Custom, Excise & Service Tax Tribunal
Bioseed Research India Pvt Ltd vs Hyderabad - G S T on 4 December, 2019
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CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
HYDERABAD
REGIONAL BENCH - COURT NO.I
Service Tax Appeal No. 20335 of 2015
(Arising out of Order-in-Original No. HYD-EXCUS-002-37-14-15 dated 20.11.2014
passed by the Principal Commissioner of Service Tax, Service Tax Commissionerate,
Basheerbagh, Hyderabad)
M/s. Bioseed Research India, : Appellant
A Division of M/s. DCM Shriram Ltd.,
(formerly known as 'M/s. Bioseed Research (India) Pvt. Ltd.'),
Plot No. 206, H.No. 8-2-293/82/A/206
Road No. 14, Jubilee Hills,
Hyderabad - 500 003
VERSUS
The Commissioner of Service Tax, : Respondent
Service tax Commissionerate,
Basheerbagh, Hyderabad - 500 004
APPEARANCE:
Shri. S. Ganesh, Senior Advocate
Shri. G. Prahlad, Advocate
for the Appellant
Shri. N. BhanuKiran,Authorized Representative (A. R.)
for the Respondent
CORAM:
HON'BLE MR. P. VENKATA SUBBA RAO, MEMBER (TECHNICAL)
HON'BLE MR. P. DINESHA, MEMBER (JUDICIAL)
FINAL ORDER NO. A/31102/ 2019
DATE OF HEARING: 20.09.2019
DATE OF DECISION: 04.12.2019
PER P. DINESHA :
Brief facts relevant for our consideration are that
the appellant is inter alia engaged in developing
proprietary parental lines and hybrids based on its
proprietary germplasm and licences the same to
commercial seed companies who thereafter market the
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hybrid seeds to farmers. The appellant entered into
agreements with various commercial seed companies for
the supply of parent seeds to the seed companies for
production and marketing of hybrid seeds to be sold in
the market and a sample copy of such Licence Agreement
has been filed in the Appeal Memorandum at Annexure-3.
A close look at the above agreement reveals inter alia
that the appellant supplies the commercial seed company
with parent/foundation seeds developed by it through
research and development; that the parent/foundation
seeds comprise of a set of 'male seeds' and a set of
'female seeds'; that the buyer, i.e. the commercial seed
company, passes it on to its growers, who cultivate and
grow those parent seeds into plants and such grown
plants could be male or female plants with the female
plants then being pollinated; that on account of
pollination, new hybrid seeds are produced which are
collected by the growers and given back to the
commercial seed company, i.e. the buyer, who later on
exploits such hybrid seeds by selling them in the open
market; that for the parent seeds, the commercial seed
company i.e. the buyer would pay the appellant a
'Royalty' or 'breeding charges' for supplying the parent
seeds, which is a pre-determined percentage of the
revenues earned by the buyer after selling the hybrid
seeds in the open market, etc.
1.2 It is not disputed by any of the parties that the
appellant entered into similar agreements with
independent commercial seed producers wherein the seed
companies were also required to pay Royalty or breeding
charges at agreed rates.
1.3 It is the case of the appellant that none of the
parent seeds so developed and licensed by it were
registered under the Protection of Plant Varieties and
Farmers' Rights Act, 2001('PPV Act' for short)or any other
law for the time being in force at the relevant time and
during the disputed period i.e. April 2008 to June 2012,
the appellant had only applied for registration of certain
parent seeds, which were pending with the appropriate
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authority for registration. It was in 2011 i.e., on
21.10.2011 that the appropriate authority did grant
registration for one of the applications for registration
dated 02.06.2009(for Corn BIO 22027), which was for
one of the periods falling within the disputed period.
However, it is the case of the appellant that during the
period in dispute, there was no sale of that particular
variety of Corn after the registration was granted.
Subsequently, registrations were granted in respect of
various crops on various dates. A tabulation of the same
is reproduced hereinbelow for the sake of convenience:
Crop Hybrid Date applied Date granted
Cotton BIO 6588-2 BG II 21 Apr 2009
BIO 6007110 10 Jun 2009 23 Aug 2013
BIO 60502IO 06 Oct 2009 14 Oct 2013
BIO 2113-2 BG II 10 Dec 2009
BIO 322-2 BG II 16 Aug 2010
BIO 340-2 BG II 26 Jul 2010
BIO 563-2 BG II 03 Aug 2010
BIO 7215-2 BG II 19 Apr 2011
BIO 847 2 BG II 02 Aug 2011
BIO 842-2 BG II 02 Aug 2011
BIO 6488 BG I 22 Apr 2009
BIO 6488-2 BG II 11 Feb 2009
BIO 6317-2 BG II 20 Mar 2013
BIO 7213-2 BG II 18 Apr 2013
BIO 6317 BG I 21 Apr 2009
Corn BIO 22027 02 Jun 2009 21 Oct 2011
BIO 50265 H 08 Jul 2009
BIO 9544 29 Jun 2012
Rice BIO 404 11 Feb 2009 14 Oct 2013
BIO 4311 BH 25 Mar 2009 14 Oct 2013
BIO 428 H 25 Mar 2009
Millet BIO 448 H 05 Feb 2009 09 Jan 2014
Okra BIO 228 H 24 Jan 2011
Tomato BIOSEED 90 23 Sep 2013
BIOSEED 56 29 Nov 2013
SWADESHI 29 Nov 2013
Brinjal RAJANI (BPV-410) 12 Aug 2013
TRIVENI (BPG-305) 17 Sep 2013
Maize BIO 9544 22 Jun 2012 27 May 2014
1.4 The Revenue undertook investigation, during the
course of which a letter dated 29.05.2013 was issued
calling for balance-sheet for the years 2008-09 to 2012-
13 along with the details of Royalty received by the
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appellant, to which the appellant filed its reply vide letter
dated 11.06.2013. The Revenue sought additional
information vide their letter dated 19.07.2013 like
invoices, agreements, etc., which were also furnished by
the appellant vide its letter dated 29.08.2013. It is also
the case of the appellant that with the introduction of
Negative List with effect from 01.07.2012, the appellant
started paying Service Tax on the Royalty amounts
received by it on and from 01.07.2012 since, according to
the appellant, the Royalty was not a part of the Negative
List.
2.1 The Revenue thereafter issued a Show Cause
Notice dated 19.10.2013 inter alia alleging that the
appellant was a holder of Intellectual Property Rights
(IPR) in respect of the parent seeds supplied by them;
that such Intellectual Property Rights were covered in the
definition under Section 65 (55a) of the Finance Act,
1994, being the right under the Protection of Plant
Varieties and Farmers' Rights Act, 2001;that the appellant
was supplying parent seeds for commercial exploitation
whereby it was providing Intellectual Property Services by
permitting the use or enjoyment of the Intellectual
Property Rights for consideration in the form of Royalty,
etc. It is a fact borne on record that the appellant did file
its reply to the above Show Cause Notice inter alia
contending that the appellant did not hold any Intellectual
Property over the parent seeds supplied during the period
in dispute; that therefore, there was no liability under
Intellectual Property Services.
2.2 Another Show Cause Notice was issued by the
Revenue dated 15.05.2014 proposing to demand Service
Tax for the period from April 2012 to June 2012 on
almost same allegations, seeking to invoke the extended
period of limitation under Section 73(1A) of the Finance
Act, 1994 and also virtually reiterating the legal position
taken in its first Show Cause Notice, to which also the
appellant filed its detailed reply. The Adjudicating
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Authority/Commissioner of Service Tax, Hyderabad, took
up the same for adjudication and vide impugned Order
dated 20.11.2014, confirmed the proposals contained in
both the Show Cause Notices. The Adjudicating Authority,
however, has inter alia observed that the appellant was
the absolute owner and holder of the Intellectual Property
Rights for the parent seeds by virtue of the Licence
Agreements; that the registration was not required, but
the recognition itself was sufficient; that the Intellectual
Property Rights were in fact recognized by the PPV Act
and the Rights only conferred an exclusive right and
protection from infringement; and that the very filing of
application for registration was itself sufficient to construe
the appellant as the owner of such rights.
2.3 Aggrieved, the present appeal has been filed by the
appellant.
3. When the matter was taken up for hearing, Shri. S.
Ganesh, Ld. Senior Advocate, and Shri. G. Prahlad, Ld.
Advocate, appeared for the assessee-appellant and Shri.
N. BhanuKiran, Ld. Departmental Representative
appeared for the Revenue-respondent.
4.1 The contentions of the Ld. Senior Advocate for the
appellant are briefly summarized below :
Section 65 (105) (zzr) of the Finance Act, 1994
defines 'taxable service' i.e., Intellectual Property
Service to mean service provided or to be provided
"to any person by the holder of Intellectual
Property Right, in relation to Intellectual Property
Service";
Section 65 (55a) defines 'Intellectual Property
Right' to mean :
"intellectual property right 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;"
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The Commissioner/Adjudicating Authority has,
without examining the applicability in the proper
perspective, simply held that the supply of parent
seeds for production and marketing of hybrid seeds
would amount to Intellectual Property Services
covered under Section 65 (105) (zzr);
Section 65 (105) (zzr) requires certain conditions
to be satisfied and the mere activity of supplying
parent seeds for commercialization is not at all
covered;
With regard to the condition that the service should
be provided by the holder of Intellectual Property
Right, he submitted that the appellant was not the
holder of Intellectual Property Right. "Right holder"
has only been defined under Rule 2 (d) of the
Intellectual Property Rights (Imported Goods)
Enforcement Rules, 2007which reads as under :
"2. Definitions.
.
.
.
(d) " right holder" means a natural person or a legal entity, which according to the laws in force is to be regarded as the owner of protected intellectual property right, its successors in title, or its duly authorized exclusive licensee as well as an individual, a corporation or an association authorized by any of the aforesaid persons to protect its rights."
The requirement of the statute, therefore, is to safeguard the interests of the owner of the protected Intellectual Property Rights and the appellant was not at all the holder of such rights at the relevant point of time;
7 That there was no protection to seeds and plant varieties under any specific Indian law including the Patents Act, 1970 and therefore, the Protection of Plant Varieties and Farmers' Rights Act, 2001 came to be adopted whereunder Section 28 mandated registration to confer right;
Section 24 (6) of the PPV Act specifies the requirement of issuance of registration under Section 24 (2) of the same Act subject to payment of fees, etc., and not from the date of application;
Section 23 ibid is just a starting point for making an application with the authority provided under that statute whereupon the prescribed authority gets such application examined, as prescribed under Section 23 (3) and thereafter, the authority may issue directions to the Registrar subject to the authority's satisfaction;
Section 23 (7) further obligates the registration to conditions prescribed under Section 15;
Registration certificate is issued on registration alone under Section 24 (2) provided an application fulfils the requirement of Section 24 (1);
With regard to the condition that the Intellectual Property Rights should be recognized under any law for the time being in force, the appellant's right to the plant varieties under the PPV Act itself was not there, which is conferred only upon registration being granted by the competent authority. Therefore, for the period in dispute the appellant having not been granted registration, the appellant did not enjoy any right under the PPV Act;
During the disputed period, none of the impugned seeds were registered under the PPV Act and the appellant only used standard formats for agreements for protecting its trade secrets, etc. 8 4.2.1 Ld. Senior Advocate placed reliance on the decision of this very Bench of the Tribunal in the case of M/s. Lurgi India International Services Pvt. Ltd. Vs. Commissioner of Central Excise, Customs and Service Tax, Hyderabad reported in 2019-TIOL-1351- CESTAT-HYDinvolving identical issue wherein the decision of the Mumbai Bench of the Tribunal in the case of M/s. Reliance Industries Ltd. Vs. Commr. ofC.Ex. & S.T., LTU, Mumbai reported in 2016 (44) S.T.R. 82 (Tri. - Mumbai)has been followed.
4.2.2 He further relied on the decisions in the cases of M/s. Puma Ayurvedic Herbal (P) Ltd. Vs. Commissioner of C.Ex., Nagpur reported in 2009 (196) E.L.T. 3 (S.C.) andM/s.Elite Detectives Pvt. Ltd. Vs. C.S.T., Bangalore reported in 2006 (4) S.T.R. 583 (Tri. - Bang.) to contend that the onus of proving the alleged classification of service before fastening the appellant with the tax liability is on the Revenue, which has not at all been established by the Revenue and that therefore, the impugned order is liable to be set aside.
4.3.1 Ld. Senior Advocate would further contend that at the most, the agreement could be an agreement for transfer of trade secrets provided under the confidentiality clause, which per se would not amount to transfer of Intellectual Property Law as the trade secrets are not recognized as Intellectual Property by any law for the time being in force in India.
4.3.2 In this regard, Ld. Senior Counsel referred to the C.B.D.T. clarification vide F. No. B2/8/2004-TRU dated 10.09.2004, the relevant portion of which reads as under:
"09. Intellectual property services (other than copyrights):
9.1 Intellectual property emerges from application of intellect, which may be in the form of an invention, design, product, process, technology, book, goodwill etc. 9 In India, legislations are made in respect of certain Intellectual Property Rights (i.e.IPRs) such as patents, copyrights, trademarks and designs. The definition of taxable service includes only such IPRs (except copyright) that are prescribed under law for the time being in force. As the phrase 'law for the time being in force' implies such laws as are applicable in India, IPRs covered under Indian law in force at present alone are chargeable to service tax and IPRs like integrated circuits or undisclosed information (not covered by Indian law) would not be covered under taxable services."
to contend that trade secrets are never recognized as Intellectual Property Law in India and that the same are just "undisclosed information"as cited by the C.B.D.T. Circular (supra) as an example of Intellectual Property Right not covered by any Indian law.
4.4.1 Finally, Ld. Senior Advocate contended that a part of the demand is hopelessly barred by limitation, for which the extended period of limitation could not be invoked. He explained that the Show Cause Notice dated 19.10.2013 was issued for the period covering 01.04.2007 to 31.03.2012; that the appellant had filed its ST-3 return for the period ending March 2012 on 20.04.2012 and accordingly, the Show Cause Notice having been issued after more than 18 months, is clearly barred by limitation, beyond the normal period. Moreover, there was absolutely no suppression of any facts by the appellant since the appellant was always under the bona fide belief that there was no liability to Service Tax as the appellant did not hold any right; that there were series of communications between the Revenue and the appellant wherein the queries of the Revenue were answered by the appellant.
4.4.2 In this regard, Ld. Senior Counsel relied on the decisions in the cases of M/s. Padmini ProductsVs. Collector of C.Ex. reported in 1989 (43) E.L.T. 195 (S.C.) and M/s.Anand Nishikawa Co. Ltd. Vs. Commissioner of Central Excise, Meerut, reported in 10 2005-TIOL-118-SC-CX.He also placed reliance on the following judgements :
(i) Anantpur Textiles Ltd. Vs. C.C.E., Calcutta - 1994 (72) E.L.T. 48 (Tri.);
(ii) Hindalco Industries Ltd. Vs. C.C.E., Allahabad - 2003 (161) E.L.T. 346 (Tri. - Del);
(iii) Kirloskar Oil Engines Vs. C.C.E., Nasik - 2004 (178) E.L.T. 998 (Tri. - Mum.);
(iv) Paro Food Products Vs. C.C.E., Hyderabad - 2005 (184) E.L.T. 50 (Tri. - Bang.);
(v) U.T. Ltd. Vs. C.C.E., Calcutta-I - 2001 (130) E.L.T. 791 (Tri. - Kol.);
(vi) Gujrat Intelligence Security Vs. C.C.E., Vadodara -
2010-TIOL-825-CESTAT-AHM.
4.4.3 For the very same reasons, Ld. Senior Advocate submits that there cannot be any demand towards penalty under Sections 76, 77 or 78 of the Finance Act, 1994 and nor could there be any interest under Section 75 that could be demanded since the issues involve interpretation of statute/complex legal provision inasmuch as the appellant only supplied parent seeds whereas the Revenue has held that the services rendered by the appellant were in the nature of Intellectual Property Services even though the same were not recognized under any law for the time being in force in India. For these very reasons, Ld. Senior Advocate submitted that even the provisions of Section 80 ibid would apply as the appellant has proved its bona fides by showing reasonable cause, if at all there were any failures on its part, and consequently, would be entitled for waiver of any penalties under Sections 76, 77 or 78 ibid.
115.1 Per contra, Ld. Departmental Representative for the Revenue while supporting the findings of the Ld. Adjudicating Authority, put forth various contentions, which are inter alia summarized as under :
The assessee entered into agreements wherein it projected itself as the holder of Intellectual Property Rights in respect of parent seeds which are covered under Section 65 (55a) ibid., being rights under the PPV Act. The assessee-appellant is supplying parent seeds under limited "Royalty bearing" licence which tantamounts to the provision of IPR Servicesby permitting the use or enjoyment of said IPR for consideration in the form of 'Royalty', which is taxable under Section 65 (105) (zzr);
The activities of the appellant clearly meet the conditions prescribed under Section 65 (105) (zzr) for which our attention was invited to paragraph 9.4 at page 14 of the impugned order;
The appellant has not disputed the fact that it was receiving Royalty, as shown in their Books, from its customers to whom parent seeds are supplied under licence agreement;
In one of the agreements, the appellant is also shown to have supplied confidential information;
There are various clauses in the licence agreement, a cumulative reading of which makes it clear that the assessee are the absolute owners and holders of IPRs for the parent seeds for which they have received Royalty;
The requirements of law are that for the purpose of levy of Service Tax, the IPR should be recognized under the law for the time being in force, but there is no requirement that such IPRs are to be registered under the provisions of law since permitting the use or enjoyment of unregistered 12 IPR is also a taxable service. IPRs are protected by various laws from any infringement and therefore, registration of such IPRs is only for the purpose of obtaining protection from infringements. The levy of Service Tax cannot depend on whether an IPR like trademark, design, patent, etc., is registered or not;
The definition of ' taxable service' also does not require for the purposes of levy of Service Tax all the requirements of registration under any law for the time being in force and hence, the owner or any other person who holds the IPRs that are recognized under any law for the time being in force, provides any service in relation to such Intellectual Property Service for which a consideration is received in return, shall be liable to Service Tax;
The IPRs held by the assessee during the period of dispute, which came to be transferred temporarily to the customers under licence agreement for a consideration in the form of Royalty, is recognized and prescribed under the PPV Act. Hence, whether the assessee was holding the IPRs during the disputed period or not is not relevant;
The appellant has filed applications for registration during 2009, 2010, 2011 and one application in 2012, apart from five such applications during 2013. Filing of such applications itself indicates that those rights were prescribed under the PPV Act and that the appellant, as owner, had applied for registration, which itself is conclusive proof that the appellant owned the IPRs even though not registered under the PPV Act, etc. 5.2 Ld. A.R. also relied on the 'UPOV Convention' as also various decisions referred to and relied upon by the Ld. Adjudicating Authority.
136. We have heard the rival contentions and gone through the documents placed on record.
7. Two facts remain undisputed: (1) The appellant was not holding Right by virtue of non-registration (though the same has been held to be not required by the authority below) and (2) the appellant was reflecting the consideration received as Royalty (paragraph 10 of the impugned order) in its Books of Account. Therefore, the only issue to be decided in the peculiar facts and circumstances of the case, as pleaded by both the sides, is : "Whether there is any liability to Service Tax under Intellectual Property Service on the consideration received as Royalty?"
8.1 The relevant Sections of the Finance Act have already been extracted in the earlier paragraphs. Section 65 (55a) prescribes, while defining IPR, "any right .... under any law for the time being in force" and this has also been clarified by the C.B.E.C. vide Circular No. 80/10/2004-S.T. dated 17.09.2004 (with effect from 10.09.2004). The clarification reads thus :"The definition of taxable service includes only such IPRs (except copyright) that are prescribed under law for the time being in force. As the phrase 'law for the time being in force' implies such laws as are applicable in India, IPRs covered under Indian law in force at present alone are chargeable to service tax..."
8.2 Section 23 of the PPV Act prescribes the procedure for registration under the Act and the issuance of certificate of registration is prescribed under Section 24 ibid. Further, Section 28 mandates the conferring of Right. Section 23 prescribes the detailed procedure requiring the Registrar to first satisfy itself with the requirements and thereafter get the application examined and only thereafter he shall forward such application with relevant documents to the authority under the Act. Finally, it is the authority which issues directions to the Registrar or rejects such application under the Act. Once the application for registration of a variety is approved 14 i.e., accepted, only then the same is registered and the certificate of registration is issued in terms of Section 24 and only when such certificate of registration is issued under the Act, it shall confer an exclusive right in terms of Section 28 ibid.
9. In view of the above, therefore, what is clear is that mere filing of application would not lead an applicant anywhere and such applicant would not automatically become owner/holder of Right under the Act unless such right is conferred in terms of Section 28 after due process as prescribed under the said Act. Hence, one of the objections of the Revenue that mere filing is sufficient cannot survive.
10.1 The Revenue has mainly referred to the agreements between the appellant and its customers and various clauses therein and inter alia observed that the appellants are the absolute owners and holders of IPR, by which the appellants are fastened with tax liability. To our understanding, any agreement between two parties inter se is civil in nature, which only binds the parties thereto to the terms or contents therein. Such agreements could also be financial in nature whereby consideration is being passed on, however, subject to certain acts/omissions/conditions or terms in such agreements. So, any failure on the part of one of the parties to such an agreement would only lead to a civil dispute, maybe for specific performance or enforcement or recovery, etc. Such agreements, therefore, are binding only on the parties who bind themselves with the terms and conditions therein and no outsider would ever have or be influenced by any of the terms therein. So also, such agreements or clauses thereunder cannot have the effect of fastening any tax liability, that too under a taxing statute independent of Article 265 of the Constitution of India.
10.2 So, to read it in a manner so as to fix tax liability would, in our view, be a little too far-fetched. Therefore, to use the agreement and the clauses therein just to 15 fasten tax liability may not stand, more so in the absence of sanction under the taxing statute; charge to tax could only be from the taxing statute and not from the inter se agreements.
11. Now, coming to the requirements of law, the governing statute is the PPV Act, according to which the Right flows from the moment the registration is granted. Once the application is filed, procedure follows, which is not just an empty formality. The governing statute thus confers and recognizes an applicant's right, which thus satisfies the conditions in Section 65 (55a) read with Circular No. 80/10/2004 (supra), i.e., the applicant becomes holder/owner of Intellectual Property Right prescribed under the relevant Act i.e., the PPV Act, which for the time being is in force.
12.1 In this connection, we note the findings of the Mumbai Bench of the Tribunal in the case of M/s. Reliance Industries Ltd. (supra) wherein after recording the relevant observations of the Co-ordinate Bench of the Tribunal in the case of M/s. Tata Consultancy Services Ltd. Vs. Commissioner of S.T., Mumbai reported in 2016 (41) S.T.R. 121 (Tri. - Mumbai), the following observations have been made :
"9.1 We also note that a Co-ordinate Bench of the Tribunal has in the case of TCS v. CST - 2016 (41) S.T.R. 121 (T) taken a view similar to the one taken by us above. The relevant observations of the Tribunal read as under :
"4. The taxable service under consideration is defined under Section 65(105)(zzr) to mean any service provided or to be provided to any person, by the holder of Intellectual Property Right, in relation to Intellectual Property Service. Intellectual Property Service is defined under Section 65(55b) to mean (a) transferring (temporarily); or (b) permitting the use or enjoyment of, any intellectual property right. And Intellectual Property Right as defined under Section 65(55a) 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.16
4.1 Short question to be decided is whether the transfer of technical 'know how' received by the Appellant is a service which may be categorized under "Intellectual Property Right Services". We find that the definition of Intellectual Property Right must be satisfied to term the services received by the Appellant as Intellectual Property Right Services. We find no clue at all in the records as to which type of Intellectual Property Right is being assigned to the "Technical know- how" received by the Appellant. It is obvious from the definition of Intellectual Property Right that the right has to be a specific Right under a specific Law. Examples are given under the definition such as the Trade Mark which is a right provided under "Trade Marks Act". Similarly the right mentioned as 'design' in the definition is a right under the "Designs Act". Therefore we find that the technical know-how received by the Appellant and the royalty payment made by the Appellant to Unisys is nowhere established to result from the use of any Intellectual Property Right.
4.2 We may further go on to add that the Intellectual Property Right should be a right under the Indian law. Intellectual Property Right not covered by the Indian laws would not be covered under taxable service in the category of Intellectual Property Right Services. We are fortified in our view by Board Circular F. No. 80/10/2004-S.T., dated 17-9-2004 which clarified that "Intellectual Property emerges from application of intellect, which may be in the form of an invention, design, product, process, technology, book, goodwill, etc. In India, legislations are made in respect of certain Intellectual Property Rights (i.e. IPRs) such as patents, copyrights, trademarks and designs. The definition of taxable service includes only such IPRs (except copyright) that are prescribed under law for the time being in force. As the phrase "law for the time being in force" implies such laws as are applicable in India, IPRs covered under Indian law in force at present alone are chargeable to service tax and IPRs like integrated circuits or undisclosed information (not covered by Indian law) would not be covered under taxable services."
11. Insofar as the agreement with Investa Technologies S.A.R.L. is concerned the same was entered into on 14-8-2004, prior to IPR services being brought into the net of service tax w.e.f. 10-9-2004. The service itself having been rendered prior to the introduction of the levy, the mere fact that payments for 17 the same were made on a staggered basis over a period of time cannot be a ground for levying service tax merely with reference to the date on which payments were being made. We find that during the relevant period the issue as to whether a transaction is leviable to service tax and if so at what rate was required to be reckoned with reference to the date when the service was rendered and not with reference to the date on which payment is made. The law in this regard is settled by the decision of the CESTAT reported in 2008 (10) S.T.R. 243 which was affirmed by the Hon'ble Gujarat High Court in the Appellant's own case reported in 2010 (19) S.T.R. 807 as also by the Hon'ble Delhi High Court in the case of CCE v. Consulting Engineering Services India (P) Ltd.2013 (30) S.T.R. 586. As the service in the case of Investa Technologies S.A.R.L, was rendered prior to 10-9-2004, the date when the taxing entry was brought to the Statute the mere subsequent payment in respect of services that are already being rendered cannot be brought to tax with respect to the rate applicable on the date on which the payment was effected."
The very same view has been followed by this very Bench of the Tribunal in the case of M/s. Lurgi India International Services Pvt. Ltd. (supra).
12.2 The cumulative takeaway from the above orders is that in order to fasten the Service Tax liability, the person providing the service (technical knowhow) has to be registered with the Patents Authority in India and that if the IPR is registered in any foreign country, but is not registered in India, the same will not attract the Service Tax.
13. From the above, we find that on merits, the issue in the case on hand is no more res integra and accordingly, hold that the impugned order and the demand made thereunder is not sustainable and liable to be set aside, which we hereby do.
14.1 In the case on hand, admittedly, the appellant was not having the privileges of Right during most part of the disputed period and therefore, the requirements of charging Section read with the Board Circular No. 80/10/2004 (supra) remain largely unsatisfied. Hence, we 18 do not entertain the Revenue's plea and have to hold that the demand cannot sustain beyond the normal period.
14.2 There is also another reason as to why the demand for the extended period cannot be sustained. The Ld. Adjudicating Authority has observed at paragraph 10 of the impugned order that the consideration was shown as 'Royalty' in the Books of Accounts of the appellant. So, this was not something that was suppressed or camouflaged so as to give the colour of fraud, suppression, mis-representation, etc., for invoking the larger period of limitation.
15. For the foregoing reasons, the appeal is allowed both on merits as well as limitation with consequential benefits, if any, as per law.
(Order pronounced in the open court on 04.12.2019) (P. VENKATA SUBBA RAO) MEMBER (TECHNICAL) (P. DINESHA) MEMBER (JUDICICAL) Sdd/vrg