Judgment:
1. The lower authorities have demanded service tax of Rs. 20,06,457/- from the appellants on an amount of royalty of Rs. 4,01,29,140/- paid by them to M/s. Mitsubishi Motor Corporation, Japan (MMC, for short).
The present application seeks waiver of pre-deposit and stay of recovery in respect of the said amount of tax as also in respect of the amounts of penalties imposed on the assessee.
2. After examining the records and hearing both sides, we find that the above amount of 'royalty' was paid in August-October, 2002 in terms of Article 4.1(2) of the "Licence and Technical Assistance Agreement" entered into between the assessee and M/s. MMC. After a perusal of the agreement, we find that the assessee was given liberty to procure certain parts of the "licensed product" (cars) indigenously and, in that event, royalties shall be paid to M/s. MMC at 5% of the FOB value of such parts deleted from the 'full CKD pack on licensed vehicles'. It further appears from the agreement that it was incumbent on the assessee to consult M/s. MMC before such indigenous procurement of vehicle parts vide Article 2.1 of the agreement. It was open to them to obtain M/s. MMC's concurrence for indigenous procurement of such parts in terms of "MMCKD Procedure Manual". We wanted to get at the provisions of the said "Procedure", but learned Senior Counsel has not been able to furnish a copy of the manual. We are constrained to draw adverse inference against the appellants on account of this. Prima facie, it appears that an element of consultation was involved in the indigenous procurement of vehicle parts by the assessee. Obviously, M/s. MMC were consulted for the procurement of the parts during 2000 - 2001 (period of dispute), for which the above royalty was paid. The appellants do not seem to have prima facie case. Therefore, we direct them, in a lenient approach, to pre-deposit only 25% of the service tax amount, which shall be made within four weeks. Report compliance on 7th September, 2006.