Taxability of technology transfer fees as Intellectual Property Rights Service rejected where rights were only confidential know-how.

Royalty and licence fee paid for transfer of manufacturing rights and technology for aircraft engines were treated as confidential know-how and undisclosed information, not as intellectual property rights recognised and protectable under Indian law. On that basis, the Tribunal held that the consideration was not taxable as Intellectual Property Rights Service under the Finance Act, 1994, and the related demand, interest and penalties could not be sustained. The ruling also noted that the issue had already been settled in the assessee's own case, reinforcing the view that the transferred technology did not fall within the taxable service category.

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Issues: Whether licence fee or royalty paid for transfer of manufacturing rights and technology in relation to aircraft engines was taxable as Intellectual Property Rights Service under the Finance Act, 1994.

Analysis: The Tribunal held that the dispute was already settled in the appellant's own case. It noted that, for taxability under the relevant service category, the intellectual property had to be one recognised under Indian law and capable of registration or protection in India. The transferred technology and manufacturing rights were treated as confidential know-how and undisclosed information, not as a registered intellectual property right exigible to service tax. The Tribunal therefore found no basis to sustain the demand, interest, or the penalties imposed under the impugned orders.

Conclusion: The royalty and licence fee were not taxable as Intellectual Property Rights Service, and the demand and penalties could not be sustained. The issue was decided in favour of the assessee.

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