TMI Blog2018 (4) TMI 1387X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that The very fact that all these agreements talk about the foreign companies as “licensor” itself is revealing. In a typical agreement for consultancy service, there will be no licensor or licensee with transfer of licensed process technology or proprietary technical information. Demand do not sustain - appeal allowed - decided in favor of appellant. - Appeal No. ST/87733/2014 - A/86072/2018 - Dated:- 19-4-2018 - Shri Ramesh Nair, Member (Judicial) And Shri CJ Mathew, Member (Technical) Shri M.H. Patil, Advocate for Appellant Shri M.P. Damle, Assistant Commissioner (AR) for Respondent ORDER Per : Ramesh Nair The facts of the case are that the appellant have entered into agreements with various foreign entities for obtaining licence to use technical know-how and technical information and also various engineering services, in connection with setting up of their manufacturing plant/refineries. The Revenue was of the view that the appellants received taxable service under the category of Consulting Engineering Service in terms of Section 65(31) of the Finance Act, 1994 read with Section 66A of the Finance Act, 1994 and Rule 2(1)(d)(iv) of Service Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is owned by the foreign companies. The technology and production process of various products was developed by the foreign companies and the same is supplied to the appellant in connection with setting up of refinery in India. Essentially, the agreement is for such transfer of technical know-how. Thus, any engineering service, technical assistance and guarantees provided by the suppliers of such technical know-how cannot be brought under the tax category of consulting engineer service. 2.5 Thus, the foreign collaborators are thus not covered under the category of Consulting Engineer . These foreign companies are manufacturers of various final products. They have developed certain technical know-how and process technology. The appellant is getting such technical know-how and the collaborators also provided engineering service in pursuance of transfer of such technical knowhow. It is pertinent to note that Ld. Revenue has been able to establish with any evidence that the foreign companies are in fact falling under the category of Consulting Engineer as defined under Section 65(31). The dominant object of foreign collaborator is to transfer the technical know-how to the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside India. (v) Various circulars as well as clarifications were issued by Govt. regarding the taxability under reverse charge mechanism which created confusion amongst the appellants regarding the taxability under reverse charge mechanism. (vi) Due to conclusion and clarification thereon it is clear that there had been a bonafide belief of non-taxability of the service provided outside India by overseas parties till the Hon ble Bombay High Court judgment dated 11.12.2008 in the case of Indian National Shipowner s Association [2009 (13) STR 235 (Bom)] as upheld by Hon ble Supreme Court on 14.10.2009 [2010 (17) STR J-57] and thereafter CBEC Circular dated 29.09.2011 [2011 (24) STR C-77]. The period involved in the present case is 18.04.2006 to 30.09.2009 which is much prior to the judgment and the Circular. 2.8 The Appellants submit that the entire situation is revenue neutral and hence on this ground also demand is not sustainable, based on following submissions: (i) Entire service tax payable was available as cenvat credit to the appellants as the said services are availed for the conduct of business activity of manufacturing activity of the appellants and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the relevant findings on the Tribunal s order is reproduced:- 4. We have heard both the sides and perused the appeal records. It is necessary to examine the terms of agreements entered into by the appellant with various foreign collaborators. The agreement dated 06/11/1997 is with Kinetic s Technology International BV, Netherland. It stipulates that M/s Kinetic (Licensor) has developed technology for the production of Hydrogen, who is also owner and controls process technology relating to a process for the production of Hydrogen. The appellant intended to install and operate under license from the licensor a hydrogen production unit to be installed in its refinery located in Madhya Pradesh. In this connection, the appellant wishes to receive certain basic engineering services, technical assistance and guarantee with respect to the plant they are putting up. The licensor is willing and has the right to grant such right to utilize the process technology and to render basic engineering services and technical assistance and give such guarantee on the terms and conditions mentioned therein. 5. Agreement dated 01/09/2006 is between appellant and UOP LLC, U.S.A. It stipu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal information and various connected services to the appellant in connection with setting up of their plant in Madhya Pradesh. The Original Authority mainly focused on the engineering services, which are a follow up of the transfer of technical knowhow, to conclude that the appellants received engineering consultancy service only. We are not in agreement with such conclusion. The very fact that all these agreements talk about the foreign companies as licensor itself is revealing. In a typical agreement for consultancy service, there will be no licensor or licensee with transfer of licensed process technology or proprietary technical information. The essence of the agreement as could be seen from the narration above is for transfer of technology process. The Tribunal had occasioned to examine similar issues involving technical collaboration and transfer of intellectual property right from foreign companies to Indian recipient. It was held that when the agreement is for transfer of exclusive/nonexclusive technical 7 ST/58303 of 2013 knowhow the consideration received cannot be taxed under consultancy service. Reference can be made to the decisions in Yamaha Motors (I) Pvt. Ltd. vs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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