The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench held that no Service Tax Payable On Importation Of Drawings, Designs Under Category Of “Intellectual Property Services”.
The tribunal observed that designs and drawings were considered as goods under Customs Act, 1962 and customs duty has already paid on the importation of the goods. The demand of service tax to the extent of Rs.48,78,395 in the order, under the category of Intellectual property services, paid by the appellant under protest, is not sustainable.
Facts
The appellant-assessee is a manufacturer of coke in their factory located at Haldia in the State of West Bengal. For the purpose of setting up the Heat Recovery Coke Oven Project in the said factory, the appellant entered into five Agreements, with Beijing Sino-Steel Industries and Trade Group Corp (SSIT), Beijing, China. The plant simultaneously provides for production of power from the heat generated in the coke oven during conversion of coal to coke.
In April, 2007 the jurisdictional Service Tax authorities visited the appellant’s registered office at Kolkata and verified the records related to execution of Heat Recovery Coke Oven Project and found that the appellant was not paying service in respect of the imported designs and drawings supplied by SSIT, China, under reverse charge.
The Department was of the view that supply of designs and drawings, by SSIT amounts to providing the taxable service of “Intellectual property services” (IPR Services) as defined in Section 65(55b) read with Section 65(5a), which was taxable in terms of Section 65(105)(zzr) of the Act. As the appellant has not paid service tax for the IPR services received by them, they were asked to pay the service tax payable for the period from November 2005 onwards, along with interest.
The appellant, paid service tax of Rs.48,78,395/- along with interest ‘under protest’ and informed the Department about the payment ‘under protest’ vide letter dated 28.02.2008. The appellant paid service tax for various other taxable services also. Thus, the appellant paid a total sum of Rs.91,90,101/- (including cess), along with interest amounting to Rs.9,77,463/-, towards the services” received by them from SSIT.
The Commissioner issued a show cause notice to the appellant demanding service tax of Rs.91,97,197/- (including cess). The Notice demanded service tax in respect of the taxable services, namely, ‘intellectual property services’ under Section 65(105)(zzr) and “consulting engineering service” under Section 65(105)(g) respectively of the Finance Act, received by them in the form of supply of designs and drawings from SSIT, China during the period 10th November, 2005 to 31st March 2008. The Notice was adjudicated by the Commissioner and the demands raised in the Notice are confirmed along with interest and penalty.
Arguments
The assessee argued that transferring of technical know-how from SSIT is not a taxable service liable for service tax. The supply of designs and drawings by SSIT would not qualify as a taxable service under the category of “intellectual property right service” as defined under Section 65 (55a) of the Finance Act, 1994 unless the said intellectual property right is registered or patented in India.
Conclusion
The CESTAT allowed the appeal and ruled that there is no suppression of facts with intention to evade the payment of tax established in this case. The appellant has paid service tax under the category of “consulting engineering service” instead of “intellectual property service” as claimed by the Department. If service tax is paid under a different category, it is only a procedural lapse, for which no penalty can be imposed.
Case Details
Case Name: M/s. Hooghly Met Coke & Power Co. Limited v/s Commissioner of Service Tax
Citation: Service Tax Appeal No. 325 of 2011
Counsel for Petitioner : Dr. Samir Chakraborty, Senior Advocate Assisted by Shri Abhijit Biswas, Advocate
Counsel for Respondent : Shri S. Mukhopadhyay, Authorized Representative
Court: CESTAT, Kolkata
Judge: Ashok Jindal, Member (Judicial) And K. Anpazhakan, Member (Technical)
Decision Date: 09/08/2024
