TMI Blog2012 (6) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... to the effect 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. Definition of sale in section 2 (h) of Central Excise Act - held that:- This provisions can not 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. Definition of sale in section 4 of Sale of Goods Act, 1930 - held that:- The goods namely the Trade Mark "Eicher" continues to be the property of the transferor or more appropriately the licensor which is the word used in the concerned agreement. Secondly an agreement to sell become a sale only when all the conditions of the agreement are complied with. In this case there are conditions to be complied with by the Appellants in perpetuity and at no point of time the conditions be considered to be fully complied with. There is no sale involved a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans, - (a) transferring, temporarily; or (b) permitting the use or enjoyment of, any intellectual property right; (105) "taxable service" means any service provided or to be provided, - (zzr) to any person, by the holder of intellectual property right, in relation to intellectual property service; 5. The crux of the argument of the Appellant is that only a temporary transfer of the right in an intellectual property will be covered by the definition at 65(55b). A permanent transfer is actually sale and cannot be considered as service. They contest they have transferred the trade mark "EICHER" in relation to tractors in perpetuity and the transfer cannot be considered as temporary transfer and hence they are not liable to pay service tax on such transfer. But what is conspicuous by absence is that the concerned agreement does not use the word sale and there is no submission that they have paid any sales tax on the transaction. 6. The Revenue on the 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a price. There may be a contract of sale between one part-owner and another. (2) A contract of sale may be absolute or conditional (3) Where under a contract of sale the property in the goods in transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. (4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred. 9.5 Section 2(h) of the Central Excise Act 1944 reads as under: (h) "sale" and "purchase", with their grammatical variations and cognate expressions, mean any transfer of the possession of goods by one person to another in the ordinary course of trade or business for cash or deferred payment or 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistered trademarks. Notwithstanding anything in any other law to the contrary, a registered trade mark shall, subject to the provisions of this Chapter, be assignable and transmissible, whether with or without the goodwill of the business concerned and in respect either of all the goods or services in respect of which the trade mark is registered or of some only of those goods or services. So it is argued that the concept of assigning rights in a trade mark only in respect of some goods and not for others is legally recognized. 13. The Ld SDR on the other hand points out the following facts based on the agreement executed between the two parties. He points out facts as recorded in para 26.2 of the impugned order as under: * "The licensee is not entitled to use the mark as a corporate name or as the name of any other entity and the licensee shall have no right or interest thereon (para 3.1.1); * The licensee also cannot grant to 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 licen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the trademark will be covered by this clause. Since the trademark is not transferred in its entirety what is given is only a permission to use and hence will be covered by this part of the definition even if the permission is on permanent basis. 16. We have considered arguments on both sides. When the contract is read as a whole it is indeed a contract for transfer of the right to use the Trademark for limited purposes but on a permanent basis. The fact that certain post transfer conditions are attached to transfer of the right does not change the nature of the contract. A person selling a particular product to a dealer may impose post sale conditions like he should not re-sell the goods in loose forms, the dealer should sell the product only from a premises displaying the name of the manufacturer, the dealer should not re-sell the goods in other than specified territories or that he should not resell the goods or to the effect 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to use the trademark for one product in India, and the licensor have agreed not to use the corresponding rights during the time when the agreement persists; (ii) The use is a supervised by the licensor so that no harm is caused to the good will of the property which continues to belong to the licensor; (iii) If the transfer of right to use is in perpetuity so are the conditions in the agreement. So it never reaches as stage contemplated in section 4(3) of the Sale of Goods Act; (iv) If the licensee violates the terms of the agreement the rights are to revert back to the licensor; (v) The agreement is not worded as an agreement for sale; (vi) There is no contention that the appellants have paid any sales tax on the transaction. 22. Therefore we come to the conclusion that there is no sale involved and the appellants are not entitled to the benefits under Notification 12/2003 is a valid argument. 23. In the circumstances we uphold the demand for tax and interest as confirmed in the impugned order. 24. However in the matter of penalties imposed we are of the dispute is a matter of interpretation of complicated legal issues and it is unfair to allege in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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