at para 9.1 to para 9.4 of the said Article IX of the JVA dt. 29/07/2006. That the effect of the said provisions is also to prevent competition between the parties to the agreement does not take away anything from the fact that after such agreement the use of said "intellectual property" is not free and is in fact continues to be severely restricted in the hands of the appellant. The terms and conditions, in certain situations, include buying of toolings or payment of royalty .....

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ectual property". Article XII Non competition and name protection, ensures that the intellectual property so transferred cannot be used by the appellants at their own free will where the interest of M/s.Vemmar SRL, Italy may be compromised. Further in terms Article XXVII General Provisions even the contents of the Agreement and the ancillary agreements shall not be disclosed without the prior agreement of the vendor. Further as per Article XXII para 22.4 the agreement or the consummation of .....

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or as envisaged in para 9.2 of letter F.No.82/8/2004-TRU dated 10/09/2004. 11. As regards the second point of determination, I find that the transfer in issue includes product and process technology and technical information pertaining to design, manufacture and assembly of the authorized products and component parts. A detailed list of some elements of the transfer is provided in Article IX of the JVA. The agreement clearly says that the technical information is not limited to the said list. Th .....

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ioned in para 9.1 of letter F.No.82/8/2004-TRU dated 10/09/2004 and they have tried to equate their acquisition of "intellectual property rights" with only undisclosed information by deliberately disregarding the specific wordings of relevant extract of Article 9 of the JVA Section 65 (55a) of the Finance Act, 1994 and para 9.1 of letter F.No.82/8/2004-TRU dated 10/09/2004. I agree with the summarization of findings as at para 11.8 of the impugned OIO and find them to be well substanti .....

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lude copyright. In the present case I find that the services received by the noticee includes Product &Process Technology required for manufacture of helmets. The JVA allows transfer of services on temporary basis and those services appears to be provided by a person who has established a business or has a fixed establishment from which the service is provided and his permanent address or usual place of residence is outside India. Under these facts, I hold that the services received by the n .....

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able to service tax. The IPR received by the notice are not IPRs like integrated circuits or undisclosed information and hence I conclude that these are not covered under exempted services." 4.3 We find that the impugned order logically explained the issue and we agree with the same. We agree with the findings that there is no permanent transfer of IPR in the instant case. No new arguments have been raised on merits of the case. 5. Coming to the invocation of extended period of limitation, .....

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