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Provision of ‘intellectual property service’ is complete on the date
of transfer/permission to use the same. When such date is before
introduction of service tax on such services, even though royalty
payments are received over a period of time including period post
introduction of service, service tax not leviable.
Facts
The
agreement for transfer of technology and right to manufacture and sell
products using same technology was entered into before levy of service
tax on ‘Intellectual Property Services’ came into force. As per payment
terms, consideration was required to be paid by making one-time lump sum
payment in addition to a running royalty based on number of products
manufactured using technology transferred. The revenue initiated
proceedings against appellants to recover service tax under reverse
charge in capacity of service recipient on amounts of royalty paid after
period in which ‘Intellectual Property Services’ were brought into
service tax net, based on the contention that appellants were providing
continuous supply of service.
Held
Relying upon
decision in the case of Modi-Mundipharma (P.) Ltd. vs. CCE [2010] 24 STT
343 (New Delhi – CESTAT), the Tribunal held that transfer of technology
in the present case cannot be held to be continuous supply of service
merely because of periodic payments. Provision for service was complete
as soon as technology was transferred. Revenue’s contention that use of
technology over number of years covered by periodic payments would form
the basis for continuous supply of service was rejected. Since transfer
of technology took place before introduction of service tax on
intellectual property services, it was held as not liable to service
tax.
