2012 (9) TMI 528 - AT - Service Tax

Intellectual property rights - service tax liability - Stay for waiver of pre-deposit, interest thereof and penalties u/s 76 and 78 - Held that - Perusing the agreement entered between the appellant and service recipient it provides for requirement of appellant s permission for transfer of technical knowhow by the licencee to any other person who wish to manufacture same product by using the process developed by the appellant herein. This itself would indicate that there is no permanent transfer of intellectual property right to the licencee in the agreement. Be that as it may, the appellant has not made out a prima facie case for complete waiver of pre-deposit of the amounts involved & is directed to deposit an amount of Rs.4 lakhs (Rupees Four Lakhs only) within a period of eight weeks from date of order.

Summary

Issues:
1. Stay petition for waiver of pre-deposit of Service Tax, interest, and penalties under Sections 76 and 78 of Finance Act, 1994.
2. Interpretation of the agreement regarding the transfer of technical knowhow and its implications on Service Tax liability.
3. Application of limitation period in invoking extended period for raising objections.

Analysis:
1. The appellant filed a Stay Petition seeking waiver of pre-deposit of Service Tax, interest, and penalties amounting to Rs.16,33,802. The amount was confirmed as Service Tax liability, penalties were imposed, and interest was charged due to the alleged non-payment of Service Tax under intellectual property rights category.

2. The appellant argued that the transfer of technical knowhow to the licensee was permanent, supported by the agreement clauses indicating a monthly consideration based on sales. Citing precedents, the appellant claimed the issue was time-barred post-audit query compliance. The respondent contended that the agreement showed a temporary transfer of technical knowhow, emphasizing clauses restricting further development transfer.

3. After reviewing submissions and the agreement, the Tribunal found the agreement required the appellant's permission for the licensee to transfer technical knowhow, indicating a lack of permanent transfer. While considering the limitation issue for final disposal, the Tribunal directed the appellant to deposit Rs.4 lakhs within eight weeks and report compliance, allowing waiver of pre-deposit for the remaining amount pending appeal disposal.