The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that service tax can't be levied on deposits made pursuant to interim orders. Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member) were dealing with the issue of whether service tax can be levied on the amounts paid or deposited during the pendency of the proceedings...
The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that service tax can't be levied on deposits made pursuant to interim orders.
Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member) were dealing with the issue of whether service tax can be levied on the amounts paid or deposited during the pendency of the proceedings before the High Court as per interim orders.
In this case, M/s Telefonaktiebolaget LM Ericsson of Switzerland sued Micromax (assessee) for royalty for use of patents and technologies belonging to Ericsson.
The matter was before the Delhi High Court and through Interim Orders, Delhi High Court had directed Micromax to pay certain amounts to Ericsson. Further the amount was deposited on directions of the Delhi High Court.
The matter was investigated by DGCEI from the point of view of service tax as it was felt that Micromax, as a recipient of service of intellectual property rights, was required to pay service tax on the amounts paid to Ericsson which was located outside India.
The matter was finally settled between the Ericsson and Micromax as per which Micromax paid an amount of Rs. 96 crores as royalty to Ericsson. Accordingly, the Delhi High Court dismissed the case as the matter was settled between the parties.
The case of the Revenue is that the impugned order is not correct and proper and that service tax should have been confirmed on the amount paid by Micromax during the pendency of the suit as per the interim orders of the High Court.
It was asserted that the amounts paid were not mere deposits and they were indeed royalty paid to Ericsson and, therefore, service tax should have been paid.
The Tribunal opined that all the amounts which were paid during the pendency of the proceedings before the Delhi High Court either to Ericsson or deposited with the Delhi High Court by Micromax were merely deposits. The amounts paid to Ericsson or deposited in the High Court as per the interim orders cannot be called as royalty paid for the use of IPR.
The entire royalty paid by Micromax to Ericsson for use of IPR was as per the settlement between the two parties Rs. 96 crores and nothing else. IGST was already paid on that amount, added the bench.
In view of the above, the Tribunal dismissed the appeal.
Case Title: Principal Commissioner v. M/s Micromax Informatics Limited
Case Number: SERVICE TAX APPEAL NO. 50318 OF 2019
Counsel for Appellant/ Department: Anand Narayan
Counsel for Respondent/ Assessee: Anu Sura and Shri Ayushraj