Taxability follows the date a service enters the tax net, so pre-notification royalty could not be taxed.

Royalty received for use of a trade name for the period before 10.9.2004 was held outside the service tax net because Intellectual Property Services became taxable only from that date. The later quantification or finalisation of accounts did not change the fact that the taxable service had not yet been brought into force when the amounts accrued. The demand for service tax on the pre-10.9.2004 royalty was therefore unsustainable, and the related interest and penalties also could not survive.

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Issues: Whether royalty received for the period 1.4.2004 to 10.9.2004 for use of a trade name was chargeable to service tax under Intellectual Property Services.

Analysis: The royalty was payable under an agreement covering the period from 20.4.2004 to 31.3.2008, with the relevant amounts relating to the period before 10.9.2004. Intellectual Property Services were brought into the service tax net only from 10.9.2004, and the notification governing the levy did not support taxation of amounts received for the earlier period. The liability could not be fastened by treating the subsequent finalisation of accounts as altering the date on which the taxable service came into force.

Conclusion: The royalty received for the period prior to 10.9.2004 was not liable to service tax and the demand was unsustainable.

Final Conclusion: The impugned demand, interest and penalties could not stand, and the assessee succeeded in the appeal.

Ratio Decidendi: A service can be taxed only from the date on which it is brought into the tax net by the applicable notification, and amounts referable to a period before that date cannot be subjected to service tax merely because they are quantified or received later.

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