Case Law Details
Reebok India Company Vs Commissioner of Central Excise And Service Tax (CESTAT Chandigarh)
CESTAT Chandigarh held that service tax demand under reverse charge mechanism unsustainable in case the IPR is registered in any foreign country and is not registered in India.
Facts- M/s Refop India Company, or say RIC (formerly known as Reebok India Company), the appellants have entered into a technology licence agreement dated 01.03.1995 which was renewed on 01.10.2002 with Reebok International Ltd. UK; under the agreement with RIC UK, RIC India were granted non-exclusive and non-transferable right to utilise the technology in manufacture and distribution of products in India; the rights granted comprised of data, documentation, drawings, specifications relating to inventions, designs, formulae, processes and similar property rights, commonly known as technical know-how; RIC India was required to pay a royalty of 5% of net sales as per the agreement to the overseas entity.
The contention of the department was that the appellants are required to pay Service Tax under the head “Business Auxiliary Service”, on the amount of royalty paid, to their overseas entity and the commission received from Greg Norman Division for identifying and negotiating with Indian exporters, under Reverse charge mechanism.
Conclusion- Tribunal in the case of Reliance Industries Ltd. has held that in order to fasten the service tax liability, the person providing the technical know-how has to be registered with the Patent Authority in India. If the IPR is registered in any foreign country but is not registered in India, the same will not attract the service tax, demand under reverse charge mechanism.
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