9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (4) TMI 446 - AT - Service TaxLiability of service tax - Intellectual Property Service prior to July 2012 - transfer of technical know-how to the appellant - extended period of limitation - HELD THAT - In the instant case it is an admitted fact that the technical know-how was transferred to the appellant in 2009 soon after the signing of agreements. It is also an admitted fact that the appellant shared a portion of the PGCIL business with GANZ ZTR in lieu of transfer of technical know-how. It is noted that no service tax was payable on technical know-how service under the category of intellectual property service prior to this date. IPR service was covered under section 66E (c) with effect from 1.7.2012 and the confirmation of demand on technical know-how service cannot be sustained prior to this date. It is further noted that transfer of technical know-how service cannot be treated as IPR as the same was not registered under any law in India. Accordingly no service tax can be confirmed under this head. In the case of Chambal Fertilizers Chemicals Ltd. vs. Commissioner of Central Excise Jaipur-I 2016 (8) TMI 150 - CESTAT NEW DELHI this Tribunal has observed that It has been held that to be categorized for service tax purpose under IPR such right should have been registered with trade mark/patent authority. In the present case admittedly there is no right recognized as IPR under any law for the time being in force in India. As such there can be no provision of IPR service for tax liability on reverse charge basis. Conclusion - The appellant is not liable for service tax on the transfer of technical know-how prior to July 2012 as it do not qualify as an Intellectual Property Right under Indian law. The impugned order is not sustainable and the same is set aside. The appeal is accordingly allowed.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment are:
ISSUE-WISE DETAILED ANALYSIS 1. Service Tax Liability on Transfer of Technical Know-How: The relevant legal framework involves the definition of "Intellectual Property Right" under Section 65(55a) and "Intellectual Property Service" under Section 65(55b) of the Finance Act, 1994. The Tribunal noted that the technical know-how was transferred to the appellant in 2009, prior to the introduction of service tax on such services in July 2012. The court referenced several precedents, including Chambal Fertilizers & Chemicals Ltd. and Denso Haryana Pvt. Ltd., to affirm that technical know-how not registered under Indian law does not qualify as an Intellectual Property Right subject to service tax. 2. Extended Period of Limitation: The Tribunal examined whether the extended period for service tax demand could be invoked given the issuance of a prior show cause notice. Citing precedents such as P & B Pharmaceuticals (P) Ltd. and Nizam Sugar Factory, the Tribunal concluded that the issuance of a second show cause notice on the same facts and agreements barred the invocation of the extended period due to the absence of suppression of facts. 3. Calculation of Service Tax Based on Gross Profit Margin: The Tribunal analyzed whether the gross profit margin could be used to calculate service tax liability. The appellant argued that technical know-how was only one of many factors contributing to the profit margin. The Tribunal found that the profit margin alone was not a valid basis for determining the value of technical know-how for service tax purposes. 4. Revenue Neutrality: The appellant contended that any service tax paid on technical know-how could be claimed as input service credit, resulting in revenue neutrality. The Tribunal acknowledged the principle of revenue neutrality, referencing cases such as Jet Airways and Texyard International, and noted that this principle negates the demand for service tax in cases where the appellant could offset the tax liability through credits. 5. Alleged Suppression of Facts: The Tribunal evaluated the claim of suppression of facts by the appellant. It determined that all relevant facts were within the knowledge of the authorities due to prior proceedings and that the issuance of a subsequent show cause notice on the same grounds did not constitute suppression. The Tribunal relied on judgments like Hyderabad Polymers (P) Ltd. to support this conclusion. SIGNIFICANT HOLDINGS The Tribunal held that the appellant was not liable for service tax on the transfer of technical know-how prior to July 2012, as it did not qualify as an Intellectual Property Right under Indian law. The Tribunal emphasized that "the service itself having been rendered prior to the introduction of the levy, the mere fact that payments for the same were made on a staggered basis over a period of time cannot be a ground for levying service tax merely with reference to the date on which payments were being made." The Tribunal also concluded that the extended period of limitation was not applicable due to the absence of suppression of facts and that the calculation of service tax based on gross profit margin was erroneous. The principle of revenue neutrality further negated the demand for service tax. Consequently, the Tribunal set aside the impugned order and allowed the appeal.
|
