Customs, Excise and Gold Tribunal - Bangalore
Widia Gmbh vs Commissioner Of Central Excise on 25 July, 2006
ORDER T.K. Jayaraman, Member (T)
1. This appeal has been filed against the OIA No. 12/2004 dated 22-1-2004 passed by the Commissioner of Central Excise (Appeals-II), Bangalore.
2. The appellant M/s. Widia GMBH, Germany, C/o. M/s. Kennametal Widia India Ltd., Bangalore, have entered into a collaboration agreement with M/s. Kennametal Widia India Ltd., Bangalore, for transfer of technology to manufacture certain tools and parts of tools. The Revenue proceeded against the appellant demanding Service Tax for the period 1993-1999 to the tune of Rs. 21,16,880/- under Section 73 of the Finance Act, 1994 on the ground that they rendered the services of 'Consulting Engineer' and therefore, are laible to Service Tax. The original authority, apart from confirming the demand, imposed penalties under Section 75A and Section 77 of the Finance Act, 1994. The appellants contended that they did not render the services of 'Consulting Engineer' but only transferred the technology under a Collaboration Agreement. According to them, technical or technology transfer would fall under the ambit of Scientific and Technical Consultancy Services which was brought into effect from 16-7-2001 and not under the clause of 'Consulting Engineers' under the Act. Aggrieved over the order of the lower authority, they approached the Commissioner (Appeals). The Commissioner (Appeals) held that Technical Consulting Services would definitely be part of Consulting Engineering Services before it became a separate service. Therefore, relying on CBEC's clarification, he upheld the Order-in-Original.
3. The learned Advocates took us through the Collaboration Agreement and explained the scope of the same. The Collaboration Agreement is for Technical Services. For the above services, the Indian company would be paying a lump sum payment of 10 Million Rupees. The learned Advocate cited the following case-laws which held that Royalty and Technical Service paid by the Indian companies to foreign counterparts for transfer of technology would not come within the purview of Consulting Engineers service for the levy of Service Tax.
(i) Final Order No. 1068/2006 dated 15-6-2006 in the case of Turbotech Precision Engineering Pvt. Ltd. v. CCE, Bangalore-III 2006 (1) S.T.R. 325 (Tribunal)
(ii) Final Order No. 1061 to 1063/2006 dated 15-6-2006 in the cases of Bharat Electronics Ltd., SKF India Ltd. & Araco Corporation.
(iii) CCE, Calicut/Cochin v. Rubco Sales International P. Ltd. 2006 (1) STR 291 (Tri.-Bang.)
(iv) CCE, Mangalore v. Micro Finish Valves (P) Ltd. 2006 (1) S.T.R. 283 (Tribunal) : 2006 (72) RLT 584 (CESTAT-Ban.)
(v) Amco Batteries Ltd. v. CCE, Bangalore 2006 (2) STR 346 (T)
4. The learned SDR referred to para 6 of the Agreement which is reproduced in the impugned order and stated that the scope of the services is quite broad and it includes definitely the services of Consulting Engineer.
5. We have gone through the records of the case carefully. The services rendered by the appellant would come under the category of Scientific and Technical Consultancy Services. Even the Commissioner (Appeals) in his order has stated as follows:
It is a fact that the services mentioned by the appellants have been brought to the tax net on later dates.
It is not correct to say that these services include the services of Consulting Engineer and to charge Service Tax on the entire sum of royalty received. It has been held that a composite contract cannot be vivisected and service portion cannot be subjected to service tax under the category of Consulting Engineer in the case of Daelim Industrial Co. Ltd. v. CCE, Vadodara 2006 (3) S.T.R. 124 (Tribunal) and maintained by the Supreme Court as . Even the Commissioner (Appeals) has given a finding that the services would come within the category of Scientific and Technical Consultancy Services. Since these services came into the tax net for the first time on 16-07-2001 and in view of the fact that the period involved in this appeal is from 1993-1999, no Service Tax can be levied under the category of 'Consulting Engineers'. Hence, we allow the appeal with consequential relief, if any.
(Operative portion of this Order was pronounced in open court on conclusion of hearing)