Services of technical know-how, patents etc. classifiable under IPR.

PJ/Case law/2014-15/2207

Case:- DURALINE CORPORATION V/S COMMISSIONER OF C.EX. & CUS., GOA

Citation:- 2014(34) S.T.R. 398 (Tri. – Mumbai)

Brief Facts:- The appellant is M/s. Duraline Corporation, Kentucky, USA. The appellant entered into an agreement with M/s. Duraline Corporation India pvt. Ltd., New Delhi for supply of technical know-how for manufacture of their products HDPE/thermoplastic pipe related telecommunication duct products and accessories. The technical know-how included patents, secret information relating to processes, permission to use trademark, etc. The department was of the view that the said activity was liable to service tax under “Consulting Engineer’s Service and accordingly issued a show caused notice dt. 4-11-2003 demanding tax on the royalties paid to the appellants during the period 1-4-1999 to 30-9-2002. The service tax demanded was Rs. 10,39,442/- along with interest and there was also a proposal to impose penalties on the appellants under the provisions of the Finance Act, 1994. The appellant contested the levy. Nevertheless the demands were confirmed along with interest and also by imposing penalties against which the appellants preferred an appeal before the lower appellate authority. The lower appellate authority vide the impugned order dismissed the appeal.

Appellant’s Contention:- The learned counsel for the appellant submits that supply of technical know-how does not come within the category of “consulting Engineer’s service “ as has been held by this tribunal in a number of cases such as Navinon Ltd. v/s Commissioner of Central Excise, Mumbai -2004 (172) E.L.T. 400=2006 (3) S.T.R. 397 (Tribunal) ; Yamaha motors (India)Pvt. Ltd. v/s Commissioner of Central Excise - 2005 – TIOL-598-CESTAT-DEL = 2006 (3) S.T.R. 665 (Tri.-Del.) =2005 (186) E.L.T. 161(Tribunal) and Samsung India Electronics Ltd. v/s Commissioner of Central Excise -2005-TIOL-620-CESTAT-DEL., =2006 (1) S.T.R. 217 (Tri.-Del.) . Therefore the demand is not sustainable in law.

Respondent’s Contention:- The learned Superintendent (AR) appearing for the revenue concedes the issue in view of the decision of the decision of the tribunal in the case–laws cited by the appellant.

Reasoning of Judgment:- After considering the submission made by both the sides and from perusal of the agreement, it is seen that the technical know-how supplied by the appellant consisted of the patents, secret information , licence fee for use of trade mark and so on. These fall under the category of intellectual property rights. Therefore, the appellant is right in contending that the demands are not sustainable in law as the service provided do not come under the category of “Consulting Engineer’s Service”
Accordingly the appeal is allowed with consequential relief and if any. The pre-deposit made by the appellant shall be returned forthwith without waiting for application in this regard.

Decision:- Appeal allowed.

Comment:-The substance of this case is that for any service tax demand to conclude, it is very necessary that it is demanded under right category. The service tax demand under wrong category of service is not sustainable at the outset.

Prepared by: Madhav Rathi

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PJ/Case law/2014-15/2207

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