2025 (4) TMI 7 - AT - Service Tax

Classification of services - Intellectual Property Right (IPR) service or not - amount paid by the appellant as consideration for receiving know-how technical information technical assistance and training - HELD THAT - The appellant has advanced a two-fold argument submitting that the relevant Technical Collaboration Agreements were entered with the respective foreign companies prior to 10.09.2004 i.e. before levy of service tax on Intellectual Property Right (IPR) services; secondly that the said services do not come under the scope of Intellectual Property Right (IPR) Services. The said issues could not dwell as much as these are no more res integra and covered by the judgment of this Tribunal in a series of cases. This Tribunal in the case of CST vs. Denso Haryana Pvt. Ltd. 2015 (11) TMI 235 - CESTAT NEW DELHI in similar circumstances examining the applicability of IPR services to agreements entered prior to 10.09.2004 held the allegation in the show cause notice that the service was provided on continuous basis is incorrect. Only payment of service was spread over a period of time. The service was performed as soon as the technology was transferred. Applicability of service tax on know-how and technical information technical assistance and training - HELD THAT - The same is also addressed by series of judgments by this Tribunal. In the case of M/s. GE Medical Systems (India) Pvt. Ltd. 2024 (12) TMI 1545 - CESTAT BANGALORE this Tribunal following the precedent on the subject held The issue to be decided is whether the royalty payments made by the appellant for receiving the technical know-how to their parent-company at USA and consideration received from the domestic customers towards transfer of technical know-how are liable to service tax under the category of intellectual property service as defined under Section 65(55a) of the Finance Act 1994. This Tribunal recently in the case of GE BE Pvt. Ltd. vs. CCE 2024 (12) TMI 839 - CESTAT BANGALORE in a similar set of facts had set aside the demand of service tax in relation to technical know-how. Conclusion - The demand for service tax interest and penalties set aside concluding that the appellant was not liable under the IPR service category for the period in question. Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The primary legal issue considered in this appeal was whether the amounts paid by the appellant for receiving know-how, technical information, technical assistance, and training were liable to service tax under the category of Intellectual Property Right (IPR) services. The appellant argued that the agreements were entered into before the imposition of service tax on IPR services and that the services provided did not fall under the scope of IPR services as defined by Indian law.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents:

The relevant legal framework revolves around the Finance Act, 1994, particularly Section 65(105)(zzr), which pertains to the levy of service tax on IPR services. The appellant cited various precedents and case laws, including Indian National Shipowners Association v. UOI and CST v. Denso Haryana Pvt Ltd, to support their claim that the services in question were not taxable under the IPR category.

Court's Interpretation and Reasoning:

The Tribunal considered the argument that the agreements were executed prior to the introduction of service tax on IPR services (before 10.09.2004) and thus should not be subject to the tax. The Tribunal also evaluated whether the services provided under these agreements constituted IPR services as per the legal definition.

Key Evidence and Findings:

The Tribunal examined the terms of the Technical Collaboration Agreements, which included non-transferable and exclusive rights to manufacture and sell licensed products, as well as licenses to use know-how, technical information, and training. The agreements were established before the relevant tax laws came into effect, and the Tribunal found that the services were not continuous but were effectively determined by the date of the agreement.

Application of Law to Facts:

The Tribunal applied the legal principles from previous judgments, such as Modi-Mundipharma Pvt. Ltd., which held that the timing of the agreement, rather than the payment schedule, determined the taxability of the service. The Tribunal concluded that since the agreements were executed before the introduction of service tax on IPR services, the payments were not taxable.

Treatment of Competing Arguments:

The Tribunal addressed the Revenue's argument that the services were continuous and taxable due to ongoing payments. However, it rejected this view, aligning with the precedent that the taxable event was the transfer of know-how, which occurred before the tax was applicable.

Conclusions:

The Tribunal concluded that the service tax demand was not sustainable as the agreements were executed before the imposition of service tax on IPR services, and the services did not fall within the scope of IPR as defined by Indian law.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning:

The Tribunal noted: "The rendering of service is effectively determined by the date of transfer/permission to use technology... which was prior to the introduction of tax liability on such service."

Core Principles Established:

The Tribunal reaffirmed the principle that the date of the agreement, rather than the payment schedule, determines the applicability of service tax. It also emphasized that know-how and technical assistance are not recognized as IPR services under Indian law, following the CEBC Circular F.No. B2/8/2004-TRU.

Final Determinations on Each Issue:

The Tribunal set aside the demand for service tax, interest, and penalties, concluding that the appellant was not liable under the IPR service category for the period in question. The appeal was allowed with consequential relief as per law.

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