9911796707
TMI Blog2011 (3) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... various benefits granted to the latter under various agreements. The particulars of the agreements entered into between the appellant and Cadila are as follows:- Sl.No. Name of Agreement Date of Agreement Nature of Agreement 1. Deed of Assignment of trade marks 18.9.2001 Transfer of the brand name ATEN to Cadila Healthcare Ltd. on a permanent basis. The consideration was Rs.70 crores. 2. Agreement for transfer of know-how for bulk drug 18.9.2001 Transfer of know-how for manufacture of the bulk drug ATENOLOL. The consideration was Rs.20 crores. 3. Agreement for transfer of know-how for formulation 18.9.2001 Transfer of technical know-how to make tablets (formulations). The consideration was Rs.5 crores. 4. Formulation supply agreement 18.9.2001 For manufacture and sale of formulations to M/s. Cadila Healthcare Ltd. 5. Marketing assistance agreement 18.9.2001 For assistance in marketing products of brand name ATEN. The consideration was Rs.5 crores. 6. Supplementary agreement of marketing assistance 26.11.2001 Modification in the marketing assistance agreement dated 18.9.2001. Certain trade marks (ATENOLOL, ATEN etc.) were p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of limitation under Section 73(1) of the Finance Act, 1994 on the ground that the appellant suppressed material facts. 3.1. On a perusal of the records and on hearing both sides, we find that, with regard to a major part of the demand of service tax, the question to be considered is whether the appellant can be said to have provided scientific or technical consultancy service to Cadila under the first three agreements dated 18.9.2001. The learned counsel for the appellant analyzed the definition of scientific or technical consultancy [Section 65(92) of the Finance Act, 1994] and submitted that the Revenue should establish the following three ingredients in the transactions between the appellant and Cadila so as to hold the former liable to pay service tax under the above head in terms of Section 65(105)(za) read with Section 65(92) of the Act:- (i) Advice, consultancy or scientific or technical assistance should be rendered in any manner; (ii) It should be rendered by a scientist or a technocrat or any science or technology institution or organization to a client; (iii) It should be rendered in one or more disciplines of science or technology. &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight given under Section 65(55a). He argued that the subject transactions were, therefore, not liable to be classified under any other pre-existing entry under Section 65. In this connection, the learned counsel relied on the Hon ble High Court s judgment in Indian National Ship Owners Association vs. UOI 2009 (14) STR 289 (Bom.) (particularly para 38 of the judgment). The counsel also relied on the Tribunal s decision in the cases of BPL Telecom Pvt. Ltd. vs. CCE, Cochin 2007 (6) STR 374 (Tri.-Bang.), Amco Batteries Ltd. vs. CCE, Bangalore 2006 (2) STR 346 (Tri.-Bang.), Bajaj Auto Ltd. vs. CCE, Aurangabad 2005 (179) ELT 481 (Tri.-Mumbai), Ispat Industries Ltd. vs. CCE, Raigad 2007 (8) STR 282 (Tri.-Mumbai), Navinon Ltd. vs. CCE, Mumbai 2004 (172) ELT 400 (Tri.-Mumbai) etc. 3.2. Ld. counsel also claimed support from Matrix Laboratories Ltd. vs. CCE, Hyderabad 2008 (9) STR 15 (Tri.-Bang.) wherein it was held by the Tribunal (after examining the terms of the relevant agreement) that scientific or technical consultancy was not involved in the sale of technical know-how for a consideration. 3.3. It was also submitted that the adjudicating authority ought to have treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een the appellant and Cadila. He pointed out that, under one agreement, the appellant transferred to Cadila certain trade marks to be affixed on the medicaments to be manufactured by the latter. Under another agreement, the technical know-how required for the manufacture of bulk drugs was transferred and, under the third agreement, the know-how for the manufacture of the end products (medicaments) was transferred. Without this transfer of technical know-how, it was practically not possible for the said company to enjoy the benefit of the trade marks. In this scenario, according to the JCDR, the transactions between the appellant and the said company should be treated as a package deal resembling the transactions considered by the apex court in the case of Andhra Petrochemicals vs. CC. Madras 1997 (90) ELT 275 (SC). According to the JCDR, the first four agreements dated 18.9.2001 purported to enable Cadila to manufacture branded formulations (medicaments) under the advice and technical assistance of the appellant and, therefore, the appellant should be held to have provided scientific or technical consultancy service to Cadila. Had Cadila wanted to manufacture ATEN formulations on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any definite view on the question of law raised before it. The JCDR also placed on record a copy of the apex court s order dated 1.12.2010. On this basis, he submitted that the High Court s judgment could not be relied upon. 4.2. Referring to the counsel s plea of cum-tax value, the learned JCDR contended that this benefit was not liable to be granted to the appellant as Explanation 2 added to Section 67 of the Finance Act, 1994 with effect from 10.9.2004 could not be applied retrospectively. In this connection, reliance was placed on RPG Enterprises Ltd. vs. CCE, Mumbai-IV 2008 (11) STR 488 (Tri.-Mumbai). 4.3. The learned JCDR pointed out that the definition of intellectual property right service under clause (55b) of Section 65 of the Finance Act, 1994 as it stood on 10.9.2004 covered only temporary transfer of intellectual property right and hence would not apply to the facts of the present case inasmuch as the transfer of trade marks and technical know-how effected under the relevant agreements was perpetual and not temporary. It was only with effect from 16.6.2005 that the word temporarily used in the above definition was replaced by the phrase whether permanen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us: Such consultation may be in the nature of an expert opinion/advice in regard to scientific or technical feasibility or any other scientific or technical aspect of a project, process or design, recommending an apt technology, suggestion for improvement in existing technology or process, providing consultation on any technical problem or about new technology etc. We have got to examine the facts of this case in this backdrop. The terms of the relevant agreements indicate that these agreements were intended primarily to cover the following transactions, viz., transfer of brand names/trademarks to Cadila against payment of Rs.70 crores, transfer of know-how for manufacture of bulk drug against payment of Rs.20 crores and transfer of technical know-how to make tablets (formulations) against payment of Rs.5 crores. None of these transactions can be conceptually reduced to mere advice, consultancy or scientific/technical assistance. On the other hand, they involve permanent transfer of intellectual property in one form or another and are presently covered by intellectual property service . The ld. JCDR s essential character test is not applicable as the service is classifiable only un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the ambit of the definition of intellectual property right under Section 65(55a) of the said Act, which reads as under:- (55a) intellectual property right means 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 copyright. In fact, nobody has argued that the right transferred by the appellant to Cadila under each of the said agreements is not a right to intangible property coming within the above definition, though it was argued by the learned JCDR that permanent transfer of intellectual property right would not be covered by the definition of intellectual property service under Section 65(55b) of the Act. This argument was made with reference to the definition of intellectual property service as it stood prior to 16.6.2005. This definition reads as follows:- (55b) intellectual property service means, - (a) transferring [temporarily]; or (b) permitting the use or enjoyment of, any intellectual property right. The clause whether permanently or otherwise was substituted for the word temporarily by the Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stands in our way of following the aforesaid view taken by the Hon ble High Court. The appellant can also legitimately claim support from decisions of this Tribunal in the cases of BPL Telecom Pvt. Ltd. [wherein it was held that the providing of technical assistance under technical know-how agreement was neither consulting engineer s service nor scientific or technical consultancy ], Amco Batteries Ltd. [wherein it was held that no consultancy or advice was involved in the transfer of the right to use trademark], Bajaj Auto Ltd. [which was followed in Amco Batteries], Ispat Industries Ltd. [wherein it was held that service tax was not payable under the head consulting engineer s service in respect of transfer of technical know-how], Navinon Ltd. [wherein it was held that payment of royalty for the use of technology was not any payment for taxable service viz. consulting engineer s service] etc. (vide supra). 7. The rights permanently transferred by the appellant to Cadila under the first three agreements dated 18.9.2001 were only intellectual property rights. Intellectual property service was not a taxable service during the period of dispute. Moreover, the service provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se also, the learned counsel submitted that the amount collected by the appellant from Cadila should be treated as inclusive of tax. The learned JCDR opposed. Both sides reiterated their respective earlier submissions made in a similar context. 9.3. Again, the issue of time-bar was also agitated before us. 10. We have considered the submissions. The following services were rendered by the appellant to Cadila under the Marketing Assistance Agreement dated 18.9.2001 as amended by the Supplementary Agreement dated 26.11.2001:- a) Product Promotion Services; b) Market Development (Product Growth Achievement) Services. Product Promotion Service was explained in para 5.1.1 of the supplementary agreement, as follows:- 5.1.1 KOPRAN shall provide to CADILA, Product Promotion Service, i.e. promotion and detailing in the market of Product ATEN by deputing KOPRAN s field staff for such period as KOPRAN and CADILA may agree, launch customer education programmes, provide information to customers, providing operational field assistance in marketing, developing prospective customers, etc. and it is agreed that for providing such services KOPRAN shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t research, creative development research, brand name, logo, pack label research, corporate image, diagnostic market research, customer research etc. Thus, it is apparent that the market research services are of a very diverse nature and of a very wide variety. The services mentioned in para (5.1.1) and para (5.2) of the aforesaid agreement can appropriately be classified as market research agency s services . Hence the services provided by the appellant to Cadila under the agreement would fall within the scope of market research agency s service defined under Section 65(105(y) read with Section 65(69) of the Finance Act, 1994. Therefore, the appellant has liability to pay service tax under this head on the amount collected by them from Cadila under the said agreement. 11. We have also considered the claim of the appellant under Section 67 of the Finance Act, 1994. This Tribunal, in the case of Advantage Media Consultant (supra), held that the total amount received by the service provider for the provision of service could be treated as inclusive of service tax due to be paid by the ultimate customer unless the service tax was also paid by the customer separately. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or is it their case that they submitted copies of balance sheets (which contained the relevant information) on their own to the department from time to time. The Revenue s allegation that the appellant suppressed the relevant facts with intent to evade tax has not been successfully rebutted. However, as against the demand of service tax on Rs.38.99 lakhs, their defence based on show-cause notice dated 16.4.2003 has to be considered in de novo proceedings. 14. The impugned order contains no findings in support of the penalties imposed on the appellant. 15. In the result, the appellant is not liable to pay service tax under the head scientific or technical consultancy on any amount collected from Cadila under the relevant agreements, and not liable to be penalized on account of these transactions. The Commissioner s decision to the contra is set aside. But the appellant is liable to pay service tax under the head market research agency s service on the taxable value of the services provided to Cadila under the Marketing Assistance Agreement. The adjudicating authority shall requantify this demand in terms of this order. The Commissioner shall also examine afresh the q ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
