Lumax Samlip Industries Vs. Commissioner of Service Tax - Court Judgment

Excerpt:
1. the appellants had received technical know-how from m/s. samlip industrial co limited, korea on 6.5.1997 under an agreement concluded with the foreign company. the consideration for this service, known as royalty, was paid on 5.09.02, the lower authorities have demanded service tax on this amount from the appellants. hence this appeal.2. ld. consultant for the appellants submits that, at the time when the above service was received from the foreign company, even "consulting engineers service" was not taxable under the finance act, 1994. it is submitted that the lower authorities have treated the transfer of technical know-how as "consulting engineers service" and have demanded tax thereon under the above act by adopting the date of payment of royalty as the relevant date. it is submitted that, in the first instance, "transfer of technology" is not identifiable as "consulting engineers service" inasmuch as the finance act, 1994 has classified "transfer of intellectual property" as a separate taxable service while retaining consulting engineers service under a different category.secondly, it is submitted that, if it be assumed that service tax could be levied on royalty paid for the service received by the appellants, classified as consulting engineers service, no such tax was payable by the appellants inasmuch as, as on the date of receipt of the service, the service recipient was not liable to pay the tax. finally, ld.consultant submits that the challenge against the above demand of service tax is squarely supported by the tribunal's decision in cce, noida v. matsushita tv & audio india ltd. 2006 (1) s.t.r. 162 (tri.del). we have heard id. sdr who reiterates the findings and observations contained in the impugned order.3. after examining the submissions, we find that the issue arising in this case can be settled without reference to any amendments made to the service tax rules, 1994. the service under consideration is transfer of technology by the korean company to the appellants, which took place on 6.5.1997. the consideration (royalty) for that service was paid by the appellants on 5.9.2002. for determination of tax liability, the relevant date is the date on which the service was received by the appellants. this view was held in the case of matsushita tv & audio india ltd. (supra). hence the relevant date in the present case is 6.5.1997. on that date, neither consulting engineer's service nor transfer of intellectual property was a taxable service.4. for the reasons noted above, the appellants are not liable to pay service tax on the royalty paid by them to the korean company for the service rendered by the latter in may, 1997. the impugned order is set aside and the appeal is allowed.

Judgment:
1. The appellants had received Technical know-how from M/s. Samlip Industrial Co Limited, Korea on 6.5.1997 under an Agreement concluded with the foreign company. The consideration for this service, known as royalty, was paid on 5.09.02, The lower authorities have demanded Service Tax on this amount from the appellants. Hence this appeal.

2. Ld. Consultant for the appellants submits that, at the time when the above service was received from the foreign company, even "Consulting Engineers Service" was not taxable under the Finance Act, 1994. It is submitted that the lower authorities have treated the transfer of Technical know-how as "Consulting Engineers Service" and have demanded tax thereon under the above Act by adopting the date of payment of royalty as the relevant date. It is submitted that, in the first instance, "Transfer of Technology" is not identifiable as "Consulting Engineers Service" inasmuch as the Finance Act, 1994 has classified "transfer of Intellectual Property" as a separate taxable service while retaining Consulting Engineers Service under a different category.

Secondly, it is submitted that, if it be assumed that service tax could be levied on royalty paid for the service received by the appellants, classified as Consulting Engineers Service, no such tax was payable by the appellants inasmuch as, as on the date of receipt of the service, the service recipient was not liable to pay the tax. Finally, Ld.

Consultant submits that the challenge against the above demand of Service Tax is squarely supported by the Tribunal's decision in CCE, Noida v. Matsushita TV & Audio India Ltd. 2006 (1) S.T.R. 162 (Tri.

Del). We have heard Id. SDR who reiterates the findings and observations contained in the impugned order.

3. After examining the submissions, we find that the issue arising in this case can be settled without reference to any amendments made to the Service Tax Rules, 1994. The service under consideration is transfer of technology by the Korean Company to the appellants, which took place on 6.5.1997. The consideration (royalty) for that service was paid by the appellants on 5.9.2002. For determination of tax liability, the relevant date is the date on which the service was received by the appellants. This view was held in the case of Matsushita TV & Audio India Ltd. (supra). Hence the relevant date in the present case is 6.5.1997. On that date, neither Consulting Engineer's Service nor transfer of Intellectual Property was a taxable service.

4. For the reasons noted above, the appellants are not liable to pay Service Tax on the royalty paid by them to the Korean Company for the service rendered by the latter in May, 1997. The impugned order is set aside and the appeal is allowed.