2024 (12) TMI 840 - AT - Service Tax

Levy of service tax under IPR service - transfer of intangibles such as goodwill, right to use the term Kanan Devan as part of the name of purchaser when such transfers are made in the course of transfer of entire plantation business on a going concern basis under slump sale arrangement for a lumpsum consideration - assignment of value merely for stamp duty purposes - itemised sale or itemised provisioning of services or not - neither goodwill nor the term Kanan Devan were registered under the Indian laws - tenability of issuance of SCN in the year 2010 by invoking extended period of limitation. Tenability of issuance of SCN in the year 2010 by invoking extended period of limitation - HELD THAT - A perusal of the letters reveals that the business transfer from the Appellant to KDHP was duly informed by the Appellant to the Superintendent of Central Excise, Munnar vide letter dated 30.03.2005. Further, from the letter dated 08.09.2009 issued by the Superintendent of Central Excise, Cochin it is amply evident that the copy of the transfer deed was available with the Department inasmuch as the letter requesting payment of service tax on IPR service was issued relying upon para 8(d) of the Transfer Deed dated 30.03.2005. Hence, it is observed that when the fact of such business transfer along with copy of transfer deeds were easily accessible to the Department much earlier in the year 2005 itself, issuance of SCN on 22.04.2010 invoking extended period of limitation is untenable. The demand in this case covers the period from March 2005 and July 2005 and the SCN was issued on 22.04.2010. Thus, the entire demand confirmed in the impugned order is barred by limitation. Accordingly, the demands confirmed in the impugned order by invoking the extended period of limitation is not sustainable and hence the same is liable to be set aside. Since, the demand itself is not sustainable, the question of demand of interest and imposition of penalty does not arise. As the demands confirmed in the impugned order are not sustainable on the ground of limitation, it is not required to go into the merits of the issues raised by the appellant - the impugned order set aside - appeal allowed.

Issues Involved:

1. Whether the demand of service tax under Intellectual Property Right (IPR) service is sustainable on the transfer of intangibles such as goodwill and the right to use the term 'Kanan Devan' as part of the name of the purchaser during a slump sale.
2. Whether the assignment of value merely for stamp duty purposes would tantamount to itemized sale or itemized provisioning of services.
3. Whether the demand under IPR service is sustainable when neither goodwill nor the term 'Kanan Devan' were registered under Indian laws.
4. Whether the issuance of the Show Cause Notice (SCN) in 2010 by invoking an extended period of limitation is tenable when the Department was aware of the facts much earlier in 2005.

Issue-wise Detailed Analysis:

1. Demand of Service Tax under IPR Service:
The appellant argued that the transfer of goodwill and the right to use the term 'Kanan Devan' was part of a slump sale of the entire plantation business, which is not subject to service tax. The appellant contended that the lump sum consideration was apportioned merely for stamp duty purposes and did not change the nature of the transaction, which was a transfer on a going concern basis. The appellant cited several judgments to support the claim that such transfers do not constitute a sale of goods or provision of services, and hence should not be subject to service tax under IPR service.

2. Assignment of Value for Stamp Duty:
The appellant submitted that the apportionment of lump sum consideration for stamp duty purposes does not amount to an itemized sale or provision of services. The appellant referred to Section 2(42C) of the Income Tax Act, 1961, which clarifies that determining the value of assets for stamp duty purposes does not equate to assigning values to individual assets or liabilities in a slump sale.

3. Registration under Indian Laws:
The appellant argued that neither goodwill nor the term 'Kanan Devan' was registered as a brand name or trade name under Indian laws. The appellant further noted that the Corporate Name License Agreement restricted the use of 'Kanan Devan' as a trademark or brand name, reinforcing that the transaction did not amount to an IPR service. The appellant cited judgments asserting that goodwill is not recognized as an intellectual property right in India and, therefore, should not be subject to service tax under IPR service.

4. Extended Period of Limitation:
The appellant contended that the demand is time-barred because the Department was informed of the business transfer in 2005. The appellant provided evidence that the transfer deed and related documents were accessible to the Department well before the SCN was issued in 2010. The appellant cited legal precedents to argue that the extended period of limitation is not applicable in cases where the Department was aware of the facts, and the issue is interpretational in nature.

Conclusion:

The tribunal concluded that the entire demand was barred by limitation as the Department was aware of the transaction details much earlier than the issuance of the SCN. The tribunal set aside the demands confirmed in the impugned order on the ground of limitation and allowed the appeal filed by the appellant. Consequently, the tribunal did not address the merits of the issues raised by the appellant, as the demand itself was found to be unsustainable.

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