TaxTMI 
TaxTMI 
2024 (12) TMI 839
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....hnology (GTC) for transfer of technical knowhow. On scrutiny of the collaboration agreement entered by the appellant with their parent company, it was noticed that they have a contract for using intellectual property services with effect from 01.01.2007. As per the collaboration agreement recitals the collaborator that is the appellant desires to have license from M/s. General Electric company through GTC to use entity intellectual property and GE intellectual property to GE entities. Since they had paid an amount of Rs.10,30,29,433 as royalty amount for the period from January 2007 to March 2009, the said service being considered as intellectual property service under section 65(55a) they were liable to pay service tax as the recipient of service under Rule 2(1) (d)(iv) of Service Tax Rules 1994 and hence show-cause notice dated 16.07.2009 was issued. The same was adjudicated by the Commissioner confirming the service tax demand of Rs.1,20,97,716 being the service tax amount for the period January 2007 to March 2009 and equivalent amount of penalty was also imposed under section 78 of the Finance Act 1994 along with penalty of Rs. 1000 in terms of Section 77 of the Finance A....
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....4. The learned counsel relies on the following decisions to substantiate the above statements. • ABB Ltd. versus Commissioner of Central Excise and Service Tax 2019 (24) GSTL 55 (Tri Bang). • Asia Brown Boveri Limited versus Commissioner of Central Excise and Service Tax 2017 (49) STR 2009 (Tri Bang). 3.2 Also relied on various other judgments where the Tribunals have consistently held that Know-how provided by way of licensed by the foreign company to the Indian company is not in the nature of intellectual property service under the Finance Act 1994 and therefore, the demands cannot be sustained. 3.3 It is further submitted that the appellant has not suppressed any facts with an intention to evade payment of duty since they are registered service provider who has been paying the service tax due and the fact that they had received the license to use technical know-how from the foreign company was not suppressed at any juncture. The appellant had been making payment of royalty and duly making the payment on R&D Cess on the royalty paid, thus the department had complete knowledge of the transactions and their inaction at the time of discharge of ....
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....or undisclosed information (not covered by Indian law) would not be covered under taxable services. 9.2 A permanent transfer of intellectual property right does not amount to rendering of service. On such transfer, the person selling these rights no longer remains a 'holder of intellectual property right' so as to come under the purview of taxable service. Thus, there would not be any service tax on permanent transfer of IPRs. 9.3 In case a transfer or use of an IPR attracts cess under Section 3 of the Research and Development Cess Act, 1986, the cess amount so paid would be deductible from the total service tax payable (refer Notification No. 17/2004-S.T., dated 10-9-2004). 7. The Commissioner in the Impugned order has observed as follows: "34. In the present case, though there is no transfer of Brand name, there exist transfer of technical know-how and training of staff. Technical know-how is much more important than brand name. The transfer of brand name does not have any meaning for the buyer until and unless the know-how for the manufacture of the products is also transferred. The Board has never said that payment towards brand name alone should b....
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....gn companies clearly stating that only technical knowhow has been transferred to the appellant in terms of the Licence Agreement and not any other form of intellectual property such as patents, trademark, etc. He further submitted that technical know-how is not recognized as intellectual property by any Indian Law for the time being in force. In support of this submission, he relied upon the following decisions wherein the demand of Service Tax under Intellectual Property Right service on technical know-how has been set aside. (i) Asea Brown Boveri Ltd. v. CCE & ST, LTU, Bangalore [2017 (49) S.T.R. 209 (Tri.-Bang.)] (ii) ABB Ltd. v. CCE, C&ST, Bangalore (LTU) [Final Order No. 20183/2016, dated 2-2-2016] (iii) Tata Consultancy Services Ltd. v. CCE & ST, LTU, Mumbai [2018-VIL545-CESTAT-MUM-ST] (iv) Munjal Showa Ltd. v. CCE & ST, Delhi (Gurgaon) [2017 (5) G.S.T.L. 145 (Tri.-Chan.)] (v) Catapro Technologies v. CCE, Nashik [2017-VIL-534-CESTAT-MUMST] (vi) Catapro Technologies v. CCE, Nashik [2017 (48) S.T.R. 94 (Tri.Mum.)] (vii) Bharat Oman Refineries Ltd. CCE & ST, Bhopal [2017 (4) G.S.T.L. 221 (Tri.-Del.)] (viii) ....
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....means any right to intangible property, namely, trade marks, designs, patents or any other similar intangible property, under any law for the time being in force, but does not include copyright; Which has been inserted by Finance Act, 2004, dated 10-9-2004 (made effective from 10-9-2004) "Intellectual Property Service" as defined under Section 65(55b) is as follows : (55b) "intellectual property service " means, - (a) transferring, [temporarily]; or (b) Permitting the use or enjoyment of, any intellectual property right;] "Taxable Service" concerning intellectual property service as defined in Section 65(105)(zzr) is as follows : Section 65(105) "taxable service" (concerning intellectual property right) means any [service provided or to be provided] - (zzr) to any person, by the holder of intellectual property right, in relation to intellectual property service. 6.5.2 From the above provisions concerning 'Intellectual Property Right', 'Intellectual Property Service', and 'Taxable Service of Intellectual Property Right ', we find that for any services to be covered under the taxable service concerning in....
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....ition of Intellectual Property service as given in Section 65(55a) & (55b) and also see the circular issued by the Board, then we will find that for a service to be a taxable service under the Intellectual Property Service following conditions need to be fulfilled :- • Such service provider must have a right to any intangible property namely trademarks, designs, patents or any other similar intangible property, excluding copyright. • Such right over intangible property must be recognized under any India law for the time being in force. • Intellectual property rights which are not covered by India law like integrated circuits or undisclosed information would therefore not be covered under the taxable services. • Service provider must do one of the following : (a) Transfer of intangible property to another person. (b) Permit the use or enjoyment of the intellectual right. 7.3 Further we find that know-how is not recognized as Intellectual Property law by any Indian Law for the time being in force. In fact knowhow is the undisclosed information cited by the Department clarification dated 10-9-2004 as exampl....