NOVA CHEMICALS Vs. CCE, KANPUR

JUDGEMENT

(1.) THESE appeals are filed by M/s. Nova Chemicals (Nova Chemical International)S.A. Switzerland (hereinafter referred to as appellants) against Order -in -Appeal No. 300/ST/APPL/KNP/2007 dated August 29, 2007 and 619/ST/APPL/KPP/2010 dated December 31, 2010 passed by the Commissioner of Central Excise (Appeals), Kanpur. Brief facts of the case are that on perusal of balance sheet of M/s. Gas; Authority of India Ltd., U.P. (in short, "GAIL") for the financial year 2000 -01 and 2001 -02 it was noticed that GAIL had incurred expenditure in foreign currency under the head "technical consultancy and engineering" amounting to Rs. 4,26,26,000 and Rs. 8,67,44,000 during the year 2000 -01 and 2001 -02, respectively. On further enquiry, it was revealed that these expenses were incurred by them in connection with consultancy charges relating to engineering and were paid to foreign companies in foreign exchange acting as consulting engineer for GAIL who do not have office in India. Statement of Shri Sachin Jain, senior officer of GAIL was recorded on September 18, 2006 in which he stated that GAIL has entered into an agreement with appellants and subject payment of Rs. 5,84,61,381 was made to the appellant as first installment of subject licence agreement. It was also stated by him that liability to service tax if any lies with the appellants with whom licence agreement dated September 10, 2001 was entered into by GAIL. It was found that GAIL has paid total amount of Rs. 6,78,69,495 (including Rs. 64,85,045 deducted as TDS and Rs. 29,23,069 as cess) towards invoice dated February 8, 2002. Accordingly, a show -cause notice dated November 16, 2006 was issued demanding service tax of Rs. 33,93,93,475 with interest and proposing penalties. The show -cause notice was adjudicated vide order -in -original No. 5/ADC/2007 dated April 9, 2007, confirming tax amount along with interest and imposing penalties under sections 75A, 76, 77 and 78 of that Act. The appellants filed an appeal before the Commissioner (Appeals) who vide order -in -appeal dated August 29, 2007 rejected their appeal. A second show -cause notice was issued to the appellant on March 12, 2007 demanding service tax amounting to Rs. 32,63,268 along with interest and proposing penalties. This show -cause notice was in respect of the period 2001 -02. This show -cause notice was confirmed by the original authority vide Order No. 3/2007 dated October 22, 2007. The appellants preferred an appeal before the Commissioner (Appeals) who vide order -in -appeal No. 619/2010 dated December 31, 2010 rejected their appeal. The appellants have filed the present appeals before this Tribunal. Since issue is the same, these appeals are being taken up together.

(2.) THE learned advocate appearing for the appellant submits that transfer of patented technology is not classifiable under consulting engineer service and more appropriately classifiable under intellectual property right service. He submits that as per agreement with GAIL, the appellants are owners of patent right in relation to sclairtech linear polythene technology and said technology is given to GAIL under licence. Reading of various provisions of the agreement dated February 15, 1993 and September 10, 2001 subject -matter is transfer of technology, perusal of supplementary agreement would indicate appellants continue to hold patents and it transferred patented technology for proposed expansion to GAIL. He submits that there are series of judgments holding such transfer of technology would not fall under consulting engineer service and consequently order -in -appeal deserves to be set aside.

(3.) THE learned advocate further points out that with effect from September 10, 2004 specific entries 65(55a) and 65(55b) have been created bringing transfer of technology either through patents or otherwise under service tax net under category of intellectual property right service and it is not permitted under law to charge tax in any other entry when a service is covered under specific service of IPR. Since IPR service was not in existence during the period of demand, order -in -appeal is required to be quashed.