2018 (4) TMI 1106 - AT - Service Tax

IPR Service - Hallmark - Held that - In terms of Section 65 (105) (22r) taxable service means any service provided to any person, by the holder of Intellectual Property Right, in relation to intellectual property service - In the present case, Hallmark is not at all any intellectual property governed by any law for such right. Section 9 of Trade Marks Act, 1999 lays down that certain marks cannot be registered as a trademark. The Hallmark only signifies that the products which are hallmarked are in conformity to the standards under the Hallmarking Scheme. The appellant are not providing any Intellectual Property Right service in terms of Finance Act, 1994 and there is no merit in the impugned orders - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant is liable to pay service tax under "IPR Service" for operating the Hall Marking Scheme.
2. Whether the Hallmark is considered an Intellectual Property Right.
3. Whether the lower authorities correctly applied the provisions of tax entry.

Analysis:
The appellant, a statutory body under the Ministry of Food, Consumer Affairs, and Public Distribution, is involved in promoting quality in goods by carrying out tests and certifying goods for specified standards, paying service tax under "Technical Testing and Inspection Services." The dispute arises from the operation of the Hall Marking Scheme under the BIS Act, where jewellers or manufacturers apply for a license to use the Standard Mark (Hallmark) on jewellery, following BIS-approved testing and inspection standards. The Revenue claimed that Hallmark is an Intellectual Property Right, leading to tax liabilities against the appellant.

The Tribunal analyzed the concept of Intellectual Property Right Service under Section 65(55b), involving the transfer or permitting the use of any Intellectual Property Right. The lower authorities contended that the appellant permitted the use of Hallmarking to assayers and hallmarkers, receiving 10% royalty charges. However, the Tribunal disagreed, stating that Hallmark does not constitute an Intellectual Property Right governed by law. The Trade Marks Act, 1999, prohibits certain marks from being registered as trademarks, and Hallmark signifies conformity to standards under the Hallmarking Scheme, not an Intellectual Property Right. The BIS Act focuses on consumer protection and quality assurance, not Intellectual Property Rights. The Tribunal concluded that the appellant does not possess any Intellectual Property Right related to the Hallmark.

Ultimately, the Tribunal ruled that the appellant is not providing any Intellectual Property Right service under the Finance Act, 1994. The impugned orders holding the appellant liable for service tax under IPR Service were set aside, and the appeals were allowed.