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TMI Blog2019 (2) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... oices for receiving the payment from the appellant herein. The department was of the view that the appellants are liable to pay service tax on the said amount paid to M/s. Europlex under 'Scientific or Technical Consultancy Service'. Show cause notice was issued proposing to demand service tax to the tune of Rs. 87,94,070/- for the period October 2007 to April 2008. After due process of law, the adjudicating authority confirmed the demand, interest and also imposed penalties. Aggrieved, the appellants are now before the Tribunal. 2. On behalf of the appellant, ld. counsel Shri R. Sai Prashanth submitted that M/s. Europlex Technologies Limited, Ireland is a wholly owned subsidiary of the appellant. M/s. Europlex is engaged in the design, development and manufacture of embedded control and communication products and software. As per clause 2.3 of the agreement entered into between the appellant and M/s. Europlex, it is agreed that M/s. Europlex shall establish and maintain separate department which will carry on the requirement of research and development on projects and products of the appellant. In clause 3.3 of the agreement, it is agreed that if the development results in any co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sustain. Further, the entire exercise is revenue neutral since if the service tax is paid by them under reverse charge, the appellant would be able to take CENVAT credit of the same being input services. The entire demand is barred by limitation being a revenue neutral situation, the extended period is not invocable. For this, he placed reliance on the decision of the Tribunal in Punjab Chemicals and Corporation Protection Ltd. Vs. Commissioner of Central Excise - 2017 (47) STR 345. 3. The ld. AR Shri A. Cletus supported the findings in the impugned order. With regard to the contention of the appellant that the amount is reimbursable expenses, he argued that there are only two persons in the transaction and therefore the said amount cannot be considered as reimbursable expenses. M/s. Europlex is an independent entity situated in Ireland. The agreement is to pay consideration for the research and development assistance rendered by M/s. Europlex to the appellant. Being a consideration to the service provided, the amount cannot be treated as reimbursable expenses. The argument of the appellant that the transaction does not fall under the definition of Scientific or Technical Consulta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the said case is not applicable to the facts of this case. 5.3 To appreciate the second contention of the appellant that the transaction does not fall within the definition of 'Scientific or Technical Consultancy' services, it is necessary to extract the relevant portion of the agreement, which is as under:- "WHEREAS SBTPL desires to obtain the services of ETL in the performance of research and development services and desires to enter into this MASTER AGREEEMENT FOR RESEARCH AND DEVELOPMENT ASSISTANCE for the products more particularly, described in the Annexure to this Agreement and for such other products as may be required from time to time; and WHEREAS Europlex Technologies Ltd. (ETL) is willing to provide such research and development services and assistance on the terms and conditions set forth in this AGREEMENT. xxx xxx xxx xxx xxx xxx SCOPE / MISSION OF THE AGREEMENT ETL is a subsidiary of SBTPL, with R&D capacities for SBTPL Global business, SBTPL has therefore decided to utilize the R&D capacity of ETL for the global business of SBTPL and also for its AFFILIATES. ETL agrees to establish, maintain and host a separate technology assistance and servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes based on the monthly accounts of ETL. It is estimated that the annual compensation for the R&D support and hosting charges will be Euros 1.71 million. SBTPL reserves the right to audit the records to verify the correctness of allocations to R&D expenses. In case there are any errors related to wrong billings, ETL shall promptly refund and repay to SBTPL the allocation paid in excess." 5.4 Thus, it is seen that the scope of the agreement is that M/s. Europlex, which has R&D capacities has to establish, maintain and host a separate technology department to carry out mission of assistance for research and development for projects / products of appellant and its affiliates. In 3.1 as well as 3.5 of the agreement, it is agreed between the parties that if any intellectual property right results out of the said R&D activity, the same shall belong to the appellant and that M/s. Europlex shall not have any rights whatsoever on such patent or copyrights. The appellants have argued that since the copyrights / intellectual property rights are retained by the appellant, it is actually transfer of technical show-how and therefore there is no advice or consultation or assistance in sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now-how. It is only a technical assistance for research and development activities, which would definitely fall under scientific or technical consultancy service. We hold that the appeal fails on merits. 5.6 The ld. counsel has also argued on the ground of limitation. It is submitted by the ld. counsel that the entire exercise is revenue neutral for the reason that if the service tax is paid under reverse charge, the appellant being service recipient, they would be eligible for credit being an input service. It is correct that during the impugned period there was no embargo in availing credit on service tax paid reverse charge mechanism. The Scientific or Technical Consultancy services being input services, the appellants would be eligible for credit. When appellants are eligible to take credit, there can be no intention to evade payment of tax. The show cause notice for the period October 2007 to April 2008 has been issued on 24.4.2010. Being a revenue neutral situation, as per the decisions of the Tribunal, the demand raised invoking extended period is not sustainable. The appellants had disclosed the amounts in the accounts and financial statement. The issue whether the transac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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