2018 (2) TMI 148 - AT - Service Tax

Liability of service tax - payment of consideration for usage of Trademark AREVA , which is owned and registered by parent company of the appellants in France - reverse charge mechanism - Held that - There is no provision of Intellectual Property Rights Service for tax liability on reverse charge basis, when such Intellectual Property Rights/Trademark is not recognised for enforcement in India under any law for the time being in force. The submission of the Revenue that the Trademark used by the appellants were recognised by the Trademarks Act, 1999 as the same is fulfilling the legal requirements, cannot be appreciated. As long as it is legally not recognised by a process under the Act, the same cannot be considered as recognised by the law. Circular dated 17.09.2004 of CBEC clarifies that IPRs covered under Indian law in force at present alone are chargeable to service tax. In fact, the clarification supports appellants. Appeal allowed - decided in favor of appellant.

Summary

Issues involved: Service tax liability on usage of Trademark "AREVA" under Intellectual Property Rights Service.

Analysis:

Issue 1: Service tax liability on usage of Trademark "AREVA"
The appellant, engaged in manufacturing electrical equipment, used the Trademark "AREVA" under an agreement with their parent company in France, paying considerations for its usage. The lower authority confirmed service tax liability on reverse charge basis under section 66A of the Finance Act, 1994. The appellant contested this, arguing that as per section 65(55a) and section 65(55b) read with section 65(105)(zzr) of the Finance Act, 1994, the Trademark used should be recognized under Indian law. The appellant cited various case laws to support their contention. The Revenue, however, contended that even unregistered Trademarks are recognized under Indian law, citing the provisions of section 2(zb) of the Trademarks Act, 1999. The Tribunal analyzed previous decisions such as M/s. Chambal Fertilizers & Chemicals Ltd. case and held that for service tax purposes under Intellectual Property Rights, the right should be registered with the Trademark/Patent Authority. If not recognized by statutory authorities in India, the tax liability on reverse charge basis does not arise. The Tribunal referred to Circular dated 17.09.2004 of CBEC, stating that only IPRs covered under Indian law are chargeable to service tax, supporting the appellant's position. The impugned orders were found without merit, and all four appeals were allowed in favor of the appellants.

This judgment clarifies the service tax liability concerning the usage of a Trademark under Intellectual Property Rights Service, emphasizing the need for recognition under Indian law for tax liability to arise. The Tribunal's analysis of previous decisions and statutory provisions provides a comprehensive understanding of the legal principles involved in determining service tax liability in such cases.