2015 (12) TMI 260 - AT - Service Tax

Waiver of pre depposit - Intellectual Property Rights Services - Held that - Agreement between appellant and M/s. Eugenex Biotechnologies that appellant has received certain patent rights and technology rights from M/s. Eugenex Biotechnologies registered at a place outside India. As per clause 4.2 of the contract appellant has certain rights to carry out modifications in the technology other than making any changes in the clone. Further as per the clause 3.1 of this agreement certain fixed cost has to be paid by the appellant to M/s. Eugenex Biotechnologies. As per clause 5.4 of the agreement, periodical royalties have also to be paid on regional basis by the appellant to M/s. Eugenex Biotechnologies for a period of 7 years. Prima facie, it appears that transfer of patent right and technology are not permanently transferred to the appellants. However, appellant has relied upon C.B.E.& C. Circular No. 80/10/2004-S.T., dated 17-9-2004 to argue that IPR Services are not attracted to an IPR registered outside India - only those IPRs procured under Indian laws are to be covered under IPR services and those IPRs not covered by the Indian Laws would not be covered under taxable under IPR Services. In view of clarification issued by C.B.E. & C. appellant has made out a prima facie case for complete waiver of the confirmed demands and penalties - Stay granted.

Summary

Issues:
1. Interpretation of Intellectual Property Rights Services (IPRs) under Service Tax law.
2. Whether the transfer of patent rights and technology rights is permanent.
3. Applicability of Service Tax on IPRs registered outside India.
4. Prima facie case for waiver of confirmed demands and penalties.

Analysis:
1. The appellant argued that no Service Tax under IPRs is attracted as they had permanently purchased the technology from the other party. The advocate highlighted clauses of the contract and a relevant C.B.E. & C. Circular to support the argument. Reference to a previous stay order in a similar case was also made.

2. The Revenue contended that the technology had not been permanently transferred, and periodic royalties were to be remitted as per the contract. The clauses of the agreement were examined, pointing out that certain patent and technology rights were received by the appellant, with provisions for modifications and royalty payments over a specified period.

3. The Tribunal observed that the transfer of patent and technology rights was not permanent based on the agreement clauses. However, the appellant relied on a C.B.E. & C. Circular stating that IPRs not covered by Indian laws are not taxable under IPR Services. The Tribunal noted that only IPRs procured under Indian laws are covered under taxable services, providing a basis for a prima facie case for a waiver of confirmed demands and penalties.

4. Considering the arguments and the clarification provided, the Tribunal ordered a stay on the recoveries of confirmed demands and penalties until the appeal's disposal, acknowledging the appellant's prima facie case for a waiver based on the interpretation of IPR Services under the Service Tax law and the applicability of Service Tax on IPRs registered outside India.

This detailed analysis of the judgment addresses the issues involved and the arguments presented by both parties, leading to the Tribunal's decision to grant a stay on the recoveries pending the appeal's final resolution.