Transfer of Patented Technology for Commercial Production Not Taxable as Consulting Engineer Services

The appellant transferred patented technology for commercial production, receiving payment based on sales proceeds for providing technical information. The dispute centered on whether this constituted taxable consulting engineer services pre-10/9/04. The Revenue argued it involved continued assistance falling under consulting engineer services. However, the Tribunal found the service did not fit within that definition as it primarily involved knowhow transfer, not explicit technical assistance. As intellectual property services were only taxable post-10/9/04, the demands were deemed unsustainable. The appeal was allowed, and the impugned order set aside.

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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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