2007 (8) TMI 88 - AT - Service Tax

STC service - Appellant s contention is that they made sale of accessories and technology and incidental sales connected with main technology and not providing any services relating to STC service - Tribunal accept the contention of appellant and allow the appeal

Summary

Issues:
- Classification of services under "Scientific or Technical Consultancy Services (STC)"
- Determination of whether the activity falls within the ambit of the definition of Section 65(92) of the Finance Act, 1994
- Interpretation of the terms of the Agreement for technology transfer
- Application of relevant legal precedents in similar cases

Analysis:
1. Classification of services under "Scientific or Technical Consultancy Services (STC)":
The appellant, a pharmaceutical company, contended that their activity of selling technology for the manufacture of Active Pharmaceutical Ingredients (API) to a client did not fall under the category of "Scientific or Technical Consultancy Services (STC)." The Commissioner disagreed with this argument, noting that the agreement indicated the supply of API products to clients. The appellant argued that the sale of technology and accessories, without continuous service provision or commission, should not be considered STC services. The appellant relied on legal precedents where similar technology transfers were treated as sales of goods, not services.

2. Determination of activity falling within the ambit of Section 65(92) of the Finance Act, 1994:
The Department argued that the technology transfer activity fell within the definition of Section 65(92) of the Finance Act, 1994, as the appellant developed non-infringing manufacturing processes for the client. The Department maintained that the order confirming Service Tax was justified and correct, citing a Supreme Court judgment supporting the levy of Service Tax on sales transactions.

3. Interpretation of terms of the Agreement for technology transfer:
Upon examining the terms of the Agreement, it was found that the appellant had sold technical know-how for manufacturing API to the client. The Tribunal had to determine whether the transaction constituted a sale of technology or a provision of STC services. The absence of continuous service provision or commission indicated a sale of technology, not a service, as per the definition of STC services.

4. Application of relevant legal precedents in similar cases:
The Tribunal considered legal precedents cited by the appellant, which established that the transfer of technology without continuous service provision or commission should be treated as a sale of goods, not a service. The Tribunal distinguished a Supreme Court judgment related to the levy of Sales Tax on goods sold, emphasizing that the present case involved the transfer of technology for a valuable consideration without ongoing service provision.

In conclusion, the Tribunal found that the impugned order, which classified the appellant's activity as STC services, was not legally sound. The Tribunal set aside the order and allowed the appeal, considering the transfer of technology as a sale of goods rather than a provision of services, based on the terms of the Agreement and relevant legal precedents.