ORDER
Archana Wadhwa, Member (J)
1. Being aggrieved with the order passed by the Commissioner (Appeals), vide which he has set aside the demand of service tax confirmed by the Asst. Commissioner, Revenue has preferred the present appeal. We have heard Shri Sameer Chitkara, SDR for the Revenue and Shri P.M. Dave, Advocate and Shri Dhaval Shah, Advocate for the respondent.
2. As per facts on record, respondents are engaged in the manufacture of textile machinery and parts thereof and entered into a technology transfer agreement with M/s. Truetzschler Textilmaschinen, a German company (hereinafter referred to as M/s. T.T.). They paid technical know how fee and royalty to their foreign collaborator, which the Revenue is of the view comes under the category of consulting engineer and have accordingly raised and confirmed service tax against the respondents.
3. Commissioner (Appeals) while setting aside such confirmation has observed as under:
17. It is no disputed that M/s. T.T., Germany were the owners of the patents, inventions, process and date relating to manufacture of various products, components, accessories and spares thereof. The agreements between the parties were for transferring technical know-how i.e. for allowing the appellants a right to use licensed technology of M/s. T.T., Germany, and as such the agreements are in the nature of allowing use of intellectual property rights. From the agreements it is clear that M/s. T.T, Germany had agreed to provide technical know-how to the appellants for manufacture of various products, on payment of lump sum fees and royalty as per the agreements. The Hon’ble Tribunal in the case of Navinon Ltd. v. CCE, Mumbai-IV while dealing on the similar issue, has held that payment of royalty for technical know-how was not payment for any service and royalty was a share of profit reserved by the owner for permitting another person to use his property and royalty payments for the use of technology or know-how cannot be equated with any services. In the case of Essel Propack Ltd. 2006 (1) S.T.R. 150 (Tri.-Mumbai), it was held that royalty payment for use of technology and know-how cannot be equated with any service to be provided by foreign company to Indian company. The Hon’ble Tribunal in the case of BST Limited v. CCE, Cochin reported in 2006 (4) S.T.R. 40 (Tri.-Bang.) has held that royalty for technical know-how paid to foreign collaborator was not liable for service tax under “consulting engineer service” during the material period.
18. The technical know-how provided by the foreign company as per the licensed agreements was transfer of intellectual property rights and no consultancy or advice was involved and hence the same was not liable to service tax under consulting engineer service. Further the Government has specifically covered this service for levy of service tax with effect from 10-9-2004 under Section 65(55b) of the Finance Act, 1944 as “Intellectual property service” and with effect from 10-9-2004 the appellants had been discharging their service tax liability on this service under intellectual property service. The definition of ‘intellectual property services’ given under Clause (55b) of Section 65 is very specific and covers within its ambit, the sale of ‘intellectual property right’ or transfer for some period or just giving right to the other person for the use or enjoyment of any ‘intellectual property right’. Further, the German company was the manufacturer of the machinery and were in possession of technical know-how for the manufacture of various machineries and spares. Therefore, the technical know-how provided by M/s. T.T.y Germany could not be termed as advice or consultancy. Therefore, the technical know how provided by M/s. T.T., Germany cannot be equated with any service covered under consulting engineer service. Therefore, the service tax demanded and confirmed under consulting engineer service is hereby set aside.
4. As is clear from the above, the appellate authority has relied upon the Tribunal’s decisions in the case of Essel Prepack Ltd. 2006 (1) S.T.R. 150 and SST Ltd. 2006 (4) S.T.R. 40, which have held that such transfer of technical know-how and royalty payment will not be leviable to service tax under the category of consulting engineers. It is further seen that the said activities were covered under the service of transfer of intellectual property rights w.e.f. 10-9-2004 and the appellants are paying service tax on the same with effect from the said date. Tribunal in the case of BCCI v. CST, Mumbai 2007 (7) S.T.R. 384 (Tri.-Mumbai) has observed that when a new entry is introduced covering a particular activity without amending the earlier entry, it cannot be said that the earlier entry covered the subsequently introduced entry. As such, we do not find any infirmity in the view adopted by Commissioner (Appeals) and accordingly reject the Revenue’s appeal.
(Pronounced in Court on 10-1-2008)