9911796707
TMI Blog2012 (4) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... to use the Trade Mark for tractors is Intellectual Property Right Services as defined in section 66(55a) and 66(55b) of Finance Act ,1994 and hence the appellants should have paid service tax on the consideration receive. A Show Cause Notice dated 20-03-2006 issued demanding service tax amount of Rs. 3,66,53,358 from them along with interest and also proposed penalty under section 76 of the Finance Act, 1994. The SCN was adjudicated vide the impugned order to confirm the tax demand with interest. Further penalty under section 76 at the rate of Rs. 100 per day till the default is made good, not exceeding Rs. 3,66,53,358/- was imposed on the Appellants. The appellants paid Rs. 3,66,53,358 under protest on 05-12-2005. Aggrieved by the order Appellants have filed this appeal challenging both the demand confirmed and the penalties imposed. 4. Section 65(55a) and 65(55b), 65(105) of Finance Act, 1994, relevant in the context are reproduced below : (55a) "intellectual property right" means any right to intangible property, namely, trademarks, designs, patents or any other similar intangible property, under any law for the time being in force, but does not include copyright; (55b) "int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 65(121) of Finance Act, 1994. Then the argument is that sale of goods is not a service. If at all there is a service involved they are eligible for the benefit of exemption under Notification 12/2003-ST, dated 20-06-2003. Since the entire value sought to be charged for service tax levy represents sale value, they would be eligible for exemption under Notification 12/2003-ST for the full amount received as consideration and no demand can survive. 9.1 Now the definitions relied upon for the above argument are reproduced below. 9.2 Section 2(7) of Sale of Goods Act, 1930 defines "goods" as under: (7) "goods" means every kind of movable property other than actionable claims and money; and includes electricity, water, gas, stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale; 9.3 The General Clauses Act, 1897 defines movable property as under: "Movable property" shall mean property of every description, except immovable property. 9.4 Sale of Goods Act, 1930 defines "sale" as under: 4. Sale and agreement to sell.- (1) A contract of sale of goods is a contract whereb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made; 10. The Counsel submits that as per this definition in the Constitution transfer of right to use, whether or not for a specified period, constitutes sale. In their case the transfer is in perpetuity and there cannot be a doubt that it constituted sale. 11. The Counsel also relies on the decision of the Apex Court in the case of Vikas Sales Corporation v. Commissioner of Commercial Taxes AIR 1996 SC 2082 in which it was decided that transfer of import license to another person did constitute sale of goods. It is argued that the rights accruing from trademark is identical to rights accruing under an import license. Para 21 of the order it comes out clearly that trademark also is a movable property. 12. Section 38 of the Trademarks Act, 1999 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e approval of licensor (para 3.1.5.3); ♦ If the licensee makes any attempt to challenge the licensor's ownership of the mark, the agreement can be terminated (para 8.2.5); ♦ If the licensee uses the mark on goods other than the tractors without permission from the licensor, the agreement can be terminated (para 8.2.4); ♦ If the agreement is terminated, then licensee cannot claim any repayment of the lump sum consideration or portion thereof, paid by licensee to licensor for acquisition of the licensing rights; ♦ Once the licensee is revoked, the licensee loses all rights over the mark and is no longer permitted to manufacture or market the tractors using the mark." 14. He further submits that the contract should be read as a whole and its nature should not be determined by the words "perpetual" or "exclusive" used in the title or some clauses of the contract. The appellants continues to be owner of the trademark "EICHER" and they have only permitted TMTL to use the Trademark in relation to tractors and is squarely covered by the definition of "intellectual property service". 15. He further submits tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansferor 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. 19. The provisions of section 38 of the Trademarks Act, 1999 talks of assignability and transmissibility of the right to use in whole or in parts. This cannot ipso facto mean that there can be sale of such rights in parts. 20. The agreement needs closer scrutiny with reference to deemed definition of "sale" in article 366 (29A)(d) of the Constitution of India. What we find is that 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 right to use is assigned subject to certain conditions. On violation of the conditions the right reverts to the licensor. The terms of the contract is not that in such an event the right abates from both the parties. 21. Thus we are of the v ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
