Appellate Tribunal allows refund for service tax on technical know-how purchase

The Appellate Tribunal CESTAT, New Delhi allowed the appeal, granting refund of service tax paid during the investigation of liability for purchasing technical know-how. The Tribunal determined that the agreement was for Consulting Engineering Service, making it subject to service tax. However, upon analyzing the agreement, it was found that the transaction involved an exclusive license for manufacturing CNC Internal Grinding Machines, not consultancy services. Therefore, the appellant was deemed eligible for a refund as no service tax was applicable based on the agreement's nature.

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Issues: Denial of refund of service tax paid during investigation of liability for purchase of technical know-how; Interpretation of agreement for Consulting Engineering Service; Refund eligibility based on nature of agreement.

Analysis:
1. The appeal before the Appellate Tribunal CESTAT, New Delhi was against the denial of a refund of Rs.1,56,250/- paid by the appellant during the investigation of service tax liability related to the purchase of technical know-how from M/s. Lizzini SPA.

2. The impugned order concluded that the agreement between the parties was for Consulting Engineering Service, making the service liable to service tax.

3. Upon hearing both sides and examining the record, the Tribunal analyzed the relevant portions of the agreement to determine the nature of the transaction.

4. The agreement highlighted the grant of an exclusive license, technical information, and assistance for the manufacture and sale of CNC Internal Grinding Machines 'Polar model and its variants'. The agreement did not involve any consultancy element.

5. Consequently, the Tribunal held that no service tax was payable by the appellant as per the agreement's nature. The amount paid during the investigation period was deemed refundable. The impugned order was set aside, and the appeal was allowed, granting consequential relief to the appellant.

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