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of <h1>Foreign Company Wins Appeal on Service Tax Liability for Royalty on Technology Transfer</h1> <h3>BETTS UK LTD. Versus COMMISSIONER OF C. EX., GOA</h3> BETTS UK LTD. Versus COMMISSIONER OF C. EX., GOA - 2006 (4) S.T.R. 433 (Tri. - Mumbai) Issues: Stay application for dispensing pre-deposit of duty demanded by lower authority; Liability of service tax on royalty received for transfer of technology and technical assistance.In this judgment, the Appellate Tribunal CESTAT, Mumbai, considered a stay application filed by the appellants seeking to waive the pre-deposit of duty demanded by the lower authority. The appellants, a foreign company, were providing technical know-how, transfer of technology, and services related to the manufacture of products by an Indian company. The royalty received by the appellants at a rate of 4% of the total net sale price of the products was held liable to service tax at 5% and was demanded and confirmed against them.The appellant's advocate argued that the transfer of technology was not a service subject to taxes, citing precedents such as the decision in CC. Chennai v. Veleo Friction Material India Pvt. Ltd. and Turbo Energy Ltd. v. Commissioner of Central Excise. These cases held that royalty paid for the transfer of technology was not a payment for service but a share of the product or profit reserved by the owner for allowing another to use their property. The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) decision supported the appellant's case.The learned Counsel for the Department of Revenue (C.D.R.) agreed that payment of royalty for transfer of technology and technical assistance did not constitute a service, and therefore, the royalty received by the appellant was not liable to service tax. The Tribunal found that the appellant's case was in line with the CESTAT decisions cited and accordingly allowed the appeal, setting aside the Commissioner (Appeal)'s order. The judgment was pronounced in court, concluding the matter in favor of the appellants.
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