2008 (3) TMI 179 - AT - Service Tax

Applicant is basically a patent holder - Commissioner held them as rendering the services under the category of consulting engineer and confirmed demand - contention that agreements for transfer of technology/know-how can not considered to fall under category of consulting engineer impugned services were brought under tax net only w.e.f. 10-9-2004 under the head intellectual property service - prima facie case in applicant s favour and accordingly entitled to waiver of pre-deposit

Summary

Issues:
- Interpretation of service tax law regarding the nature of services provided in a license agreement for technology transfer.
- Determination of whether the agreement for technology transfer falls under the category of consulting engineering services.
- Assessment of liability for service tax and penalties under the Finance Act, 1994.

Analysis:
The case involved a dispute where the applicant, a successor in business to a patent holder, entered into a supplementary license agreement with another party to increase manufacturing capacity. The Commissioner had held the services provided as consulting engineer services, leading to a demand for service tax and penalties. The appellant argued that they were primarily a patent holder transferring technology/processes for capacity expansion, not a consulting engineering firm. They contended that the services rendered were subsidiary to implementing the technology transfer. The appellant highlighted an amendment to the service tax law, bringing intellectual property services under the tax net from a specific date, suggesting that the agreement should not be treated as consulting engineering services for the earlier period.

The appellant referenced previous Tribunal judgments to support their position that technology transfer agreements do not fall under the consulting engineer category, despite ancillary services like technical assistance provided. The Departmental Representative countered by emphasizing the detailed assistance provided in the expansion process and the trial of the additional plant. After hearing both sides, the Tribunal opined that the relationship between the parties was that of a licensor and licensee, not a consulting engineer and client. They found that the appellant had established a prima facie case in their favor, leading to the grant of waiver of pre-deposit and stay of recovery of dues as ordered by the original authority.

In conclusion, the Tribunal allowed the stay petition, indicating that the appellant was entitled to the relief sought. The decision was based on the understanding that the nature of the agreement for technology transfer did not align with the definition of consulting engineering services, leading to the waiver of pre-deposit and stay of recovery of dues.