TMI Blog2009 (4) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... DICIAL MEMBER V.K. Jain for the Appellant. A.K. Prasad for the Respondent. ORDER A.K. Srivastava, Technical Member.- This stay petition has been filed by M/s. Kopran Ltd., Raigad against the Order-in-Original dated 31-3-2008 passed by the Commissioner of Central Excise, Raigad. The Commissioner, vide the impugned order, has confirmed the demand of service tax of Rs. 507.95 lakhs together with interest and imposed equivalent penalty of Rs. 507.95 lakhs under section 78 of the Finance Act, 1994. He has also imposed penalty of Rs.1,000 under section 77 ibid and penalty of Rs. 200 for every day during which such failure continues or at the rate of two per cent, of such tax, per month, whichever is higher, till the date of actual payment of the outstanding amount of service tax subject to the total amount of the penalty payable shall not exceed the service tax payable under section 76 ibid. 2. Heard both the sides and perused the records. 3. The issue involved in the instant case is whether the applicants had provided the services of Scientific or technical consultancy and Market Research Agency and whether they are liable to pay service tax. The case r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... echnology. When the scientific or technical consultancy services were brought under the service tax net in July, 2001, the Tax Research Unit (TRU) in the CBEC issued Circular No. B-11/1/01-TRU, dated 9-7-2001 in which it was clarified that only services rendered by a scientist or a technocrat or science or technological institution or organization are covered under the said head of taxable service. This circular clarified that the said expression should be understood in the context of their commercial use. It further clarified that doctors, medical practitioners, nursing homes, hospitals etc. would not come under the purview of said levy as in common parlance, the said entities are not known as scientist or technocrat or science or technology institution or organization. They are a limited company manufacturing medicaments and can by no stretch of imagination be considered as a scientist or technocrat or a science or technology institution or organization. In support of the same, they relied upon the Tribunal's decision in the case of Mitra Hang (India) Ltd. v. CCE [2008] 15 STT 338 (New Delhi-CESTAT) in which it was held that the manufacturer does not prima facie seem to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but was an agreement merely for transfer of know-how for manufacturing certain formulations and bulk drugs in respect of which the trade mark has been assigned in favour of CHCL. (v) The applicants also placed reliance on the following case laws in support of their contention that transfer of know-how did no envisage, any advice, consultancy or technical assistance: (a) BPL Telecom (P.) Ltd. v. CCE [2007] 8 STT 233 (Bang.-CESTAT); (b) Arvind Fashions Ltd. v. CCE 2007 (7) STR 178 (Trib.); (c) Volvo India Ltd v. CCE - 2007 (7) STR 600 (Trib.); (d) Navinon Ltd. v. CCE 2004 (172) ELT 400/[2007] 6 STT 411 (Mum.-CESTAT); (e) Bajaj Auto Ltd. v. CCE C 2005 (179) ELT 481/1 STT 83 (Mum.-CESTAT); (f) Siemens Ltd. v. CST [2007] 10 STT 421 (Bang.-CESTAT); (g) Ispat Industries Ltd v. CCE [2007] 9 STT 291 (Mum.-CESTAT); (h) Yamaha Motors ( India ) (P.) Ltd. v. CCE 2005 (186) ELT 161 (Trib.-Delhi). (vi) The impugned services would be taxable under the head of intellectual property right (IPR) service, which were brought under the service tax net only with effect from 10-9-2004. The services in question at best be said to be IPR se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2006 as the facts were within the knowledge of the Department. For this, they relied upon the decisions of the Supreme Court in the cases of ECE Industries Ltd. v. CCE 2004 (164) ELT 236 and Nizam Sugar Factory v. Collector of Central Excise 2006 (197) ELT 465 respectively. 6. The learned Jt. CDR took us through the four agreements in question to claim that these were meant for the manufacture of the branded formulations under the advice and technical assistance of the applicants and it is a clear case of providing service under the category of scientific or technical consultancy service . He submitted that one single agreement has been deliberately broken up into four separate agreements to avoid payment of service tax. He also argued that the applicants fall under the category Organization and they are, in fact, a research organization (i.e., a science/technology organization) as they have a 100 per cent subsidiary unit at Navi Mumbai called Kopran Research Laboratories Ltd. He stated that a 100 per cent subsidiary is a part and parcel of the main organization. He contended that the demand is not time-barred in view of the Tribunal's Order No. A 14/09/EB/C-II ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... know-how for manufacturing formulations (ready to use dosages foams) using the bulk drug Atnelol for a consideration and the transferee has for the purpose of the more beneficial use and exploitation of the said know-how for manufacturing formulations requested the transferer to provide technical know-how for the bulk drugs used in the manufacture of said formulations [Emphasis supplied] This means that the transfer of technical know-how of formulations was of no use unless the transfer of technical know-how for the bulk drugs was also effected. Thereafter, there was another agreement called the Formulations Supply Agreement by which the applicants were required to not only manufacture the formulations in the applicant's own factory, but also to provide technical assistance and advice and training to officers of CHCL. From the above, it appears that all the 4 agreements referred to above were meant for the manufacture of the branded formulations under the advice and technical assistance of the applicants. Had CHCL wanted to start manufacturing the Aten formulations on their own, they would have sought the assistance/service of a scientific or technical consultant, who woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icants is not relevant. 9. As regards the taxability under the category Market Research Agency , the definition under section 65(41) of the Finance Act, 1994, of the service is as under:- any commercial concern engaged in conducting market research in any manner, in relation to any product, service or utility, including all types of customized and syndicated research services. As per para 2.2 (page 72 of the appeal papers) of the revised agreement of marketing assistance, the following marketing assistance services were to be provided by the applicants, viz. (a) product promotion services (b) market development (product growth achievement services). Para 5.1.1 of the marketing assistance agreement (page 73) lists the services covered under the category 'product promotion services' and para 5.2.1 lists the services required under the category 'market development services'. A perusal of these services prima facie reveals that these were nothing but the service of a market research agency as it involved the applicants to conduct market research in relation to their product Men as also for the new dosage forms and strengths of the product proposed ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
