Intellectual Property Right service tax does not cover unregistered foreign know-how and drawings under Indian law.

Technical know-how, drawings and related materials supplied by foreign collaborators are not taxable as Intellectual Property Right service unless the relevant intellectual property is recognised under Indian law. The record showed no evidence that the technology, know-how, trademarks or other rights were registered in India, and the Board circular stated that only IPRs protected under Indian law fall within the taxable category. Relying on earlier decisions, CESTAT Mumbai held that unregistered foreign technology or know-how does not amount to taxable Intellectual Property Right service, so the service tax demand was not sustainable.

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Issues: Whether technical know-how, drawings and related materials supplied by foreign collaborators, which were not shown to be registered in India, could be taxed as Intellectual Property Right service under the Finance Act, 1994.

Analysis: The definition of Intellectual Property Right service covers only such intellectual property rights as are recognised under Indian law for the time being in force. The record contained no evidence that the technology, know-how, trademarks or other rights supplied by the foreign collaborators were registered in India. The Board circular clarified that only IPRs protected under Indian law are chargeable to service tax, and that rights not recognised under Indian law fall outside the taxable category. The Tribunal also relied on earlier decisions holding that unregistered foreign technology or know-how does not amount to taxable Intellectual Property Right service.

Conclusion: The service tax demand was not sustainable because the materials supplied by the foreign collaborators did not fall within Intellectual Property Right service.

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