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TMI Blog2012 (4) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... t on a permanent basis - the impugned contract, in its pith and substance is not a "transfer of right to use" and is more in the nature of permission to use the trademark which continues to be the property of the licensor - The Appeal is thus allowed partially by setting aside the penalty imposed. However the demand for tax and interest are confirmed. - St/674 of 2007 - st/a/23/12-cus - Dated:- 11-1-2012 - Mrs. Archana Wadhwa, Mathew John, JJ. ORDER Mathew John, Technical Member There is a Miscellaneous application ST/Misc/595/2011 filed by the appellants to adduce additional grounds of pleading. We note that these grounds are legal pleadings like relying on the definition of sale in Central Excise Act and to raise a claim for exemption under Notification 12/2003-ST which was not claimed in adjudication proceedings. Since these are essentially legal pleading the Miscellaneous Petition is allowed. 2. The Appellants owned the trade Mark "EICHER" registered in India in respect of Tractors. They entered into an agreement dated 27-05-2005 for permitting M/s Tafe Motors and Tractors Limited (TMTL) and received Rs. 39.60 crores in consideration of such transfer. They ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other hand argues that the trademark "EICHER" is used for a whole range of products manufactured in different places in the world and the appellants are still using the trade mark for other products and in other countries and they have a stake in the reputation of the trade mark and the transfer is not in perpetuity at all. They rely on certain clauses in the contract to argue that the transfer is a conditional transfer and not sale of the whole rights in the trademark. They also argue that if at all the transaction is not covered in clause ( a ) of section 65(55b), the transaction is covered by clause ( b ) of section 65(55b) which is "permitting the use or enjoyment of any intellectual property right". 7. Now it may be proper to examine the arguments on either side a little more closely. 8. The first argument of the Counsel for the appellants is that Trade Mark is goods within the meaning of the word as defined in Sale of Goods Act. The definition of " goods" in Sale of Goods Act is adopted for the purpose of Finance Act, 1994 vide section 65(50) of Finance Act, 1994. His next argument is that the transfer that has been effected is a sale within the definition of "sale' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r other valuable consideration; 9.6 Section 65(121) of Finance Act, 1994 reads as under: (121) words and expressions used but not defined in this Chapter and defined in the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder, shall apply, so far as may be, in relation to service tax as they apply in relation to a duty of excise. 9.7 Clause (29A) of Article 366 of the Constitution defines "Tax on sale or purchase of goods" as under: (29A) "tax on the sale or purchase of goods" inciudes- ( a ) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; ( b ) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; ( c ) a tax on the delivery of goods on hire-purchase or any system of payment by instalments; ( d ) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; ( e ) a tax on the supply of goods by any unincorporated association or body of persons to a member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o any third party the right to use of the mark granted to them by the licensor (para 3.1.8.1); All use of the mark and goodwill accruing through use of the mark is deemed to accrue to the benefit of Licensor (para 3.1.8.2); The licensee cannot claim any proprietorship in the mark (para 3.1.8.3); Despite the grant of perpetual license to the licensee, the licensor remains the sole owner of all the right, title arid interest in and to the mark (para 3.1.8.4); In an unlikely event of a third party alleging that the use of the mark by licensee infringes any intellectual property rights of such third party, it is the licensor, who is to defend against such allegations (para 6.1); To protect its interst to the mark, the assesse-licensor has made it mandatory on the part of licensee that the tractors are to be manufactured and marketed by licensee in accordance with minimum quality standards maintained prior to the sale of the divisions (para 3.1.5.1); The licensee shall have to have regard to all norms laid down by licensor for use of the mark, as detailed in licensor's brand manual (para 3.1.5.3); The licensee even cannot change the manne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect that the goods sold should be used only for a specified purpose only does not alter the nature of the transaction as a sale. So the transaction would not be covered by clause ( a ) of section 65(55b). But we do not see any reason why the transaction would not be covered by clause ( b ) section 65(55b). So the transaction amounts to Intellectual Property Service. 17. As per the definition of sale in section 2( h ) of Central Excise Act there has to be transfer of possession. This definition would apply only to tangible goods and will not apply in the case of intangible goods like trademark. Provisions of section 65(121) is only to the effect the definitions in Central Excise Act "shall apply, so far as may be". This provisions cannot be interpreted to mean that provisions that are relevant for tangible goods will apply for intangible goods when the subject involved requires a distinction to be made. 18. The definition of sale in section 4 of Sale of Goods Act, 1930 is also not of much help to the appellants. As per this provision, in the first place there should be a transfer in the property of the goods. The goods namely the Trade Mark "Eicher" continues to be the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X
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