Transfer of technical know-how as 'Export of Service' outside India relieves appellant from service tax demand

The Tribunal held that the transfer of technical know-how by the appellant qualified as 'Export of Service' as the recipient was located outside India and payment was received in convertible foreign exchange. Additionally, the technical know-how did not fall under the taxable category of 'Intellectual Property Service' since it was not protected by Indian law. Consequently, the appellant was relieved from the service tax demand, and the decision was in favor of the appellant, Intas Pharmaceuticals Limited.

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Issues Involved:
1. Whether the transfer of technical know-how by the appellant qualifies as 'Export of Service'.
2. Whether the technical know-how supplied by the appellant falls under the category of 'Intellectual Property Right' (IPR) and is taxable under 'Intellectual Property Service'.

Summary:

Issue 1: Export of Service
The appellant, Intas Pharmaceuticals Limited, transferred technical know-how to M/s Scigen, Singapore, and received payment in US Dollars. The dispute arose during an audit in September 2012, where it was objected that the service did not qualify as 'Export of Service' since the technology was used in Pune, India. The appellant argued that the technology was transferred to Singapore and could be used globally, including India, and thus qualified as 'Export of Service' under Rule 3(2) of Export of Service Rules, 2005. The Tribunal found that the recipient of the service was located outside India and the payment was received in convertible foreign exchange, meeting the criteria for 'Export of Service'.

Issue 2: Intellectual Property Right
The appellant contended that the technical know-how was not a taxable service under 'Intellectual Property Service' as it was not protected by any Indian law. They relied on Circular No. 80/10/2004-ST and several judicial precedents, including Tata Consultancy Services Ltd and Reliance Industries Ltd, which clarified that only IPRs protected under Indian law are taxable. The Tribunal referenced the decision in Munjal Showa Ltd., which stated that for a service to be taxed under IPR, the right must be registered in India. Since the technical know-how was not protected by any Indian law, it did not qualify as an 'Intellectual Property Right'. Consequently, no service tax was leviable on the transfer of technical know-how under the head of 'Intellectual Property Service'.

Conclusion:
The Tribunal concluded that the transfer of technical know-how by the appellant did qualify as 'Export of Service' and did not fall under the taxable category of 'Intellectual Property Service' due to the lack of protection under Indian law. Therefore, the appellant was entitled to relief, and the demand for service tax was set aside.

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