2005 (12) TMI 567

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....d into an agreement with M/s. Saporiti, Italy (a foreign company) on 23-11-1998 for availing the benefit of technical know-how for manufacture of furniture and also sale thereof in India. The agreement entered into by them reveals the following two aspects : (1)     Clauses 13 to 15 of the agreement refers to the technical know-how rendered by the foreign company against a lump sum consideration of US $ 90,000. (2)     Clause 16 relates to the payment of royalty on all items of furniture manufactured and sold by the Indian company with the help of know-how received from the foreign company @ 5% of the ex-factory sale price of such products invoiced by the Indian company. 2. A....

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....ates the grounds of appeal. He has clarified that the limited issue here is whether rendering technical know-how amounts to rendering service as a consulting engineer. He refers to the Distribution and Technical Collaboration Contract (DTCC) entered into between the two parties and points out that on 16-8-2002 an amendment has been brought in the Service Tax Rules which makes the service recipient liable to pay service tax if the service provider were in a foreign country. According to him royalty is a consideration for service and hence it represents the value of service. The contention of the learned Representative is that in this case particularly the rendering of technical know-how amounts to a service. On being asked, he also clarifies....

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.....-Del.) according to which leasing on sale of trademark is merely a transaction in tangible property and not a consultancy or advice. Service tax is not payable in respect of receipts under agreement allowing use of trade mark to other manufacturers. 4. Heard both the sides. A careful reading of the contract (DTCC) reveals that what was charged by the foreign company is actually in a technical know-how fee and this amount was to be paid initially by the respondents and as regards the royalty is concerned this was to be paid by the respondents @ 5% of the ex-factory price of their clearance in every quarter. This was also paid for their right to use the brand name "Saporiti Claasics". The learned Consultant to the respondents relies ....