2014 (11) TMI 875 - HC - Service Tax

Maintainability of writ - Application for issuance of Writ of Prohibition - service tax liability was confirmed and order in original was passed - Prohibition on the respondents from levying and collecting service tax on the transfer of right to use copyright - Liability to pay service tax on copyright service - service tax on the royalty charges - Held that - Petitioner having already agitated their rights before the Tribunal with regard to the earlier period was not entitled to maintain a Writ Petition before this Court, when show cause notice was issued for the subsequent period. That apart, the issue as to whether service tax is liable to be paid on the nature of transaction done by the petitioner with its group companies, whether the logo which is registered under the Copy Right Act was used as an artistic work or merely with the purpose to show that the products marketed by their group companies also belong to the TTK group and whether in that regard, it was in the nature of a trade mark are all issues which involve adjudication of disputed questions of fact. These issues cannot be permitted to be raised for being adjudicated in a Writ Petition. Issue raised by the petitioner being an issue relating to classification, there is a clear bar of jurisdiction imposed under the statute if even entertaining an appeal as against the order passed by the Tribunal as the appeal shall lie only to the Supreme Court. - Decided against assessee.

Issues Involved:
1. Maintainability of the Writ Petition.
2. Issuance of a Writ of Prohibition to prohibit the respondents from levying and collecting service tax on the transfer of right to use copyright.

Issue-wise Detailed Analysis:

1. Maintainability of the Writ Petition:

The petitioner sought a Writ of Prohibition to prevent the respondents from levying and collecting service tax on the transfer of the right to use copyright. The petitioner argued that the levy of service tax on royalty received for the transfer of the right to use the registered copyright is without authority of law and per se illegal. The petitioner relied on Section 65(55a) of the Finance Act, which excludes copyright from intellectual property services, and cited Article 265 of the Constitution of India. The petitioner also referred to the Registration Certificate under the Copyright Act, 1957, asserting that the logo registered as an artistic work falls outside the purview of the Finance Act, 2007.

The respondents contended that the Writ Petition is not maintainable, as the petitioner had already preferred an appeal before the CESTAT against an order confirming the service tax liability. The appeal was pending when the petitioner moved the Writ Petition and obtained an interim order, subsequently withdrawing the appeal. The respondents argued that the issue raised by the petitioner is a classification issue, and a Writ of Prohibition cannot be granted. They cited decisions from the Supreme Court and High Courts to support their contention that the matter should be adjudicated by the authorities under the Act, and the petitioner must pursue their remedy before the Tribunal.

The Court noted that the petitioner had not disclosed the pendency of the appeal for the earlier period and sought a Writ of Prohibition alleging that the respondent had no jurisdiction to demand service tax. The Court held that the petitioner, having already agitated their rights before the Tribunal, was not entitled to maintain a Writ Petition when a show cause notice was issued for the subsequent period. The Court emphasized that issues involving adjudication of disputed questions of fact cannot be raised in a Writ Petition.

2. Issuance of a Writ of Prohibition:

The petitioner argued that the logo registered under the Copyright Act as an artistic work falls outside the purview of the Finance Act, 2007, and no service tax can be demanded on the royalty received. The respondents countered that the definition of copyright under the Copyright Act cannot be merely incorporated while interpreting the Finance Act, and the logo used in goods has a nexus with the brand name, indicating a trade mark rather than an artistic work.

The Court referred to the show cause notice issued to the petitioner, which proposed that the logo 'ttk' was used as a trade mark rather than an artistic work, and the consideration received for the temporary transfer of intellectual property right is liable to service tax. The Court noted that the petitioner had already been issued a notice demanding service tax for an earlier period, which culminated in an order confirming the service tax payment. The petitioner had preferred an appeal before the CESTAT, which was pending when the Writ Petition was filed.

The Court held that the issue of whether service tax is liable to be paid on the transaction, whether the logo was used as an artistic work or a trade mark, involves adjudication of disputed questions of fact. Such issues cannot be adjudicated in a Writ Petition. The Court cited decisions from the Supreme Court and High Courts, emphasizing that classification issues relating to the rate of duty and the nature of the transaction should be adjudicated by the authorities under the Act, and not by the High Court under Article 226 of the Constitution.

The Court concluded that the Writ Petition is not maintainable, and a Writ of Prohibition cannot be issued. The Writ Petition was dismissed as not maintainable, and no costs were awarded. Consequently, the connected miscellaneous petition was closed.

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