TMI Blog2019 (12) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... registration is issued in terms of Section 24 and only when such certificate of registration is issued under the Act, it shall confer an exclusive right in terms of Section 28 ibid. Mere filing of application would not lead an applicant anywhere and such applicant would not automatically become owner/holder of Right under the Act unless such right is conferred in terms of Section 28 after due process as prescribed under the said Act. Hence, one of the objections of the Revenue that mere filing is sufficient cannot survive. Any agreement between two parties inter se is civil in nature, which only binds the parties thereto to the terms or contents therein. Such agreements could also be financial in nature whereby consideration is being passed on, however, subject to certain acts/omissions/conditions or terms in such agreements. So, any failure on the part of one of the parties to such an agreement would only lead to a civil dispute, maybe for specific performance or enforcement or recovery, etc. - Such agreements, therefore, are binding only on the parties who bind themselves with the terms and conditions therein and no outsider would ever have or be influenced by any of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been filed in the Appeal Memorandum at Annexure-3. A close look at the above agreement reveals inter alia that the appellant supplies the commercial seed company with parent/foundation seeds developed by it through research and development; that the parent/foundation seeds comprise of a set of male seeds and a set of female seeds ; that the buyer, i.e. the commercial seed company, passes it on to its growers, who cultivate and grow those parent seeds into plants and such grown plants could be male or female plants with the female plants then being pollinated; that on account of pollination, new hybrid seeds are produced which are collected by the growers and given back to the commercial seed company, i.e. the buyer, who later on exploits such hybrid seeds by selling them in the open market; that for the parent seeds, the commercial seed company i.e. the buyer would pay the appellant a Royalty or breeding charges for supplying the parent seeds, which is a pre-determined percentage of the revenues earned by the buyer after selling the hybrid seeds in the open market, etc. 1.2 It is not disputed by any of the parties that the appellant entered into similar agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 Oct 2013 Corn BIO 22027 BIO 50265 H BIO 9544 02 Jun 2009 08 Jul 2009 29 Jun 2012 21 Oct 2011 Rice BIO 404 BIO 4311 BH BIO 428 H 11 Feb 2009 25 Mar 2009 25 Mar 2009 14 Oct 2013 14 Oct 2013 Millet BIO 448 H 05 Feb 2009 09 Jan 2014 Okra BIO 228 H 24 Jan 2011 Tomato BIOSEED 90 BIOSEED 56 SWADESHI 23 Sep 2013 29 Nov 2013 29 Nov 2013 Brinjal RAJANI (BPV-410 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken in its first Show Cause Notice, to which also the appellant filed its detailed reply. The Adjudicating Authority/Commissioner of Service Tax, Hyderabad, took up the same for adjudication and vide impugned Order dated 20.11.2014, confirmed the proposals contained in both the Show Cause Notices. The Adjudicating Authority, however, has inter alia observed that the appellant was the absolute owner and holder of the Intellectual Property Rights for the parent seeds by virtue of the Licence Agreements; that the registration was not required, but the recognition itself was sufficient; that the Intellectual Property Rights were in fact recognized by the PPV Act and the Rights only conferred an exclusive right and protection from infringement; and that the very filing of application for registration was itself sufficient to construe the appellant as the owner of such rights. 2.3 Aggrieved, the present appeal has been filed by the appellant. 3. When the matter was taken up for hearing, Shri. S. Ganesh, Ld. Senior Advocate, and Shri. G. Prahlad, Ld. Advocate, appeared for the assessee-appellant and Shri. N. BhanuKiran, Ld. Departmental Representative appeared for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rights Act, 2001 came to be adopted whereunder Section 28 mandated registration to confer right; Section 24 (6) of the PPV Act specifies the requirement of issuance of registration under Section 24 (2) of the same Act subject to payment of fees, etc., and not from the date of application; Section 23 ibid is just a starting point for making an application with the authority provided under that statute whereupon the prescribed authority gets such application examined, as prescribed under Section 23 (3) and thereafter, the authority may issue directions to the Registrar subject to the authority s satisfaction; Section 23 (7) further obligates the registration to conditions prescribed under Section 15; Registration certificate is issued on registration alone under Section 24 (2) provided an application fulfils the requirement of Section 24 (1); With regard to the condition that the Intellectual Property Rights should be recognized under any law for the time being in force, the appellant s right to the plant varieties under the PPV Act itself was not there, which is conferred only upon registration being granted by the competent authority. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (except copyright) that are prescribed under law for the time being in force. As the phrase law for the time being in force implies such laws as are applicable in India, IPRs covered under Indian law in force at present alone are chargeable to service tax and IPRs like integrated circuits or undisclosed information (not covered by Indian law) would not be covered under taxable services. to contend that trade secrets are never recognized as Intellectual Property Law in India and that the same are just undisclosed information as cited by the C.B.D.T. Circular (supra) as an example of Intellectual Property Right not covered by any Indian law. 4.4.1 Finally, Ld. Senior Advocate contended that a part of the demand is hopelessly barred by limitation, for which the extended period of limitation could not be invoked. He explained that the Show Cause Notice dated 19.10.2013 was issued for the period covering 01.04.2007 to 31.03.2012; that the appellant had filed its ST-3 return for the period ending March 2012 on 20.04.2012 and accordingly, the Show Cause Notice having been issued after more than 18 months, is clearly barred by limitation, beyond the normal period. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee entered into agreements wherein it projected itself as the holder of Intellectual Property Rights in respect of parent seeds which are covered under Section 65 (55a) ibid., being rights under the PPV Act. The assessee-appellant is supplying parent seeds under limited Royalty bearing licence which tantamounts to the provision of IPR Servicesby permitting the use or enjoyment of said IPR for consideration in the form of Royalty , which is taxable under Section 65 (105) (zzr); The activities of the appellant clearly meet the conditions prescribed under Section 65 (105) (zzr) for which our attention was invited to paragraph 9.4 at page 14 of the impugned order; The appellant has not disputed the fact that it was receiving Royalty, as shown in their Books, from its customers to whom parent seeds are supplied under licence agreement; In one of the agreements, the appellant is also shown to have supplied confidential information; There are various clauses in the licence agreement, a cumulative reading of which makes it clear that the assessee are the absolute owners and holders of IPRs for the parent seeds for which they have re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned order) in its Books of Account. Therefore, the only issue to be decided in the peculiar facts and circumstances of the case, as pleaded by both the sides, is : Whether there is any liability to Service Tax under Intellectual Property Service on the consideration received as Royalty? 8.1 The relevant Sections of the Finance Act have already been extracted in the earlier paragraphs. Section 65 (55a) prescribes, while defining IPR, any right . under any law for the time being in force and this has also been clarified by the C.B.E.C. vide Circular No. 80/10/2004-S.T. dated 17.09.2004 (with effect from 10.09.2004). The clarification reads thus : The definition of taxable service includes only such IPRs (except copyright) that are prescribed under law for the time being in force. As the phrase law for the time being in force implies such laws as are applicable in India, IPRs covered under Indian law in force at present alone are chargeable to service tax 8.2 Section 23 of the PPV Act prescribes the procedure for registration under the Act and the issuance of certificate of registration is prescribed under Section 24 ibid. Further, Section 28 manda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... little too far-fetched. Therefore, to use the agreement and the clauses therein just to fasten tax liability may not stand, more so in the absence of sanction under the taxing statute; charge to tax could only be from the taxing statute and not from the inter se agreements. 11. Now, coming to the requirements of law, the governing statute is the PPV Act, according to which the Right flows from the moment the registration is granted. Once the application is filed, procedure follows, which is not just an empty formality. The governing statute thus confers and recognizes an applicant s right, which thus satisfies the conditions in Section 65 (55a) read with Circular No. 80/10/2004 (supra), i.e., the applicant becomes holder/owner of Intellectual Property Right prescribed under the relevant Act i.e., the PPV Act, which for the time being is in force. 12.1 In this connection, we note the findings of the Mumbai Bench of the Tribunal in the case of M/s. Reliance Industries Ltd. (supra) wherein after recording the relevant observations of the Co-ordinate Bench of the Tribunal in the case of M/s. Tata Consultancy Services Ltd. Vs. Commissioner of S.T., Mumbai reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar F. No. 80/10/2004-S.T., dated 17-9-2004 which clarified that Intellectual Property emerges from application of intellect, which may be in the form of an invention, design, product, process, technology, book, goodwill, etc. In India, legislations are made in respect of certain Intellectual Property Rights (i.e. IPRs) such as patents, copyrights, trademarks and designs. The definition of taxable service includes only such IPRs (except copyright) that are prescribed under law for the time being in force. As the phrase law for the time being in force implies such laws as are applicable in India, IPRs covered under Indian law in force at present alone are chargeable to service tax and IPRs like integrated circuits or undisclosed information (not covered by Indian law) would not be covered under taxable services. 11. Insofar as the agreement with Investa Technologies S.A.R.L. is concerned the same was entered into on 14-8-2004, prior to IPR services being brought into the net of service tax w.e.f. 10-9-2004. The service itself having been rendered prior to the introduction of the levy, the mere fact that payments for the same were made on a staggered basis over a period ..... X X X X Extracts X X X X X X X X Extracts X X X X
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