TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 685
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.... No. AAACC0457CST005. 2.1 The entire proceedings are a fall out of the audit conducted at the premises of the appellant for the period 2008-09 and 2009-10 during the year 2011. Pursuant thereto, Show Cause Notice dated 11 October 2012 was issued to the appellant invoking extended period of limitation, wherein merely on the basis of the figures appearing in the Trial Balance and consolidated Balance Sheet of the Appellant prepared by its corporate office located at Kolkata, service tax to the tune of Rs.10,47,49,041/- was demanded from the Appellant for the period 2007-08 to 2011-12 on the following counts : (i) Tax on commission received on ocean freight under the category business auxiliary services on forward charge basis; (ii) Tax on 'Royalty income' appearing in the Balance Sheet under the category 'Intellectual Property Service' on forward charge basis; and (iii) Tax under reverse charge on expenses incurred in foreign currency towards travelling expenses (Tour Operator Service), professional fees (Technical Consultancy Service), and export sales expenses (Business Auxiliary Service). 2.2 The Appellant duly replied to the show-cause notic....
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....penalty under Section 76 for the period 01.04.2007 to 09.05.2008 along with a general penalty of Rs.5000/- under Section 77 of the said Act against the appellant. 2.8 Being aggrieved with the said order, the appellant is in appeal before us. 3. At the outset, the ld.Counsel for the Appellant submits that the demand on account of royalty income has been computed merely on the basis of the figures appearing in Schedule 25 of the consolidated Balance Sheet of Graphite India Limited. It is submitted that the Corporate Office of the Appellant had entered into a Know How Licensing Agreement dated 09 Sept 2004 with Graphite COVA GmBH ('Licensee'),whereby the Licensee was permitted to use the technical know-how owned by the Company for consideration as specified in Annexure 2 to the said agreement. The invoices for the said know-how transfer were raised by the Corporate Office on a quarterly basis, and the corresponding royalty amounts were remitted directly by the Licensee into the bank account of the Corporate Office. 3.1 He further submits that the Company, Graphite India Limited, of which the Appellant is one of the manufacturing units, has a pan-India presence with mult....
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....under any law for the time being in force except copyright. Thus, it implies that only those intellectual property rights which are covered under any Indian law in force shall be chargeable to service tax. The said position has also been fortified by the Board Circular No. 80/10/2004-ST dated 17/9/2004(Pg. 18/C) which categorically clarifies that the definition of taxable service includes only such IPRs (except copyright) that are prescribed under law for the time being in force. 3.5 It is further submitted that 'Know-how' is a parcel of closely held information relating to industrial technology, sometimes also referred to as trade secret which enables its user to derive commercial benefit from it. The Appellant submits that 'know-how' or 'trade secret' are not covered by any Indian legislation and hence fees received for know-how under the Know How Licensing Agreement is not exigible to service tax under the taxable category "Intellectual Property Services". Reference in this regard is invited to the following judgements wherein Hon'ble Tribunal has time and again consistently held that fees paid for technical know-how is not subjected to service tax. (i) Commissioner ....
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.... of Rule 3(1)(ii) of the said Rules for denying the benefit of export, when the same was never the case of the Appellant. The specific contention of the Appellant that such services qualified as exports under Rule 3(1)(iii) of the said Rules has not even been dealt with when that was always the case of the Appellant. 3.9 He further submits that since, the services are provided to a recipient located outside India and the benefit of such technical knowhow service accrues outside India, the said services would qualify as export of services in terms of Rule 3(1)(iii) of the said Rules. Reference in this regard is invited to the following judgements: (i) M/s. Regent Machine & Servicing Versus Commissioner of Service Tax, Kolkata [2024 (11) TMI 1134 - CESTAT KOLKATA]; (ii) Gap International Sourcing (India) Pvt. Ltd. Versus Commr. of S.T., Delhi [2015 (37) S.T.R. 757 (Tri. - Del.)]. 3.10 He further submitted that the demand raised in respect of export sales expenses is liable to be set aside in toto in so far as the Department has failed to specify the sub-clause of the Business Auxiliary Service under which the said expenses are sought to be taxable. 3.11 It ....
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....inabove and, in any event, the said expenses cannot be made taxable under the category BAS on reverse charge. 3.16 Without prejudice to the submissions made hereinabove and, in any event, he submits that the said expenses are not liable to service tax under reverse charge, in as much as they predominantly pertain to activities such as storage charges, demurrage, detention, quality claimrelated expenses (including supply of free-of-cost material, tarpaulin repair, etc.), and other ancillary charges. He submits that expense of such nature does not fall within any of the sub-clauses of the Business Auxiliary services as defined under Section 65(19) of the Finance Act, 1994. These activities do not involve promotion or marketing of goods, procurement of inputs, or any service rendered on behalf of a client, which are the essential elements of BAS. Accordingly, demand of tax on such expenses under BAS is misplaced and liable to be set aside. 3.17 He further submits that a portion such expenses also includes the payment made to service providers located within India. In this regard, it is respectfully submitted that no liability of service tax can arise under reverse charge basis i....
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....78 expressly provides that the provisions of Section 76 shall not apply if penalty is payable under Section 78. Hence, the two provisions are mutually exclusive and penalty under Section 76 is liable to be set aside. Reference in this regard is invited to the judgement of Commr. of C.Ex. vs. First Flight Courier Ltd. [2011 (22) S.T.R. 622 (P & H)]. Therefore, no interest and penalty is imposable when the duty demand itself is unsustainable. 3.23 It is further submitted that when the duty demand is itself unsustainable, no interest and penalty under Section 77 and/or 78 can be demanded from the appellant. Reference in this regard is invited to the judgement of Pratibha Processors vs. Union of India [1996 (88) E.L.T. 12 (S.C.)]. 4. The ld.Authorised Representative for the Revenue has justified the impugned order. 5. Heard both the parties and considered the submissions. 6. On going through the arguments advanced by both the parties and the records placed before us, two issue arises : (a) Whether the appellant is liable to pay service tax on "Royalty Income" earned by the Corporate Office of the appellant, which is having a separate registration, or not ? ....
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....filed any returns with respect to the Registration No. AEAPK6185QSD001. Regarding the reasons for the difference in the value declared in the ST-3 returns filed by them in the Service Tax Commissionerate under Service Tax registration No. AEAPK6185QSD005, he has explained that they have rendered various services such as Road Construction, construction of historical monuments, construction of buildings meant predominantly for use other than for commerce and industry which were exempted from payment of service tax in terms of Sl no 12, 12A, 13 and 29(h) of the Exemption Notification No 25/2012 dated 20.06.2012. We find that inspite of their categorical submission that no taxable service was rendered with respect to the Registration No. AEAPK6185QSD001, the officers of Bolpur Commissionerate proceeded to issue the show cause notice to demand service tax. 8.1. We find that the territorial jurisdiction of Principal Commissioner, CGST & Central Excise, Bolpur extends only to the Districts of Murshidabad, Birbhum, Purulia, Purba Bardhman, Paschim Bardhman and Bankura in the State of West Bengal vide notification No. 13/2017-CE (N.T.), dated 09.06.2017. Thus, we observe that the P....
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....inable. Accordingly, the demand of royalty income confirmed against the appellant is set aside. Issue (b) Whether the appellant is liable to pay service tax under the category of "Intellectual Property Services" for licensing of know-how under the Know-How Licensing Agreement, or not ? 9. The said issue has been dealt with by this Tribunal in the case of Munjal Showa Limited Vs. Commissioner of Central Excise & Service Tax, Delhi (Gurgaon) reported in 2017 (5) GSTL 145 (Tri.-Chan.), wherein this Tribunal has observed as under : "6. On careful consideration of the submissions of both sides, we find that the Design, Trademark, Symbol, Brand Service have not been registered in India. Therefore, whether the royalty paid by the appellant-assessee under Industrial Property Right agreement is liable to service tax under Intellectual Property Rights service or not. For better appreciation of Intellectual Property Right, the definition of the same is reproduced :- Section 65. Definition. - In this Chapter, unless the context otherwise requires, - (55)(a) "intellectual property right" means any right to tangible property, namely, trademarks, de....
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.... conclusion is not legally tenable and is beyond the scope of taxable service as defined in Finance Act, 1994 : "Section 65(105)(zzr) of the Act defines in the taxable IPR service tax as under : "Taxable service" means any service provided or to be provided to any person by the holder of intellectual property right, in relation to intellectual property service; Section 65(55a) of the Act defines 'Intellectual Property Right' to mean as under : "Intellectual Property Right" means any right to intangible property, namely, trade marks, designs, patents or any other similar intangible property, under any law for the time being in force, but does not include copyright" 6. The IPR as defined should be a right under any law for the time being in force. The legal position on this issue has been examined by various decisions of the Tribunal which are as under : (a) Rochem Separation Systems (India) Private Limited v. Commissioner of Service Tax, Mumbai I - 2015 (39) S.T.R. 112 (Tri.-Mum.) [para 8]; (b) Whirlpool of India Limited v. C.C.E & S.T., Delhi - 2016-VIL- 57-CESTAT-DEL-ST [para 7]; (c) Tata Consultancy Services ....