2020 (9) TMI 790 - AT - Service Tax

Classification of services - service classified in more than one category of taxable service - clients were granted the right to sell the goods using the trade mark 'LUX' owned by the appellant in return of the consideration mentioned in the said agreement - SCN was issued proposing demand of service tax under the category of Management Consultancy Services for the period 01.04.2002 to 09.09.2004 and under the category of Intellectual Property Services for the subsequent period 10.09.2004 to 15.02.2005. HELD THAT - The issue stands settled in favour of the appellant assessee by series of decisions rendered by the various coordinate Benches of this Tribunal wherein it has been held that the intellectual property service which is made the subject matter of service tax levy is transferred prior to the date of introduction of taxable entry under the head Intellectual Property Services w.e.f. 10.09.2004, no service tax is leviable - the service tax cannot be demanded from the appellant in the present case when the subject service was rendered prior to the introduction of taxable entry under the head Intellectual Property Service i.e. 10.9.2004. With regard to other issue as contended by the Ld. DR that the agreement was modified on 15.02.2005 retrospectively from 10.09.2004 to reduce the value of taxable service, we are of the view that the said aspect is not relevant when the tax itself is held to be not payable as the date of entering into the original agreement i.e. 01.04.2004 is not in dispute. The impugned demand of service tax, interest and penalty are set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of service tax under the category of "Intellectual Property Services" for the period prior to the introduction of the levy.

Analysis:
The appellant, M/s. Biswanath Hosiery Mills Ltd, filed an appeal against the demand of service tax under the category of "Intellectual Property Services" for the period from 10.09.2004 to 15.02.2005. The dispute arose from User Agreements dated 1st April, 2004, granting clients the right to sell goods under the trade mark 'LUX'. The Ld. Commissioner confirmed the demand under "Intellectual Property Services" but dropped it under "Management Consultancy Services," citing that the same service cannot be classified under multiple taxable categories. The appellant's advocate argued that since the agreement was made before the introduction of the tax levy on 10.09.2004, no service tax was payable. The advocate relied on various decisions to support this claim and also contested the demand on the grounds of limitation and penalty imposition.

The Revenue contended that the appellant altered the agreement on 15.02.2005 to deceive by reducing the taxable service value. However, the Tribunal noted that the issue was settled in favor of the appellant by previous decisions where it was held that if the intellectual property service was transferred before the introduction of the tax levy, no service tax was applicable. The Tribunal referenced cases like Denso Haryana Pvt Ltd and Reliance Industries Ltd to support this stance. It emphasized that the date of rendering the service, not the payment date, determines the tax liability. Therefore, the service tax demand, interest, and penalty were set aside, and the appeal was allowed.

In conclusion, the Tribunal ruled in favor of the appellant, holding that service tax could not be demanded for the period before the introduction of the levy under "Intellectual Property Services." The Tribunal emphasized that the date of rendering the service is crucial in determining tax liability, not the date of payment. The demand, interest, and penalty were overturned, providing the appellant with consequential relief as per the law.