The Ahmedabad CESTAT has held that no tax can be levied of such transfer of technical knowhow under the head of “Intellectual Property Service‟.
The appellant had agreed to transfer technical know-how to manufacture and market two formulations to M/s Scigen, Singapore vide agreement dated 17.06.2006 as amended on 20.08.2007.
The appellants had transferred technology related documents and two vials of Cell Banks to M/s Scigen, Singapore at its facility located in Israel. The appellant received payment from M/s Scigen, Singapore in US Dollars. Under the agreement Scigen could use the technology to manufacture the products at any place in the world including its existing Pune (India) facility. During audit an objection was raised that since the said technology is used in Pune it does not become “Export of Service”. The appellant had paid service tax of Rs. 74,99,857/- and interest of Rs. 51,34,290/-. The appellant claimed the refund of the said service tax and interest.
The refund claim was rejected on the ground that the said transfer of technology did not amount to “Export of Service‟ as the said service though sold to M/s Scigen, Singapore was used in the plant located at Pune (India) also. They had transferred the agreed upon technology in soft copy to the registered office of M/s Scigen, Singapore and the agreement authorized M/s Scigen, Singapore to use the said technology anywhere including in India.
During the audit of the appellant premises in the month of September 2012, an objection was raised that the service provided by the appellant to M/s Scigen, Singapore was not “Export of Service‟.
The audit was of the view that the said service is chargeable to service tax under the head of “Intellectual Property Service‟ w.e.f. 10.09.2004. The technical know-how is not a taxable service under the head of “Intellectual Property Service‟.
The appellant had paid the service tax along with interest consequent to the said audit objection. A show cause notice was issued to the
appellant for rejection of the refund claim holding that the services claimed to have been exported to M/s Scigen, Singapore cannot be considered „Export of Service‟ as the same were not used “outside India‟. The services were in turn used by M/s Scigen, Singapore in the Bio-Technical Park, Pune Maharashtra (India). The recipient of service M/s Scigen, Singapore is located outside India. The service has been provided to M/s Scigen, Singapore with liberty to use said technical know-how anywhere in India and the payment of service is received in convertible foreign exchange. Under rule 3(2) of Export of Service Rules, 2005, it qualifies as “Export of Service”.
The tribunal held that to qualify as Intellectual Property Right, the said right should be protected by some law for the time being in force within India. It is seen that Revenue has not pointed out any law under which the said technical knowhow being transferred to Sicgen Singapore is protected. In absence of any clear evidence of the said knowhow being protected by any law, the same cannot qualify as “Intellectual Property Right‟ and therefore, no tax can be levied of such transfer of technical knowhow under the head of “Intellectual Property Service”.
Intas Pharmaceuticals Ltd. V/S C.S.T.-Service Tax, Ahmedabad