2018 (2) TMI 1409 - AT - Service Tax

Liability of service tax - consideration received for transferring the said trade mark rights - Held that - Admittedly, the appellant transferred the right to use the registered brand name to HWL in 1975. This is not disputed. The continuous usage of such right by HWL cannot be construed as continuous rendering of taxable service on the part of the appellant. Intellectual Property Service means transfer temporarily or permitting the use or enjoyment of any IPR. Admittedly, such transfer happened before the introduction of the tax entry in the present case. The tax entry is not for continuous usage of Intellectual Property but on the event of transfer or permission. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Service tax liability of the appellant for transferring trade mark rights.
2. Interpretation of Intellectual Property Service under relevant statutory entries.
3. Continuous transfer of rights leading to tax liability.

Analysis:

Issue 1: Service tax liability of the appellant for transferring trade mark rights
The case involved the appellant, owners of the registered trade mark "Hamdard," who had entered into an agreement with another party for the use of the trade mark in various products. The dispute centered around the service tax liability of the appellant for the period of transferring the trade mark rights. The proceedings resulted in a confirmation of service tax demand and penalties under the Finance Act, 1994. The appellant argued that the tax liability was on the transfer of Intellectual Property Right (IPR) and not on continuous enjoyment, citing relevant statutory entries and previous tribunal decisions in similar cases.

Issue 2: Interpretation of Intellectual Property Service under relevant statutory entries
The tribunal examined the statutory entries related to Intellectual Property Service, emphasizing that it involves the temporary transfer or permitting the use of any intellectual property right. The tribunal noted that the transfer of the right to use the registered brand name occurred before the introduction of the tax entry, indicating that the tax liability is not for continuous usage but for the event of transfer or permission. Citing previous tribunal decisions in similar cases, the tribunal clarified the interpretation of Intellectual Property Service and its applicability to the present case.

Issue 3: Continuous transfer of rights leading to tax liability
The tribunal analyzed the continuous receipt of consideration by the appellant for permitting the use of the brand name, arguing that continuous usage does not necessarily imply continuous rendering of taxable service on the part of the appellant. The tribunal referred to specific cases where it was held that the rendering of service is determined by the date of transfer or permission to use the technology, which occurred before the introduction of tax liability on such service. The tribunal concluded that the Original Authority erred in confirming the demand and set aside the impugned order, allowing the appeal.

In conclusion, the tribunal ruled in favor of the appellant, highlighting the distinction between the transfer of Intellectual Property Right and continuous usage, ultimately setting aside the tax liability imposed on the appellant for transferring the trade mark rights.