2017 (3) TMI 1292 - AT - Service Tax

Transfer of the right to the use of the trade mark - intellectual property service - whether penalty is imposable, where the short levied duty is already deposited by the assessee before issue of SCN? - Held that - In the case of Union of India Vs. TPL Industries Ltd. 2007 (3) TMI 71 - HIGH COURT, RAJASTHAN , the Hon ble Rajasthan High Court has held that no penalty amount charged from assessee for non payment of duty - no penalty will be leviable on the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Liability of payment of service tax under intellectual property service.
2. Imposition of penalties under Sections 76 and 78 of the Finance Act, 1994.
3. Applicability of penalty when the short levied duty is already deposited before the issuance of a show cause notice.

Analysis:

Issue 1: Liability of payment of service tax under intellectual property service
The appellant, who is the Chairman and Managing Director of a company, entered into a trademark agreement with the company for granting the right to use the trademark "OMAXE" registered in his name. The Revenue contended that such transfer of the right to use the trademark falls under the category of intellectual property service, subject to service tax under Section 65(55)(b) of the Finance Act, 1994. The impugned order confirmed the demand of service tax, interest, and imposed penalties under Sections 76 and 78. The appellant did not contest the payment of service tax and interest but sought to set aside the penalties imposed.

Issue 2: Imposition of penalties under Sections 76 and 78
The appellant argued that since the entire service tax and interest were already paid, no show cause notice should have been issued by the Revenue. They contended that the service tax was not paid by them directly as the amount was received from the company owned and controlled by the appellant. The appellant relied on various judgments to support their argument that penalties should not be imposed when the tax and interest are paid and informed to the Revenue Authorities.

Issue 3: Applicability of penalty when the short levied duty is already deposited before the issuance of a show cause notice
The Tribunal referred to several decisions, including the case of Union of India Vs. TPL Industries Ltd., where it was established that if the duty is deposited before the issuance of a show cause notice, no penalty under Section 11AC of the Central Excise Act should be imposed. The Tribunal emphasized that where duty is paid before the show cause notice, there is no short levy of duty for which penalties can be imposed. The Tribunal concluded that since the appellant had paid the entire service tax before the show cause notice, no penalty should be levied under Section 78 of the Finance Act, 1994.

In light of the above analysis, the Tribunal upheld the liability to pay service tax and interest but set aside the penalties imposed under Sections 76 and 78. The decision was based on the principle that when the duty is paid before the issuance of a show cause notice, penalties should not be imposed. The appeal was disposed of accordingly.