2024 (3) TMI 131 - HC - Service Tax

Levy of service tax - transfer of Intellectual Property Services - slump sale - transaction amounting to providing of service or not - service tax levied on the ground that it supplied their own invention and scientific discovery without clarification and bifurcation of the value in the sale and purchase agreement - HELD THAT - After considering the facts of the case and referring to the statements recorded by the appellant during the course of investigation prior to issuance of the show-cause notice wherein it is made clear that the respondent has transferred the entire polymer division as a slump sale to SIPPL and accordingly the Tribunal has rightly observed after analysing the provisions of Section 65 pertaining to the definition of scientific or technical consultancy under Section 65(92) and intellectual property service as per Section 65(55b) of the Finance Act, 1994 read with the definition of slump sale as per Section 2(42C) of the Income Tax Act, 1961 has rightly held that in case of slump sale, there is no question of providing intellectual property service or scientific or technical consultancy as alleged by the appellant. The facts narrated in the impugned order of the Tribunal are not in dispute and in case of slump sale, there is no question of providing any service as per Section 65(92) as well as Section 65(55b) of the Finance Act, 1994 - the reasons assigned by the Tribunal and as such no question of law much-less any substantial question of law arises from the impugned order of the Tribunal. Appeal dismissed.

Summary

Issues involved:
The issues involved in this case are:
1. Whether the Tribunal explicitly addressed the transfer of Intellectual Property Rights and verified the cessation of the seller as the "Holder of Intellectual Property Right" for a permanent transfer to occur.
2. Whether the Tribunal's findings were based on evidence and if technical aspects were considered and law was applied accurately.

Issue 1:
The appellant-revenue appealed under Section 35G of the Central Excise Act, 1944, regarding the transfer of Intellectual Property Rights (IPRs) in a sale and purchase agreement. The appellant contended that the transfer of technical know-how and patent constituted taxable services under the Finance Act, 1994. The Tribunal analyzed the definitions of scientific or technical consultancy and intellectual property services under the Finance Act, concluding that the transfer was a slump sale and not a provision of services.

Issue 2:
The respondent, engaged in the polymer business, sold its division to another company for a lump sum price. The appellant authority observed the transfer of the polymer division and issued a notice for service tax payment on the transfer of Intellectual Property Services. The Commissioner adjudicated the matter, confirming the demand. The Tribunal, after considering definitions under the Finance Act and the Income Tax Act, ruled in favor of the respondent, stating that in a slump sale, there is no provision of intellectual property services as alleged by the appellant.

Separate Judgment:
The judgment was delivered by the Tribunal, not mentioning the specific judges. The Tribunal found that the transfer of the polymer division as a slump sale did not fall within the definition of "Scientific and Technical Consultancy Service" and "Intellectual Property Service" as per the Finance Act, 1994. The Tribunal highlighted that no temporary transfer of intellectual property occurred, as the entire division was sold as a going concern. The concept of slump sale was explained, and it was concluded that demand for service tax on such transactions was not sustainable.