Customs, Excise and Gold Tribunal - Tamil Nadu
Turbo Energy Ltd. vs Cce on 3 May, 2005
Equivalent citations: 2005(187)ELT47(TRI-CHENNAI), 2006[3]S.T.R.678
ORDER P.G. Chacko, Member (J)
1. The appellants are manufacturers of Turbo Charger and parts thereof (Heading 84.14 of the CETA Schedule). They entered into a technical collaboration with M/s Aktiengesellschaft kuhnie koop & Kausch (M/s KKK, for short) whereunder they were liable to pay royalty to M/s KKK @ 3% on the sale price of the licensed product in respect of which technical know-how was provided by M/s KKK. During 2001-2002, the appellants paid royalty to M/s KKK at the above rate. The department wanted to levy Service Tax on this amount of royalty @ 5%, amounting to Rs 6,93,100/-. This demand was resisted by the party contending that no consultancy service was involved in the transfer of technology by M/s KKK to the appellants. The original authority and the first appellate authority have not accepted this contention. In the result, the above demand of Service Tax stands confirmed against the assessee.
2. In the present appeal of the assessee, the main ground is that the transfer of technology to them by M/s KKK did not involve any Engineering Consultancy Service as alleged by the Department. In support of this ground, the learned Counsel has relied upon the following decisions:
4. Navinon Ltd. v. CCE reported in 2004(172) ELT 400 (Tri-Mumbai).
5. Bajaj Auto Ltd. v. CCE,Aurangabad reported in 2005 (179) ELT 481 (Tri.Mumbai)
3. The learned JDR reiterates the findings of the Commissioner (Appeals) and, further, points out that transfer of technology has since been recognized as a taxable service in the form of "Engineering Consultancy".
4. After examining the records and the submissions, I find that, during the period of dispute, the definition of "Engineering Consultancy Service" did not take within its scope, any such intangible service as transfer of technology. In the case of Navion Ltd. (supra), it was held that payment of royalty in the common parlance was not intended to be payment for service and that it was only understood as share of product or profit reserved by owner for permitting another the use of his property. This view was followed in the case of Bajaj Auto Ltd. (supra), wherein a reference was also made to the Tribunal's decision in the case of Aviat Chemicals Pvt Ltd. v. CCE reported in 2004 (174) ELT 466. In the case of Aviat Chemicals, it had been held that no consultancy or advice was involved in transfer of intangible property. In the instant case, it is not in dispute that transfer of technology by M/s KKK to the appellants was not a transaction in which intangible property was involved. Hence the ratio of the decision in the case of Aviat Chemicals (supra) as also the decision in the case of Bajaj Auto Ltd (supra) are squarely applicable to the facts of this case.
5. In the result, the demand of Service Tax on royalty paid by the appellants to M/s KKK in connection with transfer of technology cannot be sustained. The same is set aside. Consequently, the penalty imposed on the appellant is also unsustainable. The impugned order is set aside and the appeal is allowed.