2008 (1) TMI 220 - AT - Service Tax

CESTAT Mumbai: Waiver of Service Tax on Royalty

The Appellate Tribunal CESTAT, Mumbai found a prima facie case for waiver of service tax and penalties on royalty paid for license to use know-how, ... Waiver of provisional tax demand - stay of recovery pending appeal - service tax on royalty for licence to use know how treated as consulting engineer services - prima facie case for waiver - requirement that show cause notice must encompass proposed apportionmentWaiver of provisional tax demand - prima facie case for waiver - Application for waiver of service tax and related penalties was allowed prima facie and waiver granted pending appeal. - HELD THAT: - The Tribunal found that the applicant had made out a prima facie case for waiver by relying on earlier Tribunal decisions where similar disputes about classification of payments had been resolved in favour of the assessee. In particular, the Tribunal noted absence of material on record to rebut the assessee's stand that the foreign payee was not an engineering firm and that the original show cause notice proposed levy only under consulting engineer services. On this basis the Tribunal concluded that the circumstances justified waiver of the demanded service tax and the attendant penalties pending adjudication on appeal. [Paras 2, 3]Service tax and penalties waived prima facie and recovery stayed pending appeal.Service tax on royalty for licence to use know how treated as consulting engineer services - requirement that show cause notice must encompass proposed apportionment - The Tribunal held prima facie that the Commissioner's proposal to apportion payments between consulting engineer services and intellectual property services went beyond the scope of the show cause notice. - HELD THAT: - The Tribunal observed that the show cause notice had proposed levy only under consulting engineer services, and that the Commissioner's subsequent finding of apportionment between consulting engineer services and intellectual property right services, prima facie, exceeded the allegations in the notice. This conclusion formed part of the reasoning for granting the waiver and stay, since the levy as framed in the notice did not encompass the apportionment now sought by the revenue. [Paras 2]Finding of apportionment prima facie goes beyond the show cause notice and was a reason to restrain recovery.Final Conclusion: The Tribunal waived the service tax demand and the penalties and ordered a stay on recovery of the disputed amounts pending disposal of the appeal. The Appellate Tribunal CESTAT, Mumbai heard a case regarding waiver of service tax and penalties on royalty paid for license to use know-how, treated as consulting engineer services. The Tribunal found a prima facie case for waiver based on previous orders and stayed the recovery of service tax and penalties pending appeal.