Custom, Excise & Service Tax Tribunal
M/S. Munjal Showa Limited vs Commissioner Of Central Excise & St, ... on 15 June, 2017
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL SCO 147-148, SECTOR 17-C, CHANDIGARH 160 017 COURT NO. I Appeal No. ST/610-613/2012-DB Date of Hearing : 06.06.2017 Date of Decision : 15.06.2017 [Arising out of Order-in-Original No. OIO-07-10-AKM-CST-ADJ-2012 dated 31/01/2012 passed by the Commissioner Central Excise & ST, Delhi (Gurgaon)] For approval and signature: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. Devender Singh, Member (Technical) M/s. Munjal Showa Limited : Appellant vs. Commissioner of Central Excise & ST, Delhi (Gurgaon) : Respondent
and Appeal No. ST/743/2012-DB Commissioner of Central Excise & ST, Delhi (Gurgaon) : Appellant vs. M/s. Munjal Showa Limited : Respondent Appearance:
Shri A. Hidayatullah, Senior Advocate and Shri P.K. Ram, Advocate for the Appellant(s) vice-versa Shri Atul Handa, A.R. for the Respondent(s) vice-versa CORAM:
Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. Devender Singh, Member (Technical) Final Order No. 61077-61081 / 2017 Per : Ashok Jindal Both sides are in appeal against the impugned order-in-original.
2. The facts of the case are that assessee-appellant is registered with the service tax department under the category of GTA/IPR/Consulting Engineering services and paying service tax thereon and they are also engaged in the manufacturing of struts, shock absorbers, front forks, gas spring window balancers etc. M/s. Showa Corporation, Japan entered into a contract with the appellant-assessee on 11.03.2002, in which the Industrial Property Right i.e. Patent, Utility model, Brand Service, Design, Trademark, Symbol were transferred to the assessee-appellant and percentage of the amount of sale was to be paid as royalty. The Revenue is of the view that the said transfer of technical know-how is covered under Intellectual Property Right services. Therefore, the appellant assessee is liable to pay service tax under reverse charge mechanism with effect from 10.09.2004 when the said services came into the service tax net. In these set of facts, various show cause notices for the period 10.09.2004 to 30.09.2007, 01.10.2007 to 30.09.2008, 10.05.2008 to 31.03.2010 and 01.04.2010 to 30.09.2010 were issued to the appellant-assessee on 23.05.2008, 08.09.2009, 08.10.2010 and 04.02.2011 respectively. The adjudicating authority confirmed the demand under Intellectual Property Rights service for the normal period of limitation and demand pertaining to extended period of limitation was dropped. Aggrieved from the said order of ld. Commissioner, Revenue is in appeal on the ground that extended period of limitation is invokable and appellant-assessee is in appeal on the ground that demand is not sustainable.
3. The ld. Advocate for the appellant-assessee appeared and submits that the demand is sought to confirm against Intellectual Property Right service for royalty payments made by them to M/s. Showa Corporation, Japan. It is the contention of the ld. Counsel that the payment made towards royalty is not under Intellectual Property Rights service under Section 65 (55) (a) (b) of the Finance Act, 1994, read with Section 65 (105) (zzr) of the Act. Therefore, it is his submission that impugned order has to be set-aside quo demand of service tax relying on the decision in the case of Chambal Fertilizers & Chemicals Limited vs. CCE, Jaipur 2016 (45) STR 118 (Tri. Del.) and Tata Consultancy Services Limited vs. CST, Mumbai 2016 (41) STR 121 (Tri. Mum.). He further submitted that no evidence has been produced by the Revenue that patents are registered to Showa Corporation Japan in India. Therefore, it is not Intellectual Property Rights hence, no levy of service tax can be confirmed against them.
4. On the other hand, ld. AR opposed the contention of the ld. Counsel and draws our attention to the CBEC Circular No. 80/10/2004-ST dated 17.09.2004 to say that Design, Trademark, Brand Service, Symbols etc. have been recognised by the Government of India, therefore, they are liable to pay service tax thereon.
5. Heard the parties and considered the submissions.
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, designs, patents or any other similar intangible property, under any law for the time being in force, but does not include copyright..
(55) (b) intellectual property service means, -
(a) transferring, {temporarily} whether permanently or otherwise; or
(b) permitting the use or enjoyment of, any intellectual property right.
(105) taxable service means any service provided or to be provided (zzr) to any person, by the holder of intellectually property right, in relation to intellectual property service.
7. On going through the said provisions of the Act, we find that, to tax under service tax, under Intellectual Property Rights, such rights should be registered with Trademark/ Patent authorities. It is a fact on record that such trade mark is not registered in India. Moreover, the CBEC Circular dated 17.09.2004 relied upon by the ld. AR is having no help to the Revenue as it has been clarified that the taxable service include only such Intellectual Property Rights except Copy Right that are prescribed under the law for the time being in force, as the term time being in force implies that, as are applicable in India, and Intellectual Property Rights covered under Indian law in force alone are chargeable to service tax and Intellectual Property Rights like Integrated Circuits or Undisclosed Information would not cover under the taxable services. Admittedly, Trade Mark rights which have been used by the appellant-assessee are not registered in India, therefore, the same are not liable to tax under IPR service, in the light of the decision in the case of Chambal Fertilizers & Chemicals Limited (supra), wherein this Tribunal has observed as under :-
5.?We have heard both sides and examined the appeal records. The only point for decision is that whether or not the appellant received taxable service under the category of Intellectual Property Right service during the relevant period. The admitted facts of the case are that the technical know-how, engineering design licence involved in these agreements with foreign service providers are not registered in India under Indian law. However, the original authority held that registration of IPR under Indian law is only for obtaining protection from its infringement. He observed that the levy of tax is not dependent on the fact of such registration. We find that such 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 Limited v. C.S.T., Mumbai - 2015-TIOL-2370-CESTAT-MUM = 2016 (41) S.T.R. 121 (Tri.) [para 4.1];
(d) Asea Brown Boveri Ltd. v. C.C.E & S.T., Bangalore - 2016-VIL-480-CESTAT-BLR-ST [para 6.7.1];
(e) Reliance Industries Ltd. v. C.C.E. & S. Tax, Mumbai - 2016-TIOL-1654-CESTAT-MUM = 2016 (44) S.T.R. 82 (Tri.) [para 2].
7.?It has been held that to be categorized for service tax purpose under IPR, such right should have been registered with trade mark/patent authority. In the present case, admittedly, there is no right recognized as IPR under any law for the time being in force in India. As such, there can be no provision of IPR service for tax liability on reverse charge basis. Therefore, we hold that services received by the appellant-assessee are not covered under Intellectual Property Rights services, under section 65 (105) (zzr) of the Finance Act, 1994, therefore, no service tax is payable by the appellant-assessee.
8. In that circumstance, we hold that services received by the appellant-assessee are not covered under IPR service, under Section 65 (105) (zzr) of the Finance Act, 1994. Therefore, no service tax is payable by the appellant-assessee.
9. In these circumstances, we hold that extended period of limitation is not invokable and the demand is not sustainable. We also take note of the fact that the agreement is dated 11.03.2002 whereas the levy of tax under IPR service has come into force on 10.09.2004. As the agreement is executed on 11.03.2002, prior to introduction of IPR Service, the demand of service tax is not sustainable in the light of the decision of this Tribunal in the case of Reliance Industries Limited 2016-TIOL-1654-CESTAT-MUMBAI, wherein this Tribunal observed as under :-
Insofar as the agreement with Investa Technologies S.A.R.L. is concerned the same was entered into 14.04.2004, prior to IPR services being brought into the net of service tax with effect from 10.09.2004. The service tax itself having been rendered prior to the introduction of the levy, the mere fact that payments for the same were made on a staggered basis over a period of time cannot be ground for levying service tax merely with reference to the date on which payments were being made. We find that during the relevant period the issue as to whether a transaction is leviable to service tax and if so at what rate was required to be reckoned with reference to the date when the service was rendered and not with reference to the date on which payment is made. The law in this regard is settled by the decision of the CESTAT reported in 2008 (10) STR 243 = 2008 TIOL-283-CESTAT-AHM which was affirmed by the Hon'ble Gujarat High Court in the appellants own case reported in 2010 (19) STR 807 as also by the Hon'ble Delhi High Court in the case of CCE vs. Consulting Engineering Services India (P) Limited 2013 (3) ELT 586. As the service in the case of Investa Technologies S.A.R.L. was rendered prior to 10.09.2004, the date when the taxing entry was brought to the Statute the mere subsequent payment in respect of services that are already being rendered cannot be brought to tax with respect to the Rule applicable on the date on which the payment was effect. In that circumstance also, we hold that appellant-assessee are not liable to pay service tax. Therefore, the impugned order is modified and the demand of service tax against the appellant-assessee is set-aside.
10. Consequently, the appeal filed by the Revenue is dismissed and the appeals filed by the appellant-assessee are allowed with consequential relief (if any).
(Order pronounced in the court on 15.06.2017) Devender Singh Member (Technical) Ashok Jindal Member (Judicial) KL 2 Appeal Nos. ST/610-613, 743/2012