The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed the service tax demand and ruled that the payment of royalty for Intellectual Property Rights (IPR) services are not taxable in India.
The appellant,M/s. LifeCell International Private Limitedis engaged in the process of separation, isolation, storage and cryo-preservation of Umbilical Cord and Stem Cells, for which, it appears that the appellant had entered into agreement with M/s. Cryo-Cell International Inc., USA (CCI) under the ‘Licence and Royalty Agreement’ for the use of ‘Licensed Technology’ and it is the duty of the appellant to pay the royalty, as per the terms of the above agreement, to M/s. CCI.
Entertaining a doubt that the appellant had not registered under Intellectual Property Rights (IPR) service, also had not discharged Service Tax on the said payments made to M/s. CCI as required under Section 68(2) of the Finance Act, 1994, as amended, and that the appellant had paid royalty on the Intellectual Property Rights to M/s. CCI, show cause notices came to be issued.
The Chartered Accountant for the appellant submitted that at the outset, that the issue involved in the present case is no more res integra as the same is settled by the Chennai Bench of the CESTAT in the appellant’s own case namely: – M/s. LifeCell International Pvt. Ltd. v. Addl. Commissioner of Central Excise, Chennai-III.
The Tribunal of P Dinesha, Judicial Member and Vasa Seshagiri Rao, Technical Member observed that “It appears that the CESTAT Benches have consistently held that the payment of royalty for IPR services was not liable to tax in India. Following the above ratio decidendi, therefore, we are of the view that the demands raised are not proper, for which reason the impugned orders are set aside.”
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