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of <h1>Appellate Tribunal rules no service tax on running royalty for technical know-how transfer</h1> <h3>COMMISSIONER OF C. EX., NOIDA Versus MATSUSHITA TV & AUDIO INDIA LTD.</h3> The Appellate Tribunal CESTAT NEW DELHI ruled in a case involving service tax demand on a 3% running royalty for technical know-how that no levy was ... - Issues Involved: Service tax demand on 3% running royalty for the period 1-3-99 to 31-3-2001.The Appellate Tribunal CESTAT NEW DELHI, in the case involving a collaboration agreement for technical know-how and training for manufacturing Colour T.V. and Audio products, addressed the issue of service tax demand on the 3% running royalty. The appellant contended that since the transfer of technical know-how occurred before the imposition of service tax, the demand was not sustainable. The Commissioner (Appeals) had held that the date of payment for services, not the time of providing the service, was relevant for service tax. The Tribunal examined the definitions of 'Consulting Engineer' and 'Taxable Service' under the Finance Act and concluded that the taxable event is the providing of service, which occurs at a specific time and place. As the transfer of technical know-how happened before the levy of service tax, the Tribunal ruled that no levy was attracted in this case. The Tribunal found the tax demand unsustainable and allowed the appeals of the parties, while rejecting the Revenue's appeals due to the absence of service tax liability.The Tribunal's decision was based on the understanding that the relevant factor for service tax liability is the time of providing the service, not the date of payment. By analyzing the definitions of 'Consulting Engineer' and 'Taxable Service' in the Finance Act, the Tribunal clarified that the taxable event is the provision of service, which must align with the time of the levy. Since the transfer of technical know-how occurred before the introduction of service tax, the Tribunal concluded that no service tax was applicable in this case. The Tribunal emphasized that the Commissioner's focus on the date of payment for services was erroneous, as the critical factor is the time of providing the service. Consequently, the tax demand was deemed unsustainable, and the appeals of the parties were allowed, while the Revenue's appeals were rejected due to the absence of service tax liability.
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