Customs, Excise and Gold Tribunal - Bangalore
Commissioner Of C. Ex. vs Toyota Motor Corpn. on 24 August, 2007
Equivalent citations: 2007[8]S.T.R.478
ORDER S.L. Peeran, Member (J)
1. This is a Revenue appeal arising from Order-in-Appeal No. 21/2005, dated 7-3-2005 by which the assessee's appeal has been allowed and the Service Tax raised under the heading of 'Consulting Engineer' has been dropped on the ground that the assessee was a foreign company which had transferred the technology to the Indian based company for a valuable consideration and therefore, the said activity would not come within the ambit of 'Consulting Engineer'.
2. The findings recorded by the Commissioner (A) is reproduced herein below.
It is seen that the appellants have formed a joint venture company joining hands with an Indian Company and they have been holding a shareholding of 74% to 88.86% during the relevant period. They are in the field of manufacturing automobiles and parts thereof based in Japan as well as in other parte of the world either operating independently or jointly with others.
Therefore it could be seen that the appellants are interested in the profit of the joint venture since they have major stake in the shareholding of the joint venture company. In view of the position, I would agree with the appellants contention that relationship between the appellants and the local company is more than a consultant-client relationship. All the activities undertaken by the appellants on behalf of the joint venture company is in their own interest rather than in the interest of the joint venture company for the reasons stated supra.
Therefore, I do not agree with the lower authority's view that the appellants are consultants. Next questions is as to whether the appellants are engineering consultants.
The appellants are a well known automobile manufacture company based in Japan. They have only parted with the know-how/technology to their joint venture for manufacture of automobiles and automobiles parts. For this, they are collecting Technical assistance fee from the Indian Company. The products manufactured bear their trade name and therefore it is incumbent on their part to ensure that the quality is at par with their products manufactured in their home country or elsewhere. Therefore, it is but natural that they take the required measures towards this end.
The know-how/technology is transferred to the joint venture company for the manufacture of automobiles and parts. The activities undertaken by the appellants cannot be called as 'advice, consultancy or technical assistance' extended to a client in the field of any engineering discipline or in the context of any specific problems. The training and other technical support Is an ongoing process as agreed upon by which the appellants have to ensure that the products manufactured come up to their expected standard comparable to the standard of their products in the world market.
In view of the above, I have to hold that the activities of the appellants do not fall under the purview of Consulting Engineer for Service Tax purpose.
In support of my above conclusion, I cite the relevant portion of the case law of Navinon Ltd. v. Commissioner of Central Excise, Mumbai-IV below:
Para 4. Since Ciba Geigy Ltd., Switzerland, are also manufacturers of the same goods, the definition of consulting engineer and providing the service as per subsection of Section 65 of the Act cannot be upheld."
Para 5. The amounts, which the appellants have to remit to M/s. Ciba Geigy Ltd., Switzerland, are mentioned in the agreement under the heading "Royalty". Payments of royalty in the common parlance are not insisted as payment for a service provided. It is understood as a share of product or profit reserved by owner for permitting another the use of his property. Royalty payments in the present case for the use of technology and know-how cannot be equated with any services to be provided by M/s. Ciba Geigy Ltd., to the appellants and therefore, the order of the lower authority attracting a levy of tax on royalty payments made are required to be set aside.
Accordingly, I set aside the Order-in-Original No. 25/2004 dated 30-8-2004 passed by the Assistant Commissioner of Central Excise, Service Tax Division, Bangalore and allow the appeal filed by M/s. Toyota Motor Corporation.
Revenue is aggrieved with the findings of the Commissioner (A).
3. We have heard both sides in the matter and find that the issue is fully settled in assessee's favour in terms of the following Tribunal rulings.
(i) Biocon Ltd. v. CST, Bangalore 2007 (7) S.T.R. 214 (Tri. -Bang.)
(ii) CCE, Bangalore v. Toyoda Iron Works Co. Ltd. by Final Order No. 734/2007, dated 28-6-2007 2007 (7) S.T.R. 603 (Tribunal).
3.1 We find that in the cited judgments, this very issue was considered and the Tribunal while allowing the appeal on an identical issue referred to large number of Tribunal rulings deciding the issue in assessee's favour. The ratio of the judgment is that Service Tax is not leviable when a foreign company has transferred technology to the Indian Company for valuable consideration, in view of the cited judgments, we find that there is no merit in this appeal and the same is dismissed.
(Operative portion of this Order was pronounced in open court on conclusion of hearing)