Case Law Details

Case Name : M/s Indian Oil Corporation Vs CS (CESTAT Delhi)
Appeal Number : ST/Appeal No. 996/2010
Date of Judgement/Order : 14/04/2010
Related Assessment Year :

Prima facie, we are not able to accept the contention that for services of Consulting Engineer, charges are linked to the volume of sales of the goods manufactured using such service. From the details given, it prima facie appears that what is transferred is the know how of the Appellants and any assistance provided in the initial stage, for which they are not charging is only incidental. Since we are prima facie convinced that the service is not covered by the entry for Consulting Engineer Services during the relevant period of time, the appellants have made a strong prima facie case for wavier of the demands made in the impugned order. Accordingly, requirement of pre- deposit is waived and recovery of such amount is stayed during pendency of the Appeal.

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
COURT NO.IV

ST/Stay No. 1968/2010
ST/Appeal No. 996/2010

Arising out of Order-in-Appeal No.187/MA/FBD/2009 Dated: 14.4.2010
Passed by the Commissioner of Central Excise (Appeals), Gurgaon

Date of Decision: 11.4.2011

M/s INDIAN OIL CORPORATION

Vs

CST, DELHI

STAY ORDER NO.ST/267/2011

Per: Mathew John:

In this case, Indian Oil Corporation Ltd has come up in appeal against the order in appeal.

2. The issue involved in this case is the payment received by M/s Indian Oil Corporation Ltd for transfer of technical specifications and knowhow for manufacture of product called “ZSM-5 Additive” which when added to the Fluid Catalytic Cracking Catalyst enhances LPG yield. This knowhow is provided to Sud-Chemie India Ltd,90, Nehru Place, New Delhi (SCIL). The payment terms as per the contract is that 20% of the sale proceeds of the goods manufactured by SCIL using the knowhow will be paid to the Appellant. Undisputedly, this service comes within the “Intellectual Property Service” as defined in section 65(55b) of the Finance Act, 1994 from 10.9.2004. The dispute before the Tribunal is whether this service can be subjected to service tax under the definition in section 65(31) and 65(105)(g) of the Act for Consulting Engineer Services, prior to 10.9.2004.

3. The learned Counsel for the appellant submits that what they are providing is transfer of knowhow. They also take responsibility for hand-holding during the initial three trials. During that phase, they do not charge for such assistance. If the transferee requires help beyond this point, the agreement provides for services on payment basis. The disputed tax amount is not relating to any assistance given beyond the initial trial phase. The Revenue is wanting to tax on 20% of sales proceeds paid to Indian Oil Corporation as per the terms of the agreement.

4. The Counsel relies on the decision in the case of Shore to Shore Mis Private Ltd Vs CCE Chennai reported in 2007 (5) STR 109 and CCE Vapi Vs M/s Harsiddhi Motors reported in (2009-IST-609-CESTAT-AHM) .

5. The learned DR on the other hand, submits that this service will be squarely covered by the definitions of Consulting Engineer Services prior to the date of 10.9.2004. According to him, the payment is on account of the fact that they have to give continued assistance and supervision for manufacture of the product in question.

6. Considered arguments of both sides.

7. Prima facie, we are not able to accept the contention that for services of Consulting Engineer, charges are linked to the volume of sales of the goods manufactured using such service. From the details given, it prima facie appears that what is transferred is the knowhow of the Appellants and any assistance provided in the initial stage, for which they are not charging is only incidental. Since we are prima facie convinced that the service is not covered by the entry for Consulting Engineer Services during the relevant period of time, the appellants have made a strong prima facie case for wavier of the demands made in the impugned order. Accordingly, requirement of pre-deposit is waived and recovery of such amount is stayed during pendency of the Appeal.

(Order dictated and pronounced in the open Court.)

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