Custom, Excise & Service Tax Tribunal
M/S. Musashi Auto Parts India Pvt. Ltd vs C.S.T., Delhi-Iii on 30 July, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No.2, R.K. Puram, New Delhi 110 066. Date of Hearing 30.7.2013 STAY No.ST/STAY/57658/2013 APPEAL No.ST/57083/2013 [Arising out of Order-in-Original No.105/AKM/CST/ADJ/2012, dated 31.12.2012 passed by the Commissioner (Adjudication): Service Tax: New Delhi-III] For Approval & Signature : Honble Justice G. Raghuram, President Honble Mr. Sahab Singh, Member (Technical) 1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3. Whether Lordships wish to see the fair copy of the order? Seen 4. Whether order is to be circulated to the Department Authorities? Yes M/s. Musashi Auto Parts India Pvt. Ltd. Appellant Vs. C.S.T., Delhi-III Respondent
Appearance Shri B. L. Narasimhan, Advocate - for the appellant Shri Govind Dixit, DR - for the respondent CORAM: Honble Justice G. Raghuram, President Honble Mr. Sahab Singh, Member (Technical) Final Order No.57226, dated 30.07.2013 Per Justice G. Raghuram :
Heard Mr. Lakshmi Narasimhan, Ld. Counsel for the assessee/appellant and Shri Govind Dixit, Ld. Departmental Representative for Revenue. The appeal is preferred against the adjudication order dated 31.12.2012 passed by the Commissioner of Service Tax, New Delhi-III. The order confirmed service tax liability of Rs.47,70,236/-; dropped demand of Rs.64,41,366/-; ordered recovery of interest under Section 75 of the Finance Act, 1994; and imposed penalties under Sections 76, 77 and 78 of the Act. Proceedings were initiated against the assessee on assumption by Revenue that during 10-09-2004 to 31-03-2007, assessee had remitted royalty of Rs.10,21,23,166/- to M/s. Musashi Seimitsu Industry Company Ltd., Japan for providing technical know-how for its products to the assessee; but had failed to obtain registration as and Intellectual Property Service (IPS) Provider; failed to file returns and to remit service tax for the taxable service covered by the provisions of Section 65 (105) (zzr) of the Act as defined in Section 65 (55a) and (55b).
2. In its response to the Show Cause Notice dated 29-10-2009, the assessee specifically contended that it had not been the recipient of the IPS from the Japanese holding company since that company was transferring technologies for manufacture of specific projects like gears, crankshafts and other driving elements to the two wheeler industry and the royalty paid for the use of such technology did not constitute intangible property under any law for the time being in force in India within the meaning of the taxable service as defined in Section 65 (55a) and (55b) of the Act. The adjudicating authority in para-17 of the impugned order considered this contention of the assessee. To the extent relevant for the purposes of this appeal suffice it to notice that the adjudicating authority concluded that the holding company of the assessee had not transferred or delivered any goods but had supplied specifications of tools, its designs, its process and its manner manufacture, etc., which constitute intangible goods. With regard to the issue whether these comprise a right to untenable property under any law for the time being in force, the definitional requirement of Section 65 (55a), the adjudicating authority disposed of this contention by this singular observation which may be extracted; All these are Intangible things and needs protection of law under IPR, therefore, fall under IPS. It is automatic and this aspect is conceded faintly by the Ld. Departmental Representative as well, that needing the protection of law is no part of the definitional requirement. The definition clearly and unambiguously enjoins that to constitute the Intellectual Property Rights there should be a 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 excluding the copy right. What criterion would satisfy intangible property, to constitute the right to such property under any law for the time being in force, is an analysis that is inevitable and a condition precedent, for visiting the assessee with the liability to remit service tax, under the provisions of the Act.
3. As the adjudicating order rescinds no reasons nor indicates any process of analysis on this vital issue, the adjudication order cannot be sustained.
4. Ld. Counsel for the appellant further contended, a contention not presented before the adjudicating authority earlier that since the agreement under which the technology know-how was transferred from the Japanese holding company to the appellant was entered into in the year 2003, whereby the know-how and technology was transferred as an one time event and prior to introduction of the taxable service under Section 65 (105) (zzr) of the Act with effect from 10-09-2004; the subsequent royalty payments in instalments/periodically, even when paid after introduction of the taxable service, would not create a taxable liability, since the provision of the service occurred on the entering into the agreement. In support of this contention reliance is placed on the judgement of the Tribunal reported in 2009 (15)S.T.R. 713 (Tri. Del.), in Modi-Mundipharma Pvt. Ltd. Vs. C.C.E., Meerut and an interim order reported in 2012-TIOL-931-CESTAT-DEL in Denso Haryana Pvt. Ltd. Vs. C.C.E., Delhi III. Ld. Counsel for the appellant also contended that the Supreme Court at paragraphs 27 and 28 of the judgement in 20th Century Finance Corpn. Ltd. and Another Vs. State of Maharashtra reported in [2000] 119 STC 182 (SC), clarified the position as to when a taxable service is said to have been rendered.
5. Since the issue as to whether the transfer of technology and know-how by the Japanese holding company to the assessee fulfils the requirements of Section 65 (105) (zzr) read with the definition of Intellectual Property Rights in section 65 (55 a), has not been considered by the adjudicating authority. we are of the considered view that it is appropriate to remit the matter for consideration afresh and grant liberty to the assessee to raise any other issue as well before the adjudicating authority including as to whether the provisions of Section 65 (105) (zzr) are applicable to the assessees transactions, since the payment of royalties event though subsequent were pursuant to an agreement which was earlier to introduction of the taxable service. The assessee shall file a Memorandum of Written Submissions within 3 weeks from today before the adjudicating authority on this aspect but shall not however be entitled to personal hearing again. Any case supporting the assessees contentions may also be appended to the Memorandum of Written Submissions, within the time stipulated herein.
6. On the preceding analysis, the adjudication order dated 31.12.2012, in Order-in-Original No.105/AKM/CST/ADJ/2012 is set aside and the matter is remanded to the Commissioner of Service Tax, Delhi-III for adjudication and determination de novo. There shall be no order as to costs however.
(Justice G. Raghuram) President (Sahab Singh) Member (Technical) SSK -5-