2015 (11) TMI 1180 - AT - Service Tax

Waiver of pre deposit - IPR service - Transfer of rights - Held that - additional rights will not be granted to any third party for a period of two years and the appellant gets time of one more year to achieve the turnover for a particular product. In our opinion when a right is transferred temporarily, there will be a cost to be paid on the basis of specific parameters periodically. In the case of permanent transfer, consideration is paid once for all and therefore no payment would be required. In this case, the consideration paid would become worthless for BL if they are not able to achieve the milestones and they will not be able to enjoy their rights at all. On the other hand, if they achieve the milestones, there is no indication that they have to make payments periodically. Prima facie, in our opinion, it cannot be said that the transfer is a temporary one. - Since we have found a prima facie case on the ground that the transfer in this case cannot be considered as a temporary one, we consider that appellant has made out a prima facie case for complete waiver only on that basis - Stay granted.

Summary

Issues:
1. Premature rejection of early hearing application
2. Demand of service tax on non-discharge of liability under IPR service during 2007-2008
3. Interpretation of joint-venture agreement for transfer of marketing rights and service tax liability

Analysis:
1. The judgment addressed the premature rejection of an early hearing application filed by the Revenue. The application was found in the records during the consideration of a stay application. Despite being filed before the stay application was disposed of, it was rejected as premature, as the stay application was the primary matter at hand. This decision was based on procedural grounds to maintain the sequence of proceedings.

2. The case involved a demand for service tax amounting to Rs. 1,59,25,860 on the grounds that the appellant failed to discharge the liability under the Intellectual Property Rights (IPR) service during the financial year 2007-2008. The tax demand was linked to the transfer of marketing rights between two entities, and the judgment delved into the specifics of the agreements and the nature of the transaction to determine the tax liability.

3. The detailed analysis focused on the joint-venture agreement between two companies for the marketing of biopharmaceutical products. The agreement involved the transfer of non-exclusive marketing rights from one entity to another, raising questions about the temporary or permanent nature of the transfer and its implications on the service tax liability. The judgment examined the terms of the agreement, including clauses related to additional rights, turnover milestones, and the nature of the transfer to ascertain the prima facie case for a complete waiver of predeposit and stay against recovery during the appeal process.

Overall, the judgment provided a thorough examination of the issues related to the premature rejection of an early hearing application, the demand for service tax on non-discharge of IPR service liability, and the interpretation of the joint-venture agreement for the transfer of marketing rights, offering a detailed analysis of the legal aspects and implications involved in the case.