Customs, Excise and Gold Tribunal - Tamil Nadu
Honda Siel Power Products Ltd. vs Commr. Of S.T. on 11 October, 2007
Equivalent citations: 2008[9]S.T.R.557
ORDER P.G. Chacko, Member (J)
1. The revisional authority has demanded service tax of over Rs. 16.5 lakhs from the appellants for the period 16-8-2002 to 31-3-2004 under Section 73 of the Finance Act, 1994 with interest thereon under Section 75 of the Act. It also imposed penalties on the assessee under different provisions of the Finance Act. The demand of service tax is on royalty paid by the appellants to their foreign-collaborators viz. Honda Motor Company Ltd., Japan, who provided technical know-how and assistance to the appellants for manufacturing in India portable gensets etc., licensed products mentioned in the Schedule to the technical collaboration contract entered into between them. We have examined the records and, particularly, perused the terms and conditions of the technical collaboration contract. Under this contract, the Japanese company would provide technical know-how and assistance to the appellants for manufacture of the licensed products in India and the latter would pay a lump sum for transfer of technical know-how as also periodical royalty @ 4% of the value of the products determined in the agreement itself. The present demand of tax is on this royalty paid by the appellants to the Japanese company during the aforesaid period in respect of their factory at Pondicherry. The department, in the relevant SCN, raised the demand by alleging that the appellants had received taxable service in the nature of "Consulting Engineering Service" from the foreign company and hence should pay tax on the royalty. The department also proposed penalties. The original authority dropped the proceedings, but the revisional authority upheld the proposals in the SCN and passed the impugned order, but with a reduction of the period for the purpose of demand.
2. After hearing both sides and considering their submissions, we note that the Tribunal has had occasion to deal with similar cases and has been consistently holding that any royalty paid by an Indian manufacturer to their foreign collaborator as consideration for transfer of technical know-how and assistance is not to be taxed in the category of "Consulting Engineer Service". Ld. Counsel has placed on record a few instances as follows:
(1) Yamaha Motors (I) Pvt. Ltd. v. CCE (2) Turbo Energy Ltd. v. CCE (3) Rane Brake Linings Ltd. v. CCE 2006 (1) S.T.R. 318 (Tri.-Chennai) 2.1 On the other hand, ld. SDR has claimed support from the Tribunal's decision in Indian Farmers Fertiliser Co-op. Ltd. v. CCE 2007 (5) S.T.R. 281 (Tri.-Del), wherein technical know-how was differentiated from technical assistance and it was held, on the facts of that case, that engineers deputed by the service provider to India for rendering technical assistance to the assessee were rendering "Consulting Engineering Service". Having been told of the facts of the present case, we have not prima facie found any parallel between this case and the case of IFFCO (supra) inasmuch as, in the present case, the Revenue has not shown that any engineers deputed by the Japanese company came to India and provided any technical assistance/consultancy or advice to the assessee at any stage during the above period. We have found prima facie case for the appellants against the demand of tax and penalties. Accordingly, there will be waiver of pre-deposit and stay of recovery in respect of the amounts of service tax and penalties.
(Dictated and pronounced in open Court)