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TMI Blog2017 (5) TMI 467X X X X Extracts X X X X X X X X Extracts X X X X ..... ical assistance agreements cannot be subjected to service tax under the category of IPR service - appeal allowed - decided in favor of appellant. - Service Tax Appeal No.51117 of 2014 - ST/A/53159/2017-CU[DB] - Dated:- 5-5-2017 - Shri S.K. Mohanty, Member (Judicial) And Shri B. Ravichandran, Member (Technical) Shri T.R. Rustogi, Advocate for the appellant Shri Amresh Jain, Authorized Representative (DR) for the respondent ORDER Per. B. Ravichandran The appeal is against order dated 29/11/2013 of Commissioner (Adjudication), Service Tax, New Delhi. The said order was passed on a denovo proceedings in terms of remand order dated 09/08/2012 of the Tribunal. The appellants are owners of brand names like Tulsi, Tulsi Mix, Rajni, Catch, Pass Pass, etc. and logo of D.S. Group. They had entered into agreements with M/s Dharampal Satyapal Ltd. (DSL) authorizing them (DSL) to manufacture and sell chewing tobacco under various brand names owned by the appellant. The appellants also entered into an agreement with DSL for granting an exclusive non-transferable and non-assignable right, to use licenced information to manufacture, sell, distribute and market thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be lost and it becomes available in public domain . [official website business.gov.in]. As such, trade secrets/undisclosed information do not fall within the definition of intellectual property right in terms of clause (55a) of Finance Act, 1994 for the simple reason that it is not a right under any law for the time being enforce ; (c) the reliance placed by the Commissioner on certain decided cases is without any relevance. In fact, in Indian Farmers Fertilizers Co-operation Ltd. vs. CCE, Bareilly (U.P.) reported in 2007 TIOL 37 CESTAT DEL = 2007 (5) S.T.R. 281 (Tri. Del.), the Tribunal categorically observed that trade secrets, are not protected by law in the same manner as trade mark or patents. The other decisions relied upon by the Original Authority are either interim order or did not examine the scope of definition of intellectual property right service (d) the Commissioner erred in not appreciating the fact that in order to fix service tax liability on the appellant, it is necessary first to establish that they have right to any patent under Patent Act. It is clear that the appellants do not have any patented rights in terms of Patent Act, 1970. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rused the technical assistance agreement dated 30/06/2007 between the appellant and DSL. It is mentioned in the said agreement that the appellant has a long years of experience in the formulae, development, processing and manufacturing of perfumery products, aromatic spices, herbal products etc. They have technical information and highly developed knowhow, secret techniques relating to the manufacture and composition of perfumes, spices, herbal products etc. In terms of said agreement appellants granted to DSL, right to use the technical information which included formulae processes, trade secrets etc. to facilitate manufacture of perfumes and spices. Article 3.3 of the agreement stipulated that DSL shall ensure that the licenced information shall be kept secret, closely guarded to safeguard against infringement by third party. Article 9 further stipulates that DSL shall not disclose any proprietary trade secret or information supplied to or acquired by it from the appellant. Article 6 provided for consideration as royalty to be paid by DSL. 6. We note that the Original Authority held registration of IPR under Patent Act, 1970 is only for the purpose of obtaining protection from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remains a trade secret and generally remains legally protected as such. However, where trade secret owner has not exercised reasonable effort at protecting the confidential information, there is risk of loosing the trade secret, even if competitor obtains the information illegally. Know-how in the nature of trade secret as an intellectual property would, therefore, be information including a formulae, pattern compilation, programme device, method, technique or process, that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by other person who can obtain economic value from its disclosure or use, and is the subject of efforts that are reasonable under the circumstances, to maintain its secrecy . 8. In Thermax Ltd. vs. CCE, Pune I reported in 2014 (36) S.T.R. 318 (Tri. Mumbai), the Tribunal referred to the Board circular issued at the time of introduction of IPR service for tax liability. The Tribunal observed as below :- 5.4 .. In this regard, the circular issued by the Board at the time of introduction of IPR service is relevant and the same is reproduced below : Intellectual pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows : Further where the demand for Service Tax has been made under the category of Intellectual Property Right Services , neither the show cause notices nor the orders relating thereto give a clear proposal or finding as to what is the intellectual property rights involved in the transactions, i.e., whether it is a patent, copy rights, trade mark or design or any other category of intellectual property rights. When Service Tax is confirmed under the taxable service category of Intellectual Property Right Services , the order confirming the demand should clearly classify the transaction under one or more of the Intellectual Property Rights which are covered under Intellectual Property Right Services law. The Board s Circular issued on 17-9-2004 in this regard makes it abundantly clear that the Intellectual Property Right Services covered under the Service Tax laws should be in respect of such services in respect of which laws have been made in India and such laws should cover the Intellectual Property Right Services involved and only in such a situation, demand for Service Tax can be raised whenever there is a transfer of Intellectual Property Rights by the hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covered by Indian law) would not be covered under taxable services of Intellectual Property Services . Revenue has not been able to prove in any manner that right to any of the intangible properties (by whatever name they call the same i.e. either documents or designs, instructions, catalogues, drawings, product software, testing specification, symbol numbering system, technical know-how, pictures and so on) is covered as IPR(s) under any of the relevant Indian law. In case of undisclosed information this C.B.E. C. circular itself says that an Indian law does not cover such undisclosed information. In other words, there is no evidence before us to categorically hold that any of the intangible properties, which are the subject matter(s) of the respective agreement(s), which have been transferred by foreign group companies to the appellant company have been registered or covered by any of the Indian law concerning intellectual property and which can be covered under the definition of Intellectual Property Right as given in Section 65(55a) of Finance Act, 1994. The appellants have mentioned in their submissions that by way of these agreements the technologies are being transferre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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