2023 (11) TMI 169 - AT - Service Tax

Levy of service tax - Technology Transfer Analysis and Agreement entered with M/s Eugenex Biotechnologies GmbH, Switzerland - reverse charge mechanism - HELD THAT - In the instant case, it is not in dispute that the entire technology was imported by the appellant from abroad and no evidence of registration of the said technology under any Indian law has been produced by the revenue - The term under any law for the time being in force appearing in Section 65(55a) implies that the Intellectual Property Right should be protected under any Indian law in force, and only then it become taxable service. The issue has been examined in the case of M/S. MUNJAL SHOWA LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE ST, DELHI (GURGAON) AND (VICE-VERSA) 2017 (6) TMI 819 - CESTAT CHANDIGARH wherein it was held that to tax under service tax, under Intellectual Property Rights, such rights should be registered with Trademark/ Patent authorities - the said decision has been held in the case of COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX DELHI VERSUS MUNJAL SHOWA LTD 2023 (8) TMI 544 - SC ORDER . From the above decision of Tribunal, upheld by the Hon ble Apex Court, it is apparent that only in cases where the technology is protected by some law of India then it can be charged under the head of Intellectual Property Service - In the instant case, the technology has been imported from abroad and no evidence of any protection under any law for the time being in force in India has been produced by Revenue. In these circumstances, no demand can be made under the head of Intellectual Property Service . There are no merit in the order, the same is set aside - appeal allowed.

Summary

Issues Involved:
1. Classification of transactions under 'Intellectual Property Service'
2. Applicability of service tax on technology transfer agreements
3. Requirement of registration of intellectual property in India
4. Applicability of service tax on agreements entered prior to specific dates

Summary:

1. Classification of transactions under 'Intellectual Property Service':
The appellant, Intas Pharmaceuticals Limited, entered into various technology transfer agreements with foreign entities. The Revenue classified these transactions under the category of 'Intellectual Property Service' and demanded service tax on a reverse charge basis as per Section 66A of the Service Tax Act, 1944. A show cause notice was issued, and a demand of service tax amounting to Rs. 49,01,798/- was confirmed under Intellectual Property Right Service, along with penalties under Sections 76, 77, and 78.

2. Applicability of service tax on technology transfer agreements:
The appellant argued that the technologies transferred were not registered in India and thus, not liable to service tax prior to the introduction of the negative list of Services w.e.f. 01.07.2012. They relied on the clarification issued vide F.No. B2/8/2005-TRU dated 10.09.2004, which stated that only IPRs covered under Indian law were chargeable to service tax. The Tribunal found that the entire technology was imported from abroad, and no evidence of registration under any Indian law was produced by the Revenue.

3. Requirement of registration of intellectual property in India:
The definition of 'Intellectual Property Service' and 'Intellectual Property Rights' as per Sections 65(55a) and 65(55b) of the Service Tax Act requires that the intellectual property should be protected under Indian law to be taxable. The Tribunal cited previous decisions, including Munjal Showa Ltd. and Chambal Fertilizers & Chemicals Ltd., which held that IPRs not registered in India are not liable for service tax. The Tribunal concluded that since the technologies in question were not registered under any Indian law, they could not be taxed under 'Intellectual Property Service'.

4. Applicability of service tax on agreements entered prior to specific dates:
The appellant also contended that no service tax was leviable on agreements entered into with suppliers prior to 18.04.2006. The Tribunal referred to the decision in Reliance Industries Ltd., which was upheld by the Hon'ble High Court of Gujarat, stating that services rendered prior to the introduction of the levy could not be taxed based on subsequent payments.

Conclusion:
The Tribunal held that the services received by the appellant were not covered under 'Intellectual Property Rights services' as defined under Section 65(105)(zzr) of the Finance Act, 1994, and therefore, no service tax was payable. The demand and penalties were set aside, and the appeals were allowed. The judgment emphasized that only technologies protected by Indian law could be charged under 'Intellectual Property Service'.