Custom, Excise & Service Tax Tribunal
Delhi South vs Micromax Onformatics Limited on 19 August, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH-COURT NO. 3
SERVICE TAX APPEAL NO. 50318 OF 2019
[Arising out of Order-in-Original No. 94/2018-ST dated 30.08.2018
passed by the Additional Director General (Adjudication), New Delhi]
PRINCIPAL COMMISSIONER ......APPELLANT
CGST South Commissionerate,
2nd & 3rd Floor, EIL Annexe Building
Bhikaji Cam Place, New Delhi-110066
Vs.
M/S MICROMAX INFORMATICS LIMITED ......RESPONDENT
Plot No. 21/14, Block A,
Naraina Industrial Area, Phase II
New Delhi-110028
Appearance:
Shri Anand Narayan, Authorised Representative for the Appellant
Ms. Anu Sura and Shri Ayushraj, Advocates for the Respondent
CORAM:
HON'BLE MS. BINU TAMTA, MEMBER ( JUDICIAL )
HON'BLE MR. P. V. SUBBA RAO, MEMBER ( TECHNICAL )
FINAL ORDER NO. 51197 /2025
DATE OF HEARING : 04/08/2025
DATE OF DECISION : 19/08/2025
P.V. SUBBA RAO
Revenue has filed this appeal to assail the Order in Original
dated 30.08.20181 passed by the Additional Director
General(Adjudication)2 Directorate General of GST Intelligence3,
New Delhi whereby he dropped the proceedings initiated by
show cause notice dated 27.03.20174 against the respondent M/s
1 Impugned order
2 ADG
3 DGCEI
4 SCN
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Micromax Informatics Limited5 and its Managing Director Shri
Rahul Sharma.
2. We have heard Ms. Anu Sura and Shri Ayushraj, learned
counsels for Micromax and Shri Anand Narayan, learned
authorized representative appearing for the department and
perused the records.
3. The facts of the case are that Micromax was registered
with the service tax department. M/s Telefonaktiebolaget LM
Ericsson of Switzerland6 sued Micromax for royalty for use of
patents and technologies belonging to Ericsson. The matter was
before the Hon'ble Delhi High Court and through Interim Orders,
Delhi High Court had directed Micromax to pay certain amounts
to Ericsson totaling Rs. 37,17,36,177/-. Further an amount of
Rs. 117,62,06,873/- was deposited on directions of the Delhi
High Court. These two amount totaled Rs.154,79,43,050/-. The
matter was investigated by DGCEI from the point of view of
service tax as it was felt that Micromax, as a recipient of service
of intellectual property rights, was required to pay service tax on
the amounts paid to Ericsson which was located outside India.
Accordingly, service tax and taxes and cesses amounting to Rs.
17,50,38,755/- was demanded from Micromax with interest in
the SCN. It was proposed to impose penalties on Micromax and
its managing director Shri Rahul Sharma.
5 Micromax
6 Ericsson
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4. The matter was finally settled between the Ericsson and
Micromax as per which Micromax paid an amount of Rs. 96
crores as royalty to Ericsson. Accordingly, the Delhi High Court
dismissed the case as the matter was settled between the
parties.
5. By the time this settlement took place on 31.12.2017 the
provisions of service tax were no longer in place as service tax
was subsumed into goods and service tax(GST). Accordingly,
Micromax paid IGST on this amount of Rs. 96 crores paid to
Ericsson. The Directorate General of Central Excise Intelligence
was also re-named Director General of GST Intelligence.
6. Considering the submissions, the SCN was adjudicated in
the impugned order as follows:
" E. In view of above the following questions arise for
my consideration in the matter:
(i) Whether the instant proceedings can be continued in
the light of the withdrawal of the suit by the parties
before the High Court?
(ii) If yes, whether the duty demanded in the Show
Cause Notice to the tune of Rs. 17,50,38,755/- (Rupees
Seventeen Crore Fifty Lakhs Thirty Eight Thousand
Seven Hundred and Fifty Five only) can be confirmed
against the Noticee no. 1?
(iii) Whether interest is payable in the matter as alleged
in the Show Cause Notice?
(iv) Whether penalty can be levied on Noticee no. 1 & 2
in the matter?
31. Now I proceed to examine above issues.
A. Whether the instant proceedings ban be continued in
the light of the withdrawal of the suit by the parties
before the High Court?
(i) I observe that the amount on which Service Tax has
been demanded was deposited by the parties concerned
in the High Court as per order of the High Court. I agree
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with the contention of the Noticees that it was simply a
deposit made by them in compliance of the orders of
the High Court pending final orders of the High Court.
As such, it cannot be said that this amount reflected the
royalty payable by Noticees in the matter. The nature of
this amount was a subject matter of decision by the
Hon'ble Delhi High Court. The question of its taxability
or otherwise could arise only after its nature was
decided by the Hon'ble Court
(ii) Pursuant to the global patent license agreement
dated 01.01.2018 entered into between M/s TLM
Ericsson and M/s Micromax the suit before the High
Court stands withdrawn. The High Court has dismissed
the application as withdrawn vide orders dated
06.04.2018. The relevant extracts from the order of the
High court are produced below:
Consequently, it is clarified that as CS (COMM)
155/2017 has been dismissed as withdrawn, all the
interim orders including the orders dated
06.03.2013 and 12.11.2014 passed by this court
stand vacated and the Custom Authorities shall not
insist on a no objection certificate from the plaintiff,
as and when any consignment is imported by the
defendant no. 2.
(Emphasis supplied)
(iii) The deposits made earlier have also been ordered
to be released to the respective parties vide order dated
05.02.2018 passed by the Hon'ble Delhi High Court
Relevant extracts from the order are produced below:
Registry is directed to release the amounts
lying with the Registry to the respective parties as
stipulated in paragraphs 4, 5 and 8 of I.A.No.
1698/2018 (as reproduced hereinabove) as well as
to release all bank guarantees furnished by the
parties within a period of one week.
(Emphasis supplied)
(iv) As such, no amount stands paid with reference to
the amount deposited under orders of the High Court
and for which the instant Show Cause Notice has been
issued demanding the Service Tax.
(v) I also observe that M/s Micromax have paid
integrated GST to the tune of Rs. 17,45.68.359/-
(Rupees Seventeen Crore Forty Five Lakhs Sixty Eight
Thousand Three Huncired and Fifty Nine only) with
reference to the royalty expenses under the reverse
charge mechanism. The payment of this amount stands
verified vide Directorate General of GST Intelligence
letter no. 574/Central Excise/159/2014/Inv dated
24.08.2018. The correctness of payment of this amount
is open to verification by the departmental authorities.
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(vi) Thus I find that nothing survives from the amount
deposited under orders of the High Court. The instant
Show Cause Notice has been issued with reference to
these deposits. The Noticee have deposited GST on the
amount paid by them under royalty. As such, I find that
there is no warrant for continuing these proceedings
further.
32. In the light of paragraph 31 above I find that issues
(ii), (iii) & (iv) framed under clause E under para 30
above have become infructuous. Thus, there is no need
to discuss these issues or to continue these
proceedings.
33. In view of above I pass the following order
ORDER
In light of dismissal of the suit as withdrawn, release of the amounts to the respective parties and payment of Rs. 17,45,68,359/0 (Rupees Seventeen Crore Forty Five Lakhs Sixty Eight Thousand Three Hundred and Fifty Nine only) by M/s Micromax Informatics Ltd, New Delhi. I drop the proceedings initiated by Show Cause Notice No. 574/Central Exicse/ 159/2014/Inv dated 27.03.2017 against M/s Micromax Informatics Ltd, and Sh. Rahul Sharma."
7. The case of the Revenue before us is that the impugned order is not correct and proper and that service tax should have been confirmed on the amount of Rs.154,79,43,050/- paid by Micromax during the pendency of the suit as per the interim orders of the High Court. It is asserted that the amounts paid were not mere deposits and they were indeed royalty paid to Ericsson and, therefore, service tax should have been paid.
8. Learned counsel for Micromax vehemently supported the impugned order and asserted that it calls for no interference.
9. We have considered the submissions advanced by both sides.
10. Ericsson sued Micromax before the High Court. It was the 6 ST/50318/2019 position of the Ericsson that Micromax had to pay royalty for using of its patent and IPR. The issue was not decided by the High Court. Only as an interim measure, the High Court directed certain payments to be made to Ericsson and certain amounts to be deposited with the High Court. The dispute was mutually settled and it was agreed and royalty of Rs.96 crores was paid by Micromax to Ericsson and any amounts paid before the Ericsson were agreed to be adjusted. Undoubtedly, the amount of Rs.96 crores which was paid by Micromax to Ericsson is an amount for using its patents and IPR. The Micromax paid IGST on this entire amount.
11. All the amounts which were paid during the pendency of the proceedings before the Delhi High Court either to Ericsson or deposited with the Delhi High Court by Micromax were merely deposits. The amounts paid to Ericsson or deposited in the High Court as per the interim orders cannot be called as royalty paid for the use of IPR. The entire royalty paid by Micromax to Ericsson for use of IPR was as per the settlement between the two parties Rs. 96 crores and nothing else. IGST was already paid on that amount.
11. Such being the case, there is no infirmity in the impugned order dropping the proceedings in pursuance of the SCN which was based on the interim payments made and not based on the royalty which was finally decided between the parties and paid. 7
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12. In view of the above, we find no infirmity in the impugned order. We uphold the impugned order and dismiss the appeal filed by the Revenue.
[Order pronounced on 19/08/2025] (BINU TAMTA) MEMBER ( JUDICIAL ) (P. V. SUBBA RAO) MEMBER ( TECHNICAL ) Tejo