2016 (6) TMI 1108 - AT - Service Tax

Tax on Unrecognized IPR Services Not Valid | Pre-Levy Services Exempt | Limitation Period

Reliance Industries Ltd. Versus Commissioner of Central Excise & Service Tax, LTU, Mumbai

The Tribunal held that an Intellectual Property Right (IPR) not recognized under Indian laws is not taxable under IPR services, emphasizing the necessity ... Import of Intellectual Property Services (IPR services) - Reverse charge - revenue neutral exercise - payment for right to use/enjoy confidential/technical know-how and patents by overseas entities - out of the six different agreement, only the patent in respect of Investa Technologies s.a.r.l., is registered in India under the Patents Act 1970 - Held that:- If an intangible property right was to refer to a right which is recognised by any country, then the legislature would not have used the expression under any law for the time being in force. The legislature would have merely stated that an intellectual property right would mean any right to an intangible property. There would have been no need for it to qualify the same with a recognition under any law for the time being in force If any inventor does not seek protection of its intellectual property under the Indian laws, the same cannot be regarded as an intellectual property right for the purpose of taxing the grant of right to use such a right. The question whether such a service could be taxed under a different head is irrelevant and does not arise as there is no such case made out in the notice. - there can be no liability to tax under the head of IPR services in respect of an Intellectual Property Right that is not recognised by the law in India. Insofar as the agreement with Investa Technologies S.A.R.L. is concerned the same was entered into on 14.8.2004, prior to IPR services being brought into the net of service tax w.e.f 10.9.2004. The service itself having been rendered prior to the introduction of the levy, the mere fact that payments for the same were made on a staggered basis over a period of time cannot be a ground for levying service tax merely with reference to the date on which payments were being made. Further, the entire dispute being revenue neutral, there could have been no intention to evade payment of duty and consequently the extended period of limitation was per se not invokable. Demand set aside - Decided in favor of assessee. Issues:- Whether an Intellectual Property Right not recognized under Indian laws is liable to tax under the head of IPR services.- Whether the extended period of limitation can be invoked in a revenue-neutral transaction.Analysis:1. The primary issue in this case was whether an Intellectual Property Right (IPR) not recognized under Indian laws could be taxed under the head of IPR services. The Appellant argued that only IPR recognized/enforceable under Indian laws are taxable. The Circular No.80/10/2004-ST clarified that IPR services are taxable under Indian laws. The Tribunal noted that the legislature specified that an IPR taxable under IPR services must be recognized under Indian law, not a third country's law. The Tribunal emphasized that if an inventor does not seek protection under Indian laws, it cannot be considered an IPR for tax purposes. The Tribunal cited a similar view in the TCS vs CST case, highlighting the necessity for the IPR to be recognized under Indian laws to be taxable.2. The Tribunal further discussed the redundancy of interpreting IPR services to include rights not recognized under Indian laws, citing the principle to avoid rendering any part of the statute redundant. The Circular F. No. 80/10/2004-S.T. clarified that only IPRs recognized under Indian laws are taxable, excluding those not covered by Indian laws. The Tribunal agreed with this clarification and held that an IPR not recognized under Indian laws is not taxable under IPR services.3. Regarding the agreement with Investa Technologies S.A.R.L., entered into before IPR services were taxed, the Tribunal emphasized that the levy should be based on the date the service was rendered, not the payment date. The Tribunal cited precedents to support this stance and concluded that the service rendered before the introduction of the levy could not be taxed based on subsequent payments made after the levy was in effect.4. Lastly, the Tribunal addressed the extended period of limitation, noting that in a revenue-neutral dispute where no intention to evade payment exists, the extended period of limitation is not justified. The Tribunal cited several judgments supporting this view and concluded that in a revenue-neutral scenario, the extended period of limitation cannot be invoked.5. In conclusion, the Tribunal allowed the appeal, setting aside the impugned order and providing consequential relief in accordance with the law.This detailed analysis of the judgment highlights the key legal arguments, interpretations, and conclusions made by the Tribunal in addressing the issues raised in the case.