SUNDARAM TEXTILES LTD. Vs. CCE

JUDGEMENT

(1.) IN this appeal filed by M/s. Sundaram Textiles Ltd., (STL), Nanguneri, they have sought to vacate the impugned order. In the impugned order the Commissioner (Appeals) confirmed a demand of service tax of Rs. 1,58,642/ - made on M/s. Sundaram Textiles Ltd./M/s. Japan Institute of Plant Maintenance (JIPM) and the penalties imposed on the same person(s). Facts of the case are that STL entered into an agreement with JIPM for receiving "Total Productive Maintenance" (TPM) from JIPM during the period 28.02.99 to 16.08.2002. In terms of the agreement STL was liable to pay taxes due from JIPM in India. The original authority found that TPM came under the category of Management Consultancy service. After due process of law, the Assistant Commissioner demanded service tax from STL/JIPM and imposed penalties.

(2.) THE Ld. Counsel for the appellants reiterated the grounds taken in the appeal. It is submitted that the service provided by JIPM came under 'Intellectual Property' which was not liable to service tax at the material time. As 'Intellectual Property' was brought under the taxnet subsequently the demand on the same activity during the material period under the head 'Management Consultancy' was not sustainable in law. During the material period a foreign firm could not be taxed for services provided by it. The Ld. Counsel relied on the decision of the Tribunal in the case of Philcorp Pvt. Ltd. v. CCE Goa reported in 2007 (7) STR 266 (Tri. -Mum.), wherein the Tribunal had held that as per Section 64 of the Finance Act, 1994, Chapter relating to the Service Tax extended to the whole of India except the State of Jammu and Kashmir. It meant that the tax would not apply to a person or a company which was situated outside India having no business establishment in India. Service tax from such provider of the service could not be recovered for the period prior to 2002, when such services were brought under the tax net. She submitted that the Japanese Company owned Trade Mark and Intellectual Property rights relating to TPM. Agreement provided for transfer of intellectual property rights. Consideration paid could not be held to have been for any consultancy service but for transfer of intellectual property. In this connection, she relied on the decision of the Tribunal in Yamaha Motors (I) Pvt. Ltd., v. CCE, Delhi

(3.) THE Ld. Counsel submitted that the Show Cause Notice had proposed to demand the impugned tax from both STL and JIPM and to penalize both STL and JIPM for the same activity. This was illegal. The order of the original authority similarly confirmed the duty demand and imposed penalty on both STL and JIPM. Therefore, the orders of the lower authorities were not sustainable.