ORDER
R.K. Abichandani, J. (President)
1. The appellant challenges the order of the Commissioner directing recovery of service tax amount of Rs. 1,94,91,959 with penalty of the like amount under the provisions of Section 78 and the penalty not exceeding Rs. 1,94,91,959 under Section 76, penalty of Rs, 1,000 under Section 75A with interest payable under Section 75 on the service tax demanded.
2. At the outset, the learned Counsel submitted that in respect of the same agreement, the Tribunal had waived pre-deposit in another matter which was filed by the recipient for the subsequent period. Copy of the order dated July 17, 2006 is placed on record. It appears from the order that no reference has been made whatsoever to any of the clauses of the agreement which have been taken into consideration by us. Moreover, interim order in respect of different period and against a different impugned order cannot constitute a precedent for passing interim order in the present case. It is submitted for the Revenue that in similar matters raising the issue regarding know-how in the context of service tax, orders of pre-deposit had been made.
3. In the present case, the appellant was alleged to be a service provider in the show cause notices issued making the aforesaid demand, on the ground that the appellant had provided taxable service under the category of “consulting engineer” to M/s. Hero Honda Motors Limited without registering under Section 69 and it failed to remit service tax within 75 days of the close of the month in which the services were rendered as required by Section 68 as it existed till October 15, 1998 and it failed to pay service tax on amended provision of Section 68 thereafter, and further, they failed to furnish the return in the manner prescribed under Section 70 of the Act.
4. The Commissioner, on the basis of the material on record and keeping in view the terms of the agreement noted that the subject-matter of the show cause notice was restricted to technical information and technical know-how received from the appellant during the period covered by the show cause notice. He noted that under Article 4.1 of the agreement the licensor was obliged to furnish the licensee with all the technical information for the manufacture of the products and the parts, by disclosing it in documentary form and by dispatching technical experts to instruct and advise the licensee as to the application of the technical information and/or otherwise, in the manner mentioned in Article 4. The Commissioner found from the various clauses, noted in para 19 of the order, that the appellant had agreed to provide technical information against monetary consideration to the recipient, charges towards technical information on dates mentioned in the show cause notice and services were required to be provided for the period spent over the validity of the agreement. It was found that the services on account of technical information including technical assistance as per the agreement. Referring to the provision of Rule 4 as it was operative during the period February 28, 1999 to August 16, 2002 it was held that since the services were provided to Hero Honda Motors Ltd., in India, they were liable to pay tax. The only concession was that the nonresident may not make an application for registration, if such person pays the service tax on taxable service rendered by him, under Rule 6. It was held that the provisions applicable to non-residents under other laws such as the income-tax law were not relevant in the context of the liability to pay service tax that was incurred by the non-resident in respect of services rendered in India. It was also held that advice and consultancy or technical information being provided in the form of drawings, standards, specifications cannot override the fact that they were the medium for rendering of taxable service.
5. The learned Counsel appearing for the appellant contended that the Commissioner had rendered the decision only on the ground that the assistance along with the passing on of technical information rendered it a service. It was submitted that service which was part and parcel of the know-how in the form of technical information was to be treated as know-how which was intellectual property and no service tax would be attracted in respect of the consideration which is received for transferring the know-how. Reliance was placed on the decision of the Tribunal in Yamaha Motors (I) P. Ltd. v. Commissioner of Central Excise, Delhi-IV (Faridabad) reported in 2005 186 ELT 161, in which it was observed in para 7 of the judgment that teaching service covered by Article 5 of the agreement which related to personnel instructions and training carried out by the personnel of the foreign collaborator “in order to make them understand or become familiar with the technical information” formed part of transfer of technical know-how. It was further contended that the appellant was a non-resident and was not a consulting engineer in the sense in which the expression was understood in the profession. Since the appellant was non-resident and technical information was prepared abroad and despatched from there it cannot be said that the services were rendered in India. He submitted that, in any event, the consideration which related to know-how as trade secret was different from the payments made for giving technical assistance. According to him, the payments for technical assistance, apart from the value of the intellectual property, were only to the tune of Rs. 1,10,24,361.95, as per the statement showing “Remittances by Hero Honda Motors Limited from 1997 to 2002 (June 20, 2002) for services rendered in India under technical assistance agreement”. Admittedly, the said statement which is on record at page 132 of this paper book was prepared by the appellant and it shows that services were rendered by it in India under the technical assistance agreement. The services were, prima facie, in the engineering discipline as they related to the manufacture of motorcycles. In view of these facts, the interim order in another matter for a different period made on July 17, 2006 cannot be a binding precedent for making total waiver of deposit despite there being clear indication on record that services were rendered under the technical assistance agreement as stated in the statement prepared by the appellant. Therefore, even if the consideration received for “know-how”, properly so called, as trade secret, which is the value which was also included in the demand confirmed, is kept out of consideration, there still would remain the liability to pay service tax on the part of the appellant, which is stated to be around Rs. 5.50 lakhs.
6. Having regard to the above facts and circumstances of the case, we, direct that there shall be interim stay on the appellant’s depositing Rs. 5 lakhs (rupees five lakhs only) within four weeks from today, failing which the appeal shall stand dismissed. On the amount being so deposited, there shall be waiver of pre-deposit of the remaining amount of tax and penalty payable under the impugned order, during the pendency of the appeal. This application stands disposed of accordingly. Post the matter for reporting compliance on December 18, 2006.