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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 ..... , 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 - To constitute a intellectual property it should be either a trade mark, design patent or any other similar intangible property under any law for the time being in force in India. As per the decision of the US District Court of Pennsylvania, the information obtained by Thermax in contravention of the US law was relating to Purolit's trade secrets and/or confidential information - 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). Thermax became a co-owner of the intellectual property right and was entitled to use, assign, sell, license, transfer or convey their interests in the in the said trade secret/information. In other words, it was not a temporary transfer of an intellectual property right or a permission to use or enjoy the intellectual property right. The transaction involved ownership of the intellectual property right and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mr/ST/19/2012 dated 25/04/2012 passed by Commissioner of Central Excise, Pune. 2. The appellant, M/s. Thermax Ltd. entered into an agreement, i.e., out of Court settlement with M/s. Purolite International Ltd., (Purolite in short) USA. Vide agreement dated 23/02/2010 it was resolved to settle amiably all disputes between the parties worldwide including, but not limited to, pending litigation in the United States District Court for the Eastern District of Pennsylvania and pending litigation between Brotech Corporation and Purolite International Ltd against Thermax Europe Ltd., Thermax Ltd. and Narvinder Sachdev in the High Court of Justice Chancery Division, Royal Courts of Justice, UK. As per 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he trade secret/confidential information procured by them from Purolite USA is not an intellectual property right under the Indian laws and therefore, the provisions of Section 65 (55a) do not apply. The appellant relies on the decision of the Unites States District Court for the Eastern District of Pennsylvania dated 14/01/2010 in the case of Brotech Corporation and Purolite Company (Plaintiff) in Civil Suit No.05-CV-2330. As per the decision of the said Court, the rights acquired by Thermax in contravention of law of the Purolite Technology was trade secret and/or confidential information. Accordingly, an injunction was passed against Thermax from utilizing the said technology in India. In order 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. 3.3 The Ld. Counsel also submits that Salmond on Jurisprudence, 12 th Edition, page 18 has explained, concept of co-ownership as follows:- "It is not correct to say that property owned by co-owners is divided between them, each of them owning a separate part. It is an undivided unity, which is vested at the same time in more than one person. 3.4 The Ld. Counsel also relies on the definition of co-ownership given in Black's Law Dictionary, which reads as follows: "Co-owner" means a person who is in concurrent ownership, possession, and enjoyment of property with one or more owners". 3.4.1 KY Aiyer's judicial Dictionary 13th Edition, defines the term as follows: "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 relations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f intellectual property right, in relation to intellectual property service; 5.2 From the above, to constitute a intellectual property it should be either a trade mark, design patent or any other similar intangible property under any law for the time being in force in India. As per the decision of the US District Court of Pennsylvania, the information obtained by Thermax in contravention of the US law was relating to Purolit's trade secrets and/or confidential information. In that case, the appellant herein, Thermax contested that the information 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 not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed information (not covered by Indian law) would not be covered under taxable services. A permanent transfer of intellectual property right does not amount to rendering of service. On such transfer, the person selling these rights no longer remains a ''holder of intellectual property right'' so as to come under the purview of taxable service. Thus, there would not be any service tax on permanent transfer of IPRs. In case a transfer or use of an IPR attracts cess under Section 3 of the Research 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 ren ..... X X X X Extracts X X X X X X X X Extracts X X X X
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