Per: B. Ravichandran
1. The appeal is against the order dated 27.11.2008 of the Commissioner of Central Excise, Chennai-III.
2. The appellant is engaged in the process of separation, isolation, storage and cryo-preservation of Umbilical Cord Blood and Stem Cells. They have entered into a Technology Transfer Agreement with M/s. Cryo-cell International Inc. U.S.A. The License and Royalty Agreement dated 14.07.2004 permitted the use of Licensed Technology in the above processes of the United States Company by the appellant. For such transfer of technology, the appellant paid consideration. The dispute is with reference to service tax liability on such consideration under the category of Intellectual Property Services (IPS in short), in terms of Section 65 (55b) with Section 65 (55a) of the Finance Act, 1994. The appellants were sought to be taxed on reverse charge basis in terms of Section 66A. The original authority concluded the proceedings against the appellant and confirmed the service tax liability of Rs. 57,68,723/-. He also imposed equal amount of penalty under Section 78.
3. The Ld. Counsel appearing for the appellants contended the tax demand on the ground that the IPR is not registered in India. Though the Technical Know-how in the form of trade mark is registered in US by the service provider, the said IPR is not recognized in India under any law. Since recognition by Indian law is a pre-requisite to tax under IPR service, the appellants are not liable to pay service tax. Further, he also contended that a Technology Transfer happened prior to 2004, though the royalty was continued to be paid on periodical basis as per the terms of the agreement. The event of service was prior to the introduction of tax entry and as such receipt of consideration post that date will not make them liable to pay service tax.
4. The Ld. AR contested the appeal on the ground that the Trade Marks Act, 1999, recognizes even unregistered trade mark. The Technical Know-how is identified with a particular person and the appellant received service of such person. Further, there is a trade mark linked with technical know-how which the appellant is permitted to use. Accordingly, he supported the findings of the original authority.
5. Heard both sides and perused the appeal records.
6. The dispute in the present case is relating to the liability of the appellant under IPR service on reverse charge basis. Similar disputes have been repeatedly brought before the Tribunal for a decision. It has been held that to be held liable for service tax on reverse charge basis under IPR service, such IPR should be recognized by any law for the time being in force in India. In the present case, the IPR is not registered for enforcement under any law including Trade Mark Act in India. This is an admitted fact. IPR now under consideration can be construed to be recognized by the Indian Law, if he satisfies the requirement of IPR as per law. Registration is not a requirement. We note that the Board has also clarified these aspects more specifically, with reference to the phrase law for the time being in force. It is clarified in the Circular datedB2/8/2004-TRU dated 10.09.2004, that the said phrase implies such laws as are applicable in India, IPRs covered under Indian Law in force at present alone are chargeable to service tax. Viewed from such clarification and also consistent view by the Tribunal in various decisions, it is clear that in the present case, the appellant cannot be held liable for service tax under IPR service. We refer to the decisions of the Tribunal in Chambal Fertilizers and Chemicals Ltd. Vs. CCE, Jaipur 2016-TIOL-2484-CESTAT-DEL and Tata Consultancy Services Ltd. Vs. CST, Mumbai 2015-TIOL-2370-CESTAT-MUM.
7. In view of the above discussion and analysis, we find no merit in the impugned order and accordingly the same is set aside. The appeal is allowed with consequential relief to the appellants.
