DAY INTERNATIONAL INC. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) IN Order -in -Original dated 26.03.2005 of the Assistant Commissioner of Central Excise, Coimbatore -I Division, an amount of Rs. 53,615/ - was demanded from M/s Day International Inc. Dayton, USA for services rendered by them during the period 01.04.2001 to 30.09.2001 in the category of "Consulting Engineer". He also demanded interest and imposed penalties of Rs. 500 and Rs. 1,000/ - under Sections 75 A and 77 respectively of the Finance Act, 1994. Besides, the penalty at the rate of Rs. 100 per day payable till the date of payment of tax was imposed. Interest at the appropriate rate was also demanded under Section 75 of the Act. As per the Order -in -Original, the case against M/s Day International is that they provided technical assistance and technical advice for converting the existing plant and machinery to suit the manufacturing needs of the licensed products, viz 'bale plucking machines', trained the personnel in the preparation of machinery and the manufacture of the licensed products. M/s Day International had entered into an agreement with M/s Coimbatore Cots and Coatings Ltd. (CCC). Consequent to the amalgamation of CCC with M/s Textool and the subsequent amalgamation of the said entity with M/s LMW supplementary agreements were made by M/s Day International with the merged entities. As per the agreements, M/s Day International would provide know -how, technical information, marketing and training assistance for the manufacture of "Bale Plucking machines". The services and know -how were to be exchanged for a royalty of 3% on the sale price of the licensed products manufactured.

(2.) ON appeal by the appellant, ld. Commissioner (Appeals), Coimbatore upheld the order of the original authority. The present appeal is against the appeal of the Commissioner (Appeals), Coimbatore.

(3.) ARGUING the application for stay of recovery and waiver of predeposit, Shri M. Saravanan, Adv. argued that the transfer of technical know -how did not constitute provision of "Consulting Engineer's Service" which has been the position settled by various decisions of the Tribunal and that in the case of Yamaha Motors (I) Pvt. Ltd. v. Commissioner of Central Excise, Delhi -IV (Faridabad) , the Tribunal had also held that instruction of personnel and training also formed part of transfer of know -how. The stay order of the Tribunal had cited the observations of the Supreme Court in the State of Orissa v. Titaghur Paper Mills Co. Ltd. 1985 Supp. SCC 280, wherein they had defined royalty "as a payment reserved by the grantor of a patent proportionately to the use made of the right by the grantee". The ld. Adv. also cited the ratio of the decision in Navinon Ltd. v. Commissioner of Central Excise, Mumbai -VI 2004 (172) E.L.T. (Tri. -Mumbai), wherein the Tribunal had decided that royalty was a share of product or profit reserved by the owner for permitting another the use of his property. Royalty payments for the use of technology and know -how did not attract Service Tax.