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TMI Blog2024 (12) TMI 839X X X X Extracts X X X X X X X X Extracts X X X X ..... d as Intellectual Property law by any Indian Law for the time being in force. In fact knowhow is the undisclosed information cited by the Department clarification dated 10-9-2004 as example of intellectual property right not covered by any Indian law. The transaction in the present case was for know-how which is in the nature of property, no service was provided by the foreign companies. This issue has been considered by the Tribunal in the appellant s own case which is reported in [ 2016 (7) TMI 559 - CESTAT BANGALORE] and it was held by the Division Bench that the right to know-how does not fall in the definition of Intellectual Property Right as given in Section 65(55a) of the Finance Act and Service Tax is not leviable on the same under the Finance Act.' The impugned order is set aside - appeal allowed. - DR. D.M. MISRA, MEMBER (JUDICIAL) AND MRS. R. BHAGYA DEVI, MEMBER (TECHNICAL) Ms. Meghana Lal, Advocate with Ms. Vani, Advocate for the Appellant Shri Neeraj Kumar, Superintendent (AR) for the Respondent ORDER The Appellant GE BE Pvt. Ltd. have filed this appeal against the Order in Original 4/2010 dated 08.03.2010. 2. The appellant is a private limited company registere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the foreign company. It is submitted that no patents trademark copyright and design licensed under the agreement were registered under any Indian law during the said time which has been certified by GE Medical Systems Global Technology Company LLC Inc vide their certificate dated 30.08.2009. It is also submitted that the appellant had submitted all the details including balance sheets for the preceding 3 financial years wherein specific disclosures about royalty payments were made pursuant to the audit proceedings based on the audit report SAR No. 76/2007-2008 in February 2008 where the audit report was issued for specific objection regarding nonpayment of service tax on royalty payments which was not accepted by the appellant. 3.1 The appellant does not dispute the fact that royalty was paid to the foreign company for receiving the technical knowhow under the agreement which is quantified as a percentage of net sales turnover of the goods manufactured by the applicant by the licensed technology and cleared. The department has confirmed the demand of service tax on such payments under the category of intellectual property service by treating the activity of licensing the know-how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the appellant for receiving the 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, which is reproduced below: 65(55a) intellectual property right means any right to intangible property, namely, trademarks, designs, patents or any other similar intangible property, under any law for the time being in force, but does not include copyright; (55b) intellectual property service means, (a) transferring, [temporarily]; or (b) permitting the use or enjoyment of, any intellectual property right; 6. The CBIC vide Letter F. No. B2/8/2004-TRU, dated 10-92004 had also provided the above clarification regarding Intellectual Property Service. The relevant paragraphs are reproduced below: 9. Intellectual property services (other than copyrights) : 9.1 Intellectual property emerges from application of intellect, which may be in the form of an invention, design, product, process, technology, book, goodwill etc. In India, legislations are made in respect of certain Intellectual Property Rights (i.e. IPRs) such as patents, copyrights, trademarks and designs. The definition of taxable service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht is concerned, the appellant during the impugned period, has paid royalty/license fee to M/s. ABB Technology Ltd., Zurich Switzerland towards receipt of technical know-how which is quantified as a percentage of the Net Sales Turnover of the goods manufactured by the appellants from the licensed technology and cleared by them, he further submitted that the Department has wrongly the demand under the category of Intellectual Property Right service by treating the activity of licensing the know-how as service rendered by the foreign company. He further submitted that in terms of the license agreement, it is clear that the foreign companies would make available to the appellant knowledge by means of data, experience, for the purpose of manufacture, sale and use of the contract products and the said knowledge may be made available in written form or in any other recorded form or in the form of personal experience. He also submitted that in the present case, the foreign companies had only supplied the technical know-how which is not a service and cannot be taxed under the category of Intellectual Property Service. He then referred to License Agreement which provides for grant of non-ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Property Right service and the Commissioner of Service Tax vide de novo Order No. 3/2017, dated 2912-2017 has dropped the demand on the technical know-how services even for the period after 18-4-2006 as the same does not fall under the taxable service viz. Intellectual Property Right service. The Learned Counsel prayed that in view of the appellants own case and other cases relied upon by them, the demand of Service Tax of Rs. 6,28,85,949/- confirmed in the impugned order under the category of Intellectual Property Right service on the technical know-how received from the foreign group companies is liable to be set aside which is taxable under the category of Intellectual Property Right service. 7.1 Further in order to find whether the service rendered by the foreign companies to the appellant falling under the definition of Intellectual Property Right service, we would like to refer to the definition of Intellectual Property Right and the corresponding taxable service concerning Intellectual Property viz. Intellectual Property service as defined in the Finance Act, 1994. These definitions are given below :- 6.5.1 Intellectual Property Right as defined under Section 65(55a) of F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ademarks and designs. The definition of taxable service includes only such IPRs (except copyright) that are prescribed under law for the time being in force. As the phrase law for the time being in force implies such laws as are applicable in India, IPRs covered under Indian law in force at present alone are chargeable to Service Tax and IPRs like integrated circuits or undisclosed information (not covered by Indian law) would not be covered under taxable services. 9.2 A permanent transfer of intellectual property right does not amount to rendering of service. On such transfer, the person selling these rights no longer remains a holder of intellectual property right so as to come under the purview of taxable service. Thus, there would not be any Service Tax on permanent transfer of IPRs. 9.3 In case a transfer or use of an IPR attracts cess under Section 3 of the Research and Development Cess Act, 1986, the cess amount so paid would be deductible from the total Service Tax payable (refer Notification No. 17/2004-S.T., dated 10-9-2004). 7.2 If we examine the definition of Intellectual Property service as given in Section 65(55a) (55b) and also see the circular issued by the Board, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant cited supra, this issue is no more res integra and has been settled by various decisions of the Tribunal that there cannot be any Service Tax on technical know-how. Therefore, this issue is decided in favour of the appellant and the demand of Service Tax to the tune of Rs. 6,28,85,949/- is set aside. Further as far as technical testing and analysis services are concerned, though the appellant had challenged the same but during the course of argument, the Learned Counsel for the appellant submitted that they are not challenging the same. Further as far as commercial training or coaching services are concerned, the Learned Counsel submitted that the appellant had made the payment to M/s. ABB Technology Ltd. Zurich, Switzerland in connection with the participation of the employees of the appellants in a seminar conducted by the foreign company at a place outside India. Appellant has also submitted that 4 of their employees attended IMD Finance Business Control Seminar from 4-3-2007 to 16-3-2007 at Lusanne conducted by M/s. ABB Ltd., Zurich and the appellant has paid in aggregate Rs. 15,69,846/- to the foreign company. The seminar was exclusively conducted outside Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X
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