Unregistered foreign technical know-how is not taxable as intellectual property right service without legal recognition in India.

Technical know-how received from a foreign principal was held not taxable as intellectual property right service under reverse charge because the underlying right was not shown to be registered or otherwise legally recognised in India. The Tribunal applied the settled principle that IPR service arises only where the right is an intangible property right recognised under Indian law, such as a patent, trade mark or design. In the absence of proof of Indian recognition, unregistered technical know-how could not be brought within the charging definition, and the service tax demand, along with interest and penalty, was set aside.

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Issues: Whether technical know-how obtained from a foreign principal, in the absence of evidence of registration or recognition in India as an intellectual property right, could be subjected to service tax under reverse charge as an intellectual property right service.

Analysis: The relevant service-tax definition treats intellectual property right as a right to intangible property such as patents, trade marks or designs under any law for the time being in force. The Tribunal applied the settled view that, for taxability under this head, the right must be a legally recognised right in India. As no evidence was produced to show that the technical know-how was registered or otherwise recognised in India as an intellectual property right, it could not be treated as taxable IPR service. Following the identical view already taken in earlier Tribunal decisions, the demand could not be sustained.

Conclusion: The demand of service tax on the technical know-how under reverse charge was not sustainable and the appeal succeeded.

Final Conclusion: The impugned demand, including the associated interest and penalty, was set aside on the ground that unregistered technical know-how not recognised as an intellectual property right in India does not fall within taxable IPR service.

Ratio Decidendi: For service tax purposes, intellectual property right service arises only where the underlying right is legally recognised under Indian law; unregistered foreign technical know-how, by itself, is not taxable as IPR service.

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