Transfer of intellectual property rights, not technical consultancy, kept brand and formula use outside service tax for the earlier period.

Transfer of a brand name and formulae for consideration was treated as transfer of intellectual property rights, not scientific or technical consultancy service under Section 65(92) of the Finance Act, 1994. The arrangement permitted use of the trade name and formulae, which fell within the statutory concept of intellectual property rights covering intangible rights such as trademarks under Section 65(55a). Because transfer of intellectual property rights entered the service tax net only from September 2004, the activity for the earlier period was outside taxability under the consultancy head. The demand was therefore held unsustainable and set aside.

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Issues: Whether transfer of the brand name and formulae for consideration amounted to scientific or technical consultancy service liable to service tax, or to transfer of intellectual property right outside the tax net for the relevant period.

Analysis: The demand was raised under the head of scientific or technical consultancy under Section 65(92) of the Finance Act, 1994. The arrangement showed that the assessee permitted use of the trade name and formulae under an agreement, which fell within the concept of transfer of intellectual property right. The definition of intellectual property right under Section 65(55a) of the Finance Act, 1994 covered rights in intangible property such as trademarks and similar rights. Since transfer of intellectual property right was brought into the service tax net only from September 2004, the activity in question for the earlier period could not be taxed as scientific or technical consultancy.

Conclusion: The demand was not sustainable and was set aside in favour of the assessee.

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