2023 (4) TMI 439 - AT - Service Tax

Classification of services - Scientific or technical consultancy Service - intellectual property right service - whether the patent and other technical know-how transferred to M/s SSIPL under sales & purchase agreement as a going concern would fall within the ambit of taxable service of 'Scientific or technical consultancy Service' and 'intellectual property right service' as defined under Section 65 (92) and 65 (55b) of Finance Act, 1994 and liable for payment of service tax?

HELD THAT:- The impugned show cause notice alleged that transfer activity of its Polymer Division to M/s SSIPL is covered under the service category of 'Intellectual Property Service' and transfer activity of technical know-how provided by the unit during transfer of its Polymer Division to M/s SSIPL is covered under the service category of 'Scientific & Technical Consultancy Service'; which are taxable service with effect from 10.09.2004 and 16.07.2001 respectively. However from the definition of 'scientific or technical consultancy service', it is found that there should be an advice, consultancy, or scientific or technical assistant given by person or an institution to another person. In the present matter it has not been brought out by the revenue as to what advice, consultancy or scientific or technical assistant has been given by the seller to the buyer.

Providing of intellectual property service - HELD THAT:- From the definition of said service it is clear that there is rendering of service only if there is temporary transfer of some intellectual property or permitting its use. In the present matter from the facts of the case there does not seem to be any temporary transfer of intellectual property. In the present case whole Polymer division itself was sold by the Appellant to M/s SSIPL as going concern.

The disputed transaction of appellant will not fall within the definition of 'Scientific and Technical Consultancy Service' and 'Intellectual Property Service' as stated in Section 65(92) and Section 65(55b) of Finance Act, 1994.

The slump sale has been one of the widely used ways of business acquisition. The concept of Slump sale was incorporated in the Income Tax Act 1961 by the Finance Act, 1999 when Section 2(42C) was inserted defining the term slump sale - Hence in the present matter all such transfer including the transfer of technical know-how and patent etc. are in pursuance to the slump sale and not by way providing the service. Therefore in our view demand of service tax not sustainable on such type of transactions.

The impugned order is set aside - Appeal allowed.