R.M. DHARIWAL Vs. COMMISSIONER OF CENTRAL EXCISE
LAWS(CE)-2015-4-23
CUSTOMS EXCISE AND GOLD(CONTROL) APPELLATE TRIBUNAL
Decided on April 15,2015

R.M. Dhariwal Appellant
VERSUS
COMMISSIONER OF CENTRAL EXCISE Respondents

JUDGEMENT

M.V.RAVINDRAN,MEMBER (J) - (1.)THIS appeal is directed against Order -in -Appeal No. P -III/VM/169 -170/2009, dated 21 -8 -2009. The relevant facts that arise for consideration are that the appellant herein was charged as to not discharging the service tax liability for an amount received by them as royalty from M/s. Dhariwal Industries Ltd. for the use of trade name/brand name on the products which were manufactured and cleared consequent to an agreement dated 20 -4 -2004. Revenue authorities were of the view that as per the terms and conditions of the above -mentioned agreement, M/s. Dhariwal Industries Ltd. is required to pay royalty to the appellant at a fixed rate of 3% of Net sales on the basis of audited annual reports. On scrutiny of the audited balance sheet for the year ending 31 -3 -2005, it was noticed that the appellant had issued two invoices for the receipt of the royalty for the period 1 -4 -2004 to 10 -9 -2004 and did not discharge the service tax liability. Show cause notice was issued which was adjudicated and demand of the service tax liability was confirmed along with interest and penalties were imposed. Aggrieved by such an order, appellant preferred an appeal before the first appellate authority. The first appellate authority after following due process of law did not agree with the contention raised by the appellant and rejected the appeal.
The ld. Counsel appearing on behalf of the appellant would take us through the entire case records. He would submit that the appellant had received royalty from M/s. Dhariwal Industries Ltd. It is his submissions that the question involved in this case is whether the service tax liability would be required to be discharged for the period 1 -4 -2004 to 10 -9 -2004 under the category of "Intellectual Property Services". He would submit that the said services were brought into service tax from 10 -9 -2004. He would submit that both the lower authorities have incorrectly appreciated the facts, as the service tax liability arises on the appellant even for the royalty amounts, which were paid for the period in question. He would submit that the liability would not arise at least up to 10 -9 -2004, as the service tax was first time brought into statute under the category of Intellectual Property Services and the benefit of Notification No. , dated 10 -9 -2004 cannot be called is for help by the department. He would draw our attention to the agreement entered by the appellant with M/s. Dhariwal Industries Ltd. and submit that the royalty which has been paid for the period in question i.e. 1 -4 -2004 to 10 -9 -2004 though settled in 2004 -2005 and hence only tax net.

(2.)LD . AR on the other hand, would draw our attention to the Notification No. and submit that the said notification specifically states service tax liability would not arise on the appellant to that portion of the value of taxable service which is received by the service provider from the customer prior to 10th day of September, 2004. He would then submit that the balance sheet for the year 2004 -2005 was finalized on 8 -9 -2005 and appellant could be ineligible for the exemption granted by Notification No. He would reiterate the findings of the lower authorities.
(3.)WE have considered the submissions made by both sides and perused the records.
The issue to be decided in this case is whether the amounts received by the appellant for the period 1 -4 -2004 to 10 -9 -2004 would be covered under the service tax net under the category of "Intellectual Property Services" or otherwise. It is undisputed that the amount which has been received by the appellant during material period in question was as royalty for the use of the brand which is registered in the name of the appellant assessee.

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