Order Date – 28 June 2023

Parties: Schneider Electric India Pvt. Ltd. Vs Commissioner of Service Tax, Delhi

Facts –

• The appellant, 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.
• On the basis of the audit conducted by the officers of the Directorate General of Audit, two show cause notices were issued for the period 2005-06 to 2009-10 and 2010-11 to Sep’11 for non-payment of service tax under Section 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.
• The Ld. Commissioner of Central Excise confirmed the demand but granted cum-tax benefit to the appellant. Being aggrieved both the appellant and revenue filed the appeal.

Issue –

• Whether the royalty paid by the appellant under the agreement is liable to service tax?

Order –

• The Tribunal observed that 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. Further, Circular No. 80/10/2004-ST dated 17.09.2004 have clarified the scope of taxable entry.
• Further, the findings in the impugned order holding that deduction under Notification No. 17/2004-ST dated 10.09.2004 is available only to service tax paid under Section 66 and not as reverse charge under Section 66A is also contrary to the decision of the Tribunal in the case of Rochem Separation Systems (india) Pvt. Ltd.
• In these circumstances, 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. Further, the extended period cannot be invoked as the entire proceedings are revenue neutral as held by the Tribunal in various cases.
• The issue of cum-tax benefit given by the Ld. Commissioner is well settled by the decision of the Tribunal in the case of DHL Express (I) Pvt. Ltd. holding that even in reverse charge scenario cum-tax benefit is available to the assessee.
• The appeal of the assessee and dismiss the appeal of the Revenue.

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