Pre-levy technology transfer is not a continuing taxable service; later instalments do not attract service tax.

Technology transfer completed under a 2002 agreement before service tax on intellectual property rights came into force was not a continuous taxable service after 10.09.2004. The tribunal held that the taxable event was the transfer of the right or technology itself, and the fact that consideration was paid in lump sum or by instalments did not shift that event or create a fresh service later. Continued use of the transferred technology in manufacture and sale after the levy date therefore did not attract service tax on post-levy payments. The demand was dropped and the adverse order against the assessee was set aside.

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Issues: Whether consideration paid under a 2002 technology transfer agreement could be subjected to service tax on intellectual property rights for the period after 10.09.2004 on the footing that the service was rendered continuously.

Analysis: The agreement provided for transfer or permission to use technology before the levy of service tax on intellectual property rights. The mode of payment, whether lump sum or periodic royalty, did not change the point at which the service was received. The use of the transferred technology in manufacture and sale after the levy date did not amount to a fresh or continuing taxable service. The taxable event was the transfer of technology, which had already occurred prior to 10.09.2004. The reasoning adopted in the earlier decisions relied upon was applied to hold that only payment was spread over time, not the service itself.

Conclusion: The technology transfer was not a continuous taxable service after 10.09.2004, and service tax was not leviable on the post-levy payments arising from the pre-levy agreement.

Final Conclusion: The assessee succeeded and the Revenue failed, resulting in affirmation of the dropping of demand and setting aside of the adverse order against the assessee.

Ratio Decidendi: For service tax purposes, the taxable event is the rendition of the service or transfer of the right itself, and where that event occurred before the levy commenced, later periodic payments or continued use of the transferred technology do not create a continuing taxable service.

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