2019 (10) TMI 1105 - AT - Service Tax

Classification of services - royalty which the appellant is paying towards the use of IPR of foreign company - whether classified under the head of Intellectual Property Rights or not - HELD THAT - The very identical issue has been considered by this Tribunal after careful consideration of various judgments in the case of MESSRS INDUCTOTHERM PVT. LTD. VERSUS C.S.T. SERVICE TAX - AHMEDABAD 2019 (7) TMI 1528 - CESTAT AHMEDABAD where it was held that since so-called IPR claimed by the Revenue is not governed by any Indian Law, the same will not fall under IPR services. Thus, no Service Tax can be demanded under the head of Intellectual Property Right Services - appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of service under 'Intellectual Property Rights Services' for royalty payment towards technical know-how.

Analysis:
The case involved a dispute over the taxability of royalty paid by the appellant for technical know-how under the head of 'Intellectual Property Rights' as per section 65(55a). The Revenue contended that the payment was taxable, leading to a demand for Service Tax upheld by the Commissioner (Appeal), prompting the present appeal.

The appellant's counsel argued that a similar issue had been considered by the Tribunal in the case of M/s Inductotherm Pvt. Ltd., where the appeal was allowed. The Revenue, represented by the Assistant Commissioner, relied on various judgments to support their position.

Upon considering the submissions and records, the Tribunal had to determine whether the service provided by the appellant was classifiable under 'Intellectual Property Rights Services' and thus taxable. The Tribunal referred to the case of Inductotherm Pvt. Ltd., where a similar issue was addressed, and the appeal was allowed based on the absence of evidence showing registration or patenting of the technical know-how in India.

The Tribunal highlighted that the concept of Intellectual Property Rights services requires the right to be recognized under any law in force, emphasizing the need for registration with the trademark/patent authority. Citing previous decisions, the Tribunal ruled that without such recognition under Indian law, there could be no provision for IPR service tax liability on a reverse charge basis.

In conclusion, since the technical know-how in question was not governed by any Indian law, it could not be classified as Intellectual Property Rights services, leading to the setting aside of the impugned order and allowing the appeal. The judgment emphasized the importance of recognition under Indian law for the taxation of Intellectual Property Rights services.