The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the service tax was not leviable to the transfer of technical know-how which falls under the category of ‘Intellectual Property Service’.
Intas Pharmaceuticals Ltd, the appellant assessee was transfering the technical know-how to manufacture and market two formulations to Scigen, Singapore.
The assessee had transferred technology-related documents and two vials of Cell Banks to Scigen, Singapore at its facility located in Israel and received payment from Scigen, Singapore in US Dollars, and under the agreement, Scigen could use the technology to manufacture the products at any place in the world including its existing Pune (India) facility.
The assessee appealed against the order passed by the Commissioner (Appeals) against the demand of service tax for technical knowhow transferred by them to a recipient in Singapore wherein consideration was received in US Dollar.
Willingdon Christian, the counsel for the assessee contended that the technical know-how is not a taxable service under the head of ‘Intellectual Property Service’.
Also submitted that the technology supplied by the assessee does not fall under the category of Intellectual Property Rights for the reason that the technology was not protected by any law in India.
R.R Kurup, the counsel for the department relied on decisions made by the lower authorities and contended that the transfer of technology knowhow is liable for service tax and the demand raised by the revenue was as per the law and liable to be sustained.
The Bench observed that in the case of Munjal Showa Ltd, the court held that to qualify as an Intellectual Property Right, the said right should be protected by some law for the time being in force within India and it was seen that Revenue had not pointed out any law under which the said technical knowhow being transferred to Sicgen Singapore was protected and in absence of any clear evidence of the said knowhow being protected by any law, the same cannot qualify as an ‘Intellectual Property Right ’ and is not liable to pay service tax.
The two-member bench comprising Ramesh Nair (Judicial) and Raju (Technical) quashed the demand for service tax while allowing the appeal filed by the assessee.
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