Case Law Details

Case Name : Commissioner of Central Excise, Nashik Vs S S Engineers & Contractors (CESTAT Mumbai)
Appeal Number : Order No. A/511 & 512/12/CSTB/C-I
Date of Judgement/Order : 07/06/2012
Related Assessment Year :


Commissioner of Central Excise, Nashik


S S Engineers & Contractors

ORDER NOs. A/511 & 512/12/CSTB/C-I

ST/CO/54 OF 2012

APPEAL NO. ST/35 OF 2012

JUNE 7, 2012


Ashok Jindal, Judicial Member

This appeal is filed by the Revenue against the Order-in-Appeal No. AKP/199/NSK/2011 dated 28/11/2011 passed by Commissioner of Central Excise & Customs (Appeals), Nashik.

2. The facts relevant in this case are as follows:

2.1 The respondent, M/S. S.S Engineers & Contractors, Nashik (SSE&C in short) entered into two agreements with their clients M/s. Dirk India Ltd. One agreement is dated 23/06/2001, which is for transfer of good will to the respondent by M/s. Dirk India Ltd., for a total consideration of Rs. 4,21,34,400/-. This consideration is paid @ Rs. 20/- per ton of pozzocrete produced by M/s. Dirk India Ltd. over a period of sixty six months. The other agreement dated 23/04/2006 is for collection, delivery and handling of fly ash by SSE&C to M/s. Dirk India Ltd. On the consideration received in respect of service they have discharged service tax liability under the “business auzilary service”. In respect of royalties received from M/s. Dirk India Ltd., on account of good will, the department was of the view that the said amount is also chargeable to service tax under the category of business auxiliary service.

2.2 Accordingly, a show-cause notice was issued demanding service tax on the amount received for the period 2009-10 totalling to Rs. 5,43,375/- under Section 73 of the Finance Act, 1994. Interest on the said amount was also demanded along with a proposal to impose penalty under Sections 76 & 77 of the Finance Act, 1944. The show-cause notice was adjudicated and the demands were confirmed. The appellant preferred an appeal before the Commissioner (Appeals), who vide the impugned order allowed their appeal on the found that the amounts were received by SSE&C on account of goodwill on transfer of business and such an amount is not leviable to service tax under business auxiliary service. The revenue is in appeal before us against the impugned order.

3. The ground urged in the appeal memorandum is that M/s. Dirk India Ltd. had given a contract to the SSE&C for collection, delivery and handling of fly ash on per ton basis from factory at Nashik and SSE&C had shown this amount under the commission received in the balance sheet and “Income from Dirk India – Royalty” in the ledgers. However, in 2008-09 SSE&C changed the accounting head from “Income from Dirk India – Royalty” to “Income from Dirk India as per Agreement” and this was done with a view to evade service tax. According to the revenue, the income received from M/s. Dirk India Ltd, is only towards commission and not towards goodwill. Hence, the Revenue is in appeal before us.

4. The respondent SSE&C has filed a detailed cross-objection, wherein they have reiterated that the amount received from M/s. Dirk India Ltd. is for two purposes. One for collection, delivery and handling of fly ash on which they have discharged service tax liability and the other is towards Royalty as per the agreement dated 23/06/2001, o which no service tax liability arises.

5. The Ld. DR appearing for the Revenue reiterates the findings of the lower adjudicating authority and the ground urged in the appeal memorandum.

6. We have considered the rival submissions.

7. We have also perused the agreement dated 23/06/2001 which has been reproduced in the impugned order. As per clause 3 of the agreement, the goodwill for transfer of fly ash business has been fixed at Rs. 4,21,34,400/- and the consideration is paid to SSE&C @ Rs. 30/- per ton of pozzocrete produced by M/s. Dirk India Ltd. The said agreement also says that the contract for fly ash collection from NTPS to MSEB for M/s. Dirk India Ltd. in the name of SS Engineers & Contractors will continue as usual as per the separate contract already signed. Thus, it is evident that there are two contracts. One for transfer of business goodwill and the other for collection, delivery and handling of fly ash on which service tax liability is being discharged. By no stretch imagination, payment of goodwill on transfer of business can come under the category of business auxiliary services; therefore, we do not find any merit in the Revenue’s appeal.

8. Accordingly, the appeal is dismissed as devoid of merits. The cross objection is also disposed of.


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  1. Tapan Ray says:

    Goodwill comes under Intellectual property services and not under business auxillary services and service tax is imposable as per the below definition given by CBEC.

    Intellectual property services (other than copyrigh
    ts) –
    (1) Intellectual property
    emerges from application of intellect, which may be
    in the form of an invention, design,
    product, process, technology, book, goodwill etc.
    In India, legislations are made in
    respect of certain Intellectual Property Rights (i.
    e. IPRs) such as patents, copyrights,
    trademarks and designs. The definition of taxable
    service includes only such IPRs
    (except copyright) that are prescribed under law fo
    r the time being in force. As the
    phrase ‘law for the time being in force’ implies su
    ch laws as are applicable in India, IPRs
    covered under Indian law in force at present alone
    are chargeable to service tax and
    IPRs like integrated circuits or undisclosed inform
    ation (not covered by the Indian law)
    would not be covered under taxable services.
    (2) A permanent transfer of intellectual property
    right does not amount to rendering
    of service. On such transfer, the person selling t
    hese rights no longer remains a ‘holder
    of intellectual property right’ so as to come under
    the purview of taxable service. Thus,
    there would not be any service tax on permanent tra
    nsfer of IPRs.
    (3) In case a transfer or use of an IPR attracts ce
    ss under Section 3 of the Research
    and Development Cess Act, 1986, the cess amount so
    paid would be deductible from
    the total service tax payable
    (refer Notification No.17/2004-S.T., dated 10-9-200
    [ C.B.E &C Circular No.80/10/2004-S.T dated 17.09.2
    004 ]

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