Technical know-how licensing is not Consulting Engineer's Service; transfer of know-how falls outside service tax.

Transfer of technical know-how, patents, trade secrets and related technical information under a licence to manufacture, sell, distribute and use a product in India was held to be outside Consulting Engineer's Service. The arrangement involved transfer of know-how for lump sum consideration and royalty, which is distinct from advice, consultancy or technical assistance in the field of engineering. On that basis, the activity was not taxable as Consulting Engineer's Service, and the Revenue's challenge failed. Earlier Tribunal rulings, including one affirmed by the Karnataka High Court, were followed in reaching the same conclusion.

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Issues: Whether supply of technical know-how and licence to manufacture, sell, distribute and use a licensed product in India is taxable as Consulting Engineer's Service.

Analysis: Consulting Engineer's Service covers advice, consultancy or technical assistance in the field of engineering. The transaction in question was for transfer of technical know-how, including patents, trade secrets, processes and other technical information, to enable manufacture of the licensed product in India against lump sum consideration and royalty. Such transfer of know-how is distinct from rendering advice, consultancy or technical assistance and therefore does not fall within the taxable category. The earlier Tribunal decisions relied upon, including the one affirmed by the High Court of Karnataka, supported the same view.

Conclusion: The service was not exigible to service tax under Consulting Engineer's Service and the Revenue's challenge failed.

Ratio Decidendi: Transfer of technical know-how and licensing rights for manufacture is not equivalent to advice, consultancy or technical assistance and is outside the scope of Consulting Engineer's Service.

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