Schneider Electric India Pvt. Ltd. Vs Commissioner of Service Tax (CESTAT Chandigarh)
CESTAT Chandigarh held that know-how is not an Intellectual Property Rights (IPR) within the meaning of service tax law and consequently its transfer is not liable to service tax.
Facts- The appellant-assessee M/s Schneider Electric India Pvt. Ltd. is engaged in the manufacture of electrical articles, namely, air circuit breaker, molded case circuit breaker, auto source changeover and integrated machinery process and factory control system and they are also registered with the service tax department.
On the basis of the audit conducted by the officers of the Directorate General of Audit, two show cause notices were issued for non-payment of service tax u/s. 66A of the Finance Act, 1994 on royalty amount paid to France based company (service provider) for transfer of technical know-how falling under Intellectual Property Rights Service.
Show cause notice was issued invoking extended period of limitation for demand of service tax including cess and provisions of interest & penalty also invoked. The Commissioner of Central Excise confirmed total demand but granted cum-tax benefit to the appellant-assessee. Being aggrieved, the present appeal is filed.
Conclusion- The only issue involved in the present case relates to levy of service tax on payment of royalty/fee on transfer of technical know-how and the same has been considered by the Tribunal in various cases and has consistently held that know-how is not an IPR within the meaning of service tax law and consequently its transfer is not liable to service tax.
Extended period cannot be invoked as the appellant-assessee has a bonafide belief that they are not liable to pay service tax on acquisition of know-how. Moreover, the issue relates to interpretation and hence intention to evade tax cannot be inferred.
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
These two appeals, one filed by the Assessee in Appeal No. ST/3895/2012 and another Appeal No. ST/55525/2013 filed by the Revenue are arising from the impugned order-in-original No. 14-15/Commr./PKL/2012-13 dated 31.08.2012 passed by the Commissioner of Central Excise, Panchkula whereby the Ld. Commissioner adjudicated two show cause notices having identical issues but for different periods. Vide the impugned order, the Ld. Commissioner has granted cum-tax benefit to the appellant-assessee and has also set-aside the demand prior to 18.04.2006 but has confirmed the total demand of Rs. 5,33,80,931/- for both the periods which are shown as under:-
