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of <h1>Transfer of Patented Technology for Commercial Production Not Taxable as Consulting Engineer Services</h1> <h3>M/s Indian Oil Corporation Limited Versus CST, Delhi</h3> The appellant transferred patented technology for commercial production, receiving payment based on sales proceeds for providing technical information. ... Classification of services - Intellectual property service or Consulting Engineer’s Service - payment towards transfer of technical know how - Held that: - A perusal of the overall agreement reveals that the hand holding for rendering assistance is incident to the main service, i.e. transfer of technical knowhow. Since the intellectual property right service has been included in the statute book only from 10/9/04, the same service cannot be charged to service tax for the period prior to 10/9/04. In any case, the service rendered is not covered within the definition of consulting engineer service. The decision in the case of Duraline Corporation vs. CCE & CUS., Goa [2014 (10) TMI 343 - CESTAT MUMBAI] relied upon - appeal allowed - decided in favor of appellant. Issues:Service tax demand on transfer of technical knowhow under consulting engineer services prior to 10/9/04.Analysis:The appellant developed a patented petroleum additive and transferred the technology to another company for commercial production. The payment terms included a percentage of sales proceeds to be paid to the appellant for providing technical information and initial support. The dispute was whether this service could be taxed under consulting engineer services before 10/9/04. The appellant argued that they provided technical knowhow transfer, not technical assistance, citing relevant case laws.The Revenue argued that the payment was for continued assistance and supervision, falling under consulting engineer services. The definition of consulting engineer services was examined, which covers advice, consultancy, or technical assistance. The agreement showed that the payment was for transferring technical knowhow linked to sales of goods, not for explicit technical assistance. The hand-holding assistance was incidental to the main service of knowhow transfer. Since intellectual property services were introduced in the statute book only from 10/9/04, service tax couldn't be applied for the period before that. The service provided did not fit within the definition of consulting engineer services.Referring to a similar case, the Tribunal highlighted that technical knowhow supplied constituted intellectual property rights, taxable only from 2004. As the services provided did not fall under consulting engineer services, the demands were deemed unsustainable in law. Consequently, the impugned order was set aside, and the appeal was allowed.
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