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TMI Blog2013 (8) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... this agreement M/s. Purolite agreed to irrevocably transfer to Thermax all claims, rights and interests necessary to use Purolite Technology and Information and Thermax shall jointly co-own with Purolite the Purolite Technology and Information in perpetuity and not subject to any geographical restrictions or customer restrictions. Upon the technology transfer, Thermax became co-owner in the Purolite Techology and Information and was entitled to use, assign, sell, license, transfer or convey their respective interests in the Purolite technology and information. For these rights, Thermax Termax agreed to pay Purolite a sum of Us $ 3.8 Crore. The department was of the view that the transfer of technology from Purolite USA to Thermax Ltd. India amounts to receipt of service by Thermax and the service so received merited classification under "intellectual property rights service" as defined in Section 65(55a) and 65 (55b) read with Section 65(105) (zzr) of the Finance Act, 1994. Accordingly, a show-cause notice dated 28/09/2011 was issued to the appellant proposing to classify the service received under "intellectual property right service" and demanding service tax amounting to Rs.18, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to overcome the adverse legal decision, Thermax entered into an agreement with Purolite USA by way of an out of Court settlement as per which Thermax was required to pay a compensation of US $ 3.8 Crore to Purolite and on payment of compensation, Thermax became a co-owner of the Purolite Technology. Thereafter the appellant applied to the RBI seeking permission to remit the foreign exchange to Purolite, USA, and vide permission dated 16/02/2010, RBI granted permission to Thermax Ltd. for remittance of US $ 3.8 crore for final settlement in respect of the aforesaid case. As per the agreement, Thermax became the co-owner of the Purolite technology and being a co-owner was entitled to all the rights relating to said IPR including its use, assign, sell, transfer, license, etc. Thus it is not a case of temporary transfer of an IPR or permitting the use of enjoyment of any intellectual property right as defined in Section 65 (55b) and therefore, the transaction does not come within the category of intellectual property right service as defined in the Finance Act, 1994. The appellant also submits that what they have paid to Purolite USA is a compensation in an out of Court settlement an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : "Co-owner" means one of two or more persons who own property (moveable or immovable) 3.4.2. He also refers to Mulla's The Transfer of Property Act, 1882, 9 th Edition published by Butterworths India, which reads as follows: " Co-ownership is a relationship which springs from consensus and contract. Legislation has only imprinted, on the concept of co-ownership, certain rights which have a supervening effect which are declaratory of the rights inter se as between co-owners. The legal relationship (in co-ownership) is always knitted in a frame work of jointness and no one interested therein can predicate, with certainty, as to what portion of the property held in common is his, and an element of inseparability is inherent in the doctrine of co-ownership." In other words, it is the contention of the ld. Counsel that the appellant is a co-owner of the trade secrets and is not a recipient of any IPR services. 4. The Ld. Commissioner (AR) appearing for the Revenue on the other hand submits that the agreement between the appellant and Purolite related to certain processes relating to production of plastic resins. Under the Indian law, patents can be made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related to expired patents and therefore, use of these processes did not involve Purolite's trade secrets. This contention of Thermax was rejected by the Court held that the formula pertaining to the processes were trade secrets or confidential information. If that be so, the department cannot take a different stand about the nature of the right involved in the transaction. It is well settled that there is no law relating to the trade secrets or confidential information in India. Therefore, the trade secrets obtained by Thermax from Purolite, USA is not an intellectual property right as defined in Section 65 (55a). 5.3 Secondly, we notice that as per the agreement between the appellant and Purolite, USA clause 9, provides for the following:- " Upon the effective date, Purolite shall irrevocably transfer to Thermax all claims, rights and interests necessary to use Purolite Technology and Information (whether by this Settlement Agreemet or any other instrument of transfer reasonably requested by Thermax), and Thermax shall jointly co-own with Purolite the Purolite Technology and Information in perpetuity and not subject to any geographic restrictions or customer restri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Development Cess Act, 1986, the cess amount so paid would be deductible from the total service tax payable". 5.5 From the above circular, it becomes very clear that to come under the category of IPR, there should be a law in India, governing such IPR and only IPR covered under the Indian law in force are chargeable to service tax. It is well known that there is no law governing trade secrets/confidential information in India and therefore, the rights obtained by the appellant does not constitute intellectual property right as defined in law. Secondly, it is also very clear from the said Circular that a permanent transfer of intellectual property right does not amount to rendering of service. In the present case, the appellant has become a co-owner of the intellectual property which would mean that the transfer is permanent. Therefore, the transaction does not come under the purview of Section 65 (55b) of the Finance Act, 1994. 5.6 Neither in the show-cause notice nor in the impugned order, is there any mention of the type of Intellectual Property acquired by the appellant. This Tribunal in the case of Royal Western India Turf Club Ltd. vide Order No. A/498-500/12/CSTB/C-I dat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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