HALL MARK – AN INTELLECTUAL PROPERTY RIGHT?

[Mr. M. GOVINDARAJAN]

                        Bureau of Indian Standards is a statutory body created under BIS Act.  It is functioning under the Ministry of Food, Consumer Affairs and Public Administration.  The same has been set up to promote quality in various products.  Tests are being carried out and certified the goods with ISI mark.  Likewise the said body is operating hallmark scheme under the Act.  The word ‘Hallmark’  is very accustomed to every body since the ornamental sector is giving widespread advertisement in this regard.  The Hallmark scheme is to ensure purity of gold sold in India.   As per this scheme, any jewelly retailer or manufacturer desirous of obtaining a licence is to apply toi BIS for use of hall mark on their jewellery.   A licence is granted to the jeweller on his application if he fulfils all conditions for that purpose.  After getting licence the jeweller has to follow the BIS approved scheme of testing and inspection on a continuous basis.  The jeweller who obtained certificate is having the right to register himself with any of the BIS recognised Assaying and Hallmarking Centres to get his jeweller hallmarked on payment of hallmarking charges along with service tax to the Assaying and Hallmarking Centre.

                        The Hallmarking Centre remits the service tax collected to the Department.  The Centre remits 10% of the amount received from the jeweller to the  BIS.  The Department is of the that Hall mark is an intellectual property right.  It stressed BIS to pay service tax under Intellectual Property Service in respect of the amount received from the Hallmarking and Assaying Centres.  The Department issued show cause notice.  The Adjudicating Authority confirmed the demand of service tax along with interest and equal amount of penalty.  

                        Being aggrieved against the order of the Adjudicating Authority the BIS filed an appeal before CESTAT, Chennai Bench.  It also filed an application for waiver of pre deposit of service tax confirmed together with interest and equal amount of penalty.   The Tribunal heard both parties on the application for waiver of pre deposit.

                        After hearing both parties the Tribunal analyzed the provisions of Finance Act, 1994 in relation to Intellectual Property Right and Intellectual Property Service and also the provisions of Trade Marks Act, 1999. 

                        Sec. 65(55a) of the Finance Act, 1994 defines ‘Intellectual Property Right’ as any right to intangible property, namely, trade marks, designs, patents or any other similar intangible property under any law for the time being in force,but does not include copy right.

                        The terms ‘Intellectual Property Service’ is defined under Section 65(55b) as transferring temporarily or permitting the use or enjoyment of any intellectual property right.  Sec. 65 (105) (zzr) defines taxable service as any service provided or to be provided to any person by the holder of intellectual property right, in relation to intellectual property services.

                        The Tribunal held that prima facie the hallmark is not a brand and also it is not a trade name or intellectual property of the applicant.   It is a universally recognized quality mark to certify purity of jewellery articles.  Prima facie hall mark is only a symbol indicating the purity of gold or silver jewellery which has been implemented by the Government of India, in public interest.  The applicant is only the authorized statutory body to administer the Hallmarking scheme in this country.    The applicant is not transferring or permitting the use of hallmark for any consideration unlike the case of allowing others to use one’s brand name or trade name.   The Tribunal further noted that as per Section 9 of the Trade Marks Act, 1999, marks which consist exclusively of marks or indications which may serve in trade to designate the kind, quality, quantity ….. of goods or rendering of the service or other characteristics of the goods or service cannot be registered.  The Tribunal also noted that the unauthorized use of hallmark is punishable under the Act which is not a law relating to any intellectual property but an act to provide for the establishment of a Bureau for the harmonious development of the activities of standardization, marking and quality certification of goods.

                        The Tribunal held that the applicant has made out a strong prima facie case for unconditional waiver on merits and hence dispense with pre deposit of the amounts in dispute and stay recovery thereof pending the appeal.  Thus it is clear that hallmark is not a intellectual property right.