2024 (10) TMI 454 - AT - Service Tax

Levy of service tax - IPR Services or not - transfer of technical know-how - time limitation - HELD THAT - The impugned order records the fact that during the course of audit, it was observed that M/s MGBPL had paid royalty fee and noncompetition fee to the appellants for the use of technical know-how developed by the noticee. On going through the MOU dated 30.06.1997 between the appellants and M/s MGBPL, it is clear that the transaction that has taken place is of sale and the consideration is mentioned under two Heads one being Purchase Consideration on a slump price basis and the second being royalty for use of technical know-how for the period 01.07.1997 to 30.06.2000. There is no mention of any Consultancy Service to be rendered by the appellants. That being the case, it will be incorrect to levy service tax on the same. Tribunal in the case of Supreme Industries Ltd. 2013 (3) TMI 739 - CESTAT MUMBAI held that consideration received towards the transfer of technical knowhow cannot be held to be consideration for the services rendered as Consulting Engineer. The impugned order passed in revision is not sustainable and is liable to be set aside - Appeal allowed.

Summary

Issues:
Interpretation of service tax on transfer of technical know-how under Section 65(13) of the Finance Act, 1994. Application of service tax under the Head "IPR Services." Bar on limitation for Order-in-Revision dated 29.11.2006. Invocation of extended period for demand.

Analysis:
The case involves M/s Max India Financial Services Pvt. Ltd. transferring technical know-how to M/s Max G. B Pvt. Ltd. The Revenue sought to levy service tax on this transfer, treating it as the service of a consulting engineer. The Original Authority initially dropped the demand, but the Commissioner reviewed and confirmed it. The Tribunal remanded the case back to the Original Authority for de novo proceedings, leading to the impugned Order-in-Original dated 20.09.2011.

The appellant argued that the transfer was only of know-how, not consultation, and therefore not taxable under Section 65(13) of the Finance Act, 1994. They cited various cases to support their position. Additionally, they contended that if taxable, it should fall under "IPR Services" as per precedents. They also raised issues of limitation for the Order-in-Revision and invoking the extended period for demand.

After hearing both sides, the Tribunal found that the transaction was a sale of technical know-how, not a consultancy service. Citing the case of Bharat Oman Refineries, the Tribunal emphasized that agreements for transfer of technical know-how cannot be taxed as consultancy services. They noted that the consideration was clearly outlined in the MOU, with no mention of consultancy services. The Tribunal also referenced similar cases to support their decision.

Ultimately, the Tribunal held that the impugned order was not sustainable, setting it aside and allowing the appeal with consequential relief, if any, as per law. The judgment was pronounced in the open court on 08/10/2024.