2015 (1) TMI 187

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.... Licensing Agreement with Schenectady International Inc (SII) for supply of technical knowhow and technical services. Under the Agreement, SII was to render certain technical services under Article 5. The appellants were to pay a lump sum of US$ 500000 for transfer of technical knowhow under Article 7.1 and royalty at the rate of % of Net sales under Article 7.2 for receiving technical services from SII. Initially, the show cause notice had also demanded duty on the technical knowhow. However, Commissioner dropped this amount of the demand. He confirmed the demand on royalty for the years 1999-2000, 2000-2001, 2001-2002 and on the development expenses incurred in India for converting the know how into manufacturing facility. The demand on a....

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....fact that these expenses were incurred by the appellant in India and were not paid to SII, proves that no service has been rendered to the appellant. There is no finding whatsoever by the Commissioner as to why service tax should be demanded on these expenses. At paragraph 33 of the order, the Commissioner himself while referring to the licensing agreement states that the expenses are to be borne by the assessee for the development of the products as per the technical know-how. On the other hand, the appellants have furnished a certificate from the Chartered Accountant certifying that the amount relates to expenses for completing the technology into manufacturing facility and the same have been incurred by the appellants and no payment has ....