2016 (8) TMI 150 - AT - Service Tax

Import of services or not - ntellectual Property Right service - taxability u/s 66A - Held that - to be categorized for service tax purpose under IPR, such right should have been registered with trade mark/patent authority. In the present case, admittedly, there is no right recognized as IPR under any law for the time being in force in India. As such, there can be no provision of IPR service for tax liability on reverse charge basis. - Demand set aside - Decided in favor of assessee.

Summary

Issues:
1. Liability to pay service tax under Intellectual Property Right (IPR) service.
2. Applicability of service tax on agreements with foreign service providers.
3. Interpretation of the definition of Intellectual Property Right under the Finance Act, 1994.
4. Taxability of services without registration of IPR under Indian law.

Analysis:

1. The case involved the liability of the appellants to pay service tax under the category of Intellectual Property Right (IPR) service as per the Finance Act, 1994. The appellants, engaged in manufacturing fertilizers and gases, had entered into agreements with foreign service providers for design, engineering, and consultancy services. The Department claimed service tax of &8377; 1,42,79,138 for the period April 2006 to March 2007. The original authority confirmed the demand and imposed penalties under Sections 76 and 77 of the Act.

2. The appellants contended that they were not liable for service tax as they had not received any IPR service under the agreements. They argued that the service providers did not hold any rights recognized under Indian law, as required by the definition of IPR service. They also cited a Board Circular and legal precedents to support their position, emphasizing that IPR services cover only rights recognized under Indian law.

3. The key issue was the interpretation of the definition of Intellectual Property Right under the Finance Act, 1994. The Tribunal examined the definition which stated that IPR means any right to intangible property under any law in force, excluding copyright. The Tribunal noted that the technical know-how and engineering design licenses in the agreements were not registered in India under Indian law. The original authority's view that tax liability is not dependent on registration was deemed legally untenable.

4. The Tribunal referred to various decisions, including Rochem Separation Systems, Whirlpool of India Limited, Tata Consultancy Services, Area Brown Boveri Ltd., and Reliance Industries Ltd., which held that for a service to fall under IPR for tax purposes, the right should be registered with the trademark/patent authority. As there was no right recognized as IPR under Indian law in this case, the Tribunal concluded that there could be no provision of IPR service for tax liability on a reverse charge basis.

5. Based on the settled legal position from previous Tribunal decisions, the impugned order demanding service tax was deemed without merit, and the appeal was allowed. The Tribunal set aside the order, ruling in favor of the appellants.

Overall, the judgment clarified the scope of tax liability under IPR services and emphasized the requirement for rights to be registered under Indian law for taxation purposes.