2012 (4) TMI 198 - AT - Service Tax

Intellectual Property Services - Trade marks and brand name - held that - If the argument of the learned Advocate that Hero Honda should be considered as trade mark of the oil companies is accepted, we really fail to understand as to whether there was any need for oil companies to enter into agreement with the appellant seeking their permission to allow use of their trade name. Admittedly, the goods manufactured by the oil companies are to be used in the vehicles manufactured by the appellant companies and have a strong connection with the same. The appearance of the trade mark Hero Honda and Hero Honda 4T plus on the oil company s products definitely indicates a connection between the said companies and the appellants product. If the oil companies would have used the said trade mark without entering into an agreement with the appellant, the same would have amounted to infringement of their right in terms of the sub-clause (4) of the Trade Mark Act. This explains the need to enter into an agreement with the appellant and for payment of royalty to them. As such, we do not agree with the learned advocate that their permission to use the said trade mark to the oil companies is not covered by the definition of Intellectual Property right and intellectual property services as appearing in the Finance Act. While deciding against the assessee, demand beyond normal period of limitation set aside.

Summary

Issues Involved:
1. Classification of the services provided by the appellant under "Intellectual Property Services."
2. Applicability of the CBEC Circular No. 80/10/2004-S.T. dated 17.9.2004.
3. Registration status of the trade marks under the Trade Marks Act, 1999.
4. Infringement and use of registered trade marks.
5. Invocation of the extended period of limitation for the demand.
6. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act.

Issue-wise Detailed Analysis:

1. Classification of the services provided by the appellant under "Intellectual Property Services":
The appellant, M/s. Hero Honda Motors Ltd., entered into agreements with M/s. Bharat Petroleum Corpn. Ltd., M/s. TIDE Water Oil Co. Ltd., and M/s. Savita Chemicals Ltd., permitting them to use the trade marks "Hero Honda" and "Hero Honda 4T plus" on their products. The Revenue classified these services under "Intellectual Property Services" based on the definition under Section 65 (55)(a) of the Finance Act, 1994, and raised a demand for service tax.

2. Applicability of the CBEC Circular No. 80/10/2004-S.T. dated 17.9.2004:
The appellant contended that the scope of "Intellectual Property Right" as defined by Section 65 (55a) of the Finance Act is confined to IPRs governed by specific legislations in India. The CBEC Circular clarified that IPRs not covered by specific Indian legislation, such as unregistered trade marks, do not give rise to taxable services. The appellant argued that their trade marks were registered only for motorcycles and not for oils, lubricants, and greases, making them unregistered for the latter class of products.

3. Registration status of the trade marks under the Trade Marks Act, 1999:
The appellant argued that their trade marks were registered only for motorcycles and parts thereof (Class 12) and not for oils, lubricants, and greases, which are a different class of products. Consequently, the trade marks should be considered unregistered for these products, and thus not covered under "Intellectual Property Right" as per Section 65(55a).

4. Infringement and use of registered trade marks:
The Revenue argued that the trade marks "Hero Honda" and "Hero Honda 4T plus" are registered in the name of the appellant and their use by the oil companies without an agreement would constitute infringement under the Trade Marks Act, 1999. The agreement between the appellant and the oil companies for the use of these trade marks and the payment of royalty indicated a connection between the appellant's products and the oil companies' products, thus falling under "Intellectual Property Services."

5. Invocation of the extended period of limitation for the demand:
The demand for service tax was raised for the period October 2004 to January 2006 by issuing a show cause notice on 31.8.2006, invoking the extended period of limitation. The Commissioner justified the invocation of the extended period based on the appellant's failure to comply with statutory provisions, which was considered suppression of facts. However, the Tribunal found that mere failure to comply with statutory provisions does not justify the invocation of the extended period without evidence of intent to evade tax. The Tribunal held that the major part of the demand was barred by limitation and remanded the matter for re-quantification of the demand within the limitation period.

6. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act:
The Tribunal found no suppression or mis-statement on the part of the appellant with any malafide intent. Therefore, the penal provisions under Sections 76, 77, and 78 of the Finance Act were not applicable. The Tribunal set aside the entire penalty imposed on the appellant.

Conclusion:
The Tribunal concluded that the use of the trade marks "Hero Honda" and "Hero Honda 4T plus" by the oil companies under the agreement with the appellant constituted "Intellectual Property Services." However, the major part of the demand was barred by limitation, and the matter was remanded for re-quantification of the demand within the limitation period. The penalties imposed on the appellant were set aside.