2012 (11) TMI 1201 - AT - Service Tax

Penalty - Classification of services - Business Auxiliary services or Computer network services or intellectual property rights services? - Held that - it is clear that right from December 2007 onwards the appellant s activities were known to the department and the department was confused under which category the service tax is leviable on the services received by the appellant. It was changed from BAS to Computer network services and finally to intellectual property rights service. In view of this factual position, the question of suppression of any facts by the appellant does not arise at all. Mere omission to furnish information does not amount to suppression of fact - extended period not invocable. The matter has to go back to the adjudicating authority to consider afresh the classification of the intellectual property rights received by the appellant under a particular category of IPR and the law which is applicable to such intellectual property in India - appeal allowed by way of remand.

Summary

Issues Involved:
Classification of services under service tax - Intellectual Property Service; Invocation of extended period for demanding service tax; Categorization of intellectual property rights under Indian law.

Analysis:

Issue 1: Classification of services under service tax - Intellectual Property Service

The appellant, a registered entity under various service tax categories, made payments to a foreign consortium for access to data related to their product. The department demanded service tax under various heads, eventually classifying the service under "intellectual property right services." The appellant contested this classification, arguing that the data obtained was for regulatory compliance in the European market and did not fall under Indian intellectual property laws. The appellant relied on a circular clarifying taxable intellectual property services under Indian law. The Tribunal noted that service tax can only be levied on intellectual property rights governed by Indian law. As the department failed to categorize the intellectual property received by the appellant under Indian law, the demand for service tax was deemed unsustainable. The matter was remanded for reclassification under relevant Indian law.

Issue 2: Invocation of extended period for demanding service tax

The Tribunal observed that the department was aware of the appellant's activities since 2007, continuously changing the tax category under which the service fell. The Tribunal held that the appellant's omission to provide information did not constitute suppression of facts, citing legal precedent. Consequently, the Tribunal deemed the invocation of the extended period for demanding service tax unwarranted. Only the demand for a specific period within the normal timeframe was considered valid.

Issue 3: Categorization of intellectual property rights under Indian law

The Tribunal emphasized that for service tax to be applicable, the revenue must first categorize the intellectual property rights received by the appellant under Indian law. The impugned order lacked efforts in this regard, necessitating a reevaluation by the adjudicating authority. The Tribunal directed the authority to classify the intellectual property rights under a specific category of IPR and identify the relevant Indian law governing such rights. The appellant was to be given an opportunity to present their case before a final decision was made.

In conclusion, the Tribunal set aside the impugned order and remanded the case for fresh consideration based on the above terms, ensuring proper categorization of intellectual property rights under Indian law. The stay application was also disposed of accordingly.