Scientific or Technical Consultancy Service did not prima facie cover trade name royalty before Intellectual Property Right Service came into force.

Royalty for transfer of trade name and formulae was considered not prima facie taxable as Scientific or Technical Consultancy Service for the period before 10-9-2004, because that head applies to services rendered by a scientist, technocrat, or science or technology institution or organisation and the record did not show that character. The order noted that transfer of technical know-how, brand name, and similar rights had been treated as Intellectual Property Right Service from 10-9-2004, not under the earlier consultancy category. It also observed that the penalty under section 77 was introduced by corrigendum, which was open to serious objection. On that basis, a prima facie case for waiver of pre-deposit and stay of recovery was made out.

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Issues: Whether the royalty received for transfer of trade name and formulae was prima facie liable to service tax under the head of Scientific or Technical Consultancy Service for the period prior to 10-9-2004, and whether pre-deposit and recovery should be stayed.

Analysis: The order noted that Scientific or Technical Consultancy Service under section 65(92) of the Finance Act, 1994 is a service rendered by a scientist, technocrat, or science or technology institution or organisation, and that the record did not support the finding that the appellant answered that description. It also noticed that transfer of technical know-how, brand name, and similar rights had been treated in judicial decisions as falling under Intellectual Property Right Service introduced with effect from 10-9-2004, and not as exigible under another head for the earlier period. The order further noted that penalty under section 77 of the Finance Act, 1994 had been imposed through a corrigendum and that this course was open to serious objection.

Outcome: The appellant was held to have made out a prima facie case for waiver of pre-deposit and stay of recovery.

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