CESTAT nullifies service tax demand for technical know-how transfer, citing GE BE Pvt. Ltd. precedent on IPR Service.

The CESTAT Bangalore set aside the Order-in-Original No. 62/2010 by the Commissioner of Service Tax, Bangalore, concerning the appellant's service tax liabilities under the Intellectual Property Rights Service category. The Tribunal found that the royalty payments for technical know-how transfer did not qualify as a taxable service, referencing the precedent in GE BE Pvt. Ltd. vs. CCE. Consequently, the Tribunal allowed the appeal, providing consequential relief to the appellant, thereby nullifying the service tax demand of Rs.97,58,668/- along with associated interest and penalties.

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The judgment from the Appellate Tribunal CESTAT Bangalore, presided over by Hon'ble Dr. D.M. Misra and Hon'ble Mrs. R. Bhagya Devi, addresses an appeal against Order-in-Original No. 62/2010 by the Commissioner of Service Tax, Bangalore. The appellant, engaged in manufacturing medical diagnostic equipment, was scrutinized for service tax liabilities under the Intellectual Property Rights Service category for royalty payments to a parent company in the USA and receipts from domestic customers for technical know-how transfer during 2005-2008. The original order confirmed a service tax demand of Rs.97,58,668/- with interest and penalties under Sections 77 and 78 of the Finance Act, 1994.The appellant argued that the transactions involved know-how transfer without any transfer of design, trademark, or patent, citing the precedent set in GE BE Pvt. Ltd. vs. CCE, which favored the appellant. The Tribunal, referencing this precedent, determined that the royalty payments and considerations did not constitute a taxable service under the Intellectual Property Service category. Consequently, the Tribunal set aside the impugned order, allowing the appeal with consequential relief as per law.

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