2008 (1) TMI 632 - AT - Service Tax

Waiver of demand of tax and penalty - Commissioner treating service activities as covered under Section 65 (55a) of the Finance Act 1994 is wrong in as much as the Intellectual Property Right transferred by assessee for consideration was not in respect of Trade Mark registered under the law - Held that - though the company was having a registered Trade Mark in respect of Shoes such a Trade Mark was transferred to the manufacture of Foam to a third party - It was contended that what was contemplated under Section 65 (55a) was only with regard to the Trade Mark owned by the appellant and not in respect of commodities for which such transfers had taken place which was not under the purview of law under Service Tax - applicant to deposit 50% of the tax raised - Stay application shall stand dismissed

Summary

Issues:
1. Interpretation of the definition of 'Intellectual Property Right' under Section 65 (55a) of the Finance Act, 1994.
2. Determination of whether the transfer of a Trade Mark for consideration falls under taxable services as per Section 65 (105) (zzr) of the Finance Act, 1994.
3. Analysis of case laws regarding the transfer and use of Trade Marks in relation to intellectual property services.
4. Decision on the waiver of tax demand under the impugned order.

Issue 1: Interpretation of 'Intellectual Property Right':
The applicant challenged the Service Tax confirmed by the Commissioner, arguing that the Intellectual Property Right transferred did not involve a Trade Mark registered under the law. The Revenue contended that the definition under Section 65 (55a) includes not only registered Trade Marks but also those recognized under the law. The disagreement centered on whether the right transferred for consideration was solely related to commercial use or constituted an Intellectual Property Right as defined under the Finance Act, 1994.

Issue 2: Taxability of Trade Mark Transfer:
The applicant claimed that the Trade Mark registered for Motor Cycles did not extend to lubricants, the subject of the transfer agreement. However, the Revenue asserted that the transfer of the right to use the Trade Mark for lubricant containers constituted a taxable service under Section 65 (105) (zzr) of the Finance Act, 1994. The debate revolved around the scope of the Trade Mark ownership and its transfer for different product categories.

Issue 3: Case Law Analysis:
Both parties relied on case laws to support their arguments. The applicant cited the Supreme Court judgment distinguishing between Trade Marks, while the Revenue referenced a case involving the transfer of a well-known Trade Mark for a different product. These cases aimed to establish the legal implications of Trade Mark transfers and usage in the context of intellectual property services under the Service Tax provisions.

Issue 4: Waiver of Tax Demand:
After hearing both sides and reviewing the records, the Tribunal concluded that the applicant failed to justify waiving the tax demand in the impugned order. The Tribunal directed the applicant to deposit 50% of the tax within a specified period, failing which the Stay application would be dismissed. Upon compliance, the remaining tax and penalty amounts under the impugned order would be waived, with a deadline set for the same.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, New Delhi highlights the key issues addressed, interpretations made, and the final decision rendered in the case.