Prima facie stay on service tax for technical know-how and patent rights denied; pre-deposit required for hearing.

Prima facie stay on service tax demand was considered in a collaboration agreement involving technical know-how and patent-related rights treated by the Department as taxable intellectual property service. The Tribunal found that the agreement appeared to grant exclusive technical information under patents and royalty-linked rights in India, with the know-how transfer operating on a continuing basis. It also noted that the appellant did not substantiate alleged errors in computation through R&D cess adjustment or demonstrate financial hardship. For the period before insertion of Section 66A of the Finance Act, 1994, service tax was not payable on the foreign service portion covered by the Bombay High Court ruling in Indian National Shipowners Association.

---

---

Issues: Whether waiver of pre-deposit of service tax and penalties should be granted, and whether the appellant had made out a prima facie case for complete stay.

Analysis: The alleged liability arose from technical know-how and patent-related rights under a collaboration agreement, which the Department treated as taxable intellectual property service. On a prima facie view, the agreement granted exclusive technical information under relevant patents and contemplated royalty-linked rights in India, while the transfer of know-how appeared to operate on a continuing basis. The appellant did not substantiate the claim of incorrect computation through R&D cess adjustment or financial hardship. The Tribunal also noted that, for the period prior to insertion of Section 66A of the Finance Act, 1994, service tax was not payable on the foreign service portion covered by the Bombay High Court ruling in Indian National Shipowners Association.

Conclusion: Complete waiver was declined. The appellant was directed to pre-deposit 25% of the service tax demand as a condition for hearing, and the balance was stayed pending compliance.

---