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.
Held that this Bench in the case of Schneider Electric India Pvt. Ltd. held that technical know-how is not taxable unless the same is shown to have been registered in India. In the instant case too, we find that the Department did not produce any evidence to show that the technical know-how or any constituent items therein have been registered in India. This being the case, we have no reason to differ with our own finding given in the case of Schneider Electric and in the case of ABB Ltd.- 2019 (24) GSTL 55 (Tri. Bang.). We hold that no case has been made by the Department to recover service tax from the appellants in the impugned case.
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
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. An investigation was initiated against the appellants and on conclusion of the same show cause notices dated 23.10.2009 and 11.10.2009, covering the period September 2004 to March 2010, demanding service tax of Rs. 9,82,97,954/-; show cause notices dated 13.09.2011 and29.02.2012, demanding Service tax of Rs.2,83,92,002/- were issued to the appellants. The show cause notices were confirmed by Orders-In-Original No.3- 4/ST/PKJ/CCE/ADJ/2013 dated 17.01.2013 and OIO no. 40-41/Commr/PKL/2012 dated 05/12/2012, along with interest and penalties as mentioned therein. 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. The demand was also on account of consideration received from Matrix Clothing Pvt. Ltd, Super Fashion and Paragon Apparel for importing assistance with respect to exports under the head “TICS”. Hence, these two appeals ST/56241/2013and ST/57195/2013.
2. Shri B.L. Narsimhan, assisted by Ms. Krati Singh and Shri Aman Garg, learned counsels for the appellants, submits that the transfer of technical know-how does not qualify as “IPR Services”; transfer of technical know-how in the impugned case is in pursuance of technology transfer agreement which encompasses limited rights of data documentation, drawings, specifications related to inventions, designs, formulae, processes in respect of products to be manufactured; by no stretch of imagination, the same can be classified under the definition of IPR service under Section 65 (55B) and Section 65(55A) of the Finance Act 1994; the technical know-how in question in the present case is not recognised as an IPR; it is not protected under any Indian law for the time being in force; Therefore, it is not taxable in view of the clarification given by Circular No. 80/10/2004-ST dated 17.09.2004.He relies on the following cases:
