TaxTMI 
TaxTMI 
TaxTMI 
2017 (5) TMI 467
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....The licenced information consisted of technical information, including formulae, process, trade secrets and other data in respect of a products. DSL was under obligation to keep the licenced information secret and closely guarded, to prevent against infringement by third party. DSL paid royalty @ 3% of the value of raw material used. The Revenue entertained a view that the appellants provided intellectual property right service in terms of Section 65 (105) (zzr) readwith Section 65 (55a) and Section 65 (55b) of the Finance Act, 1994. Accordingly, proceedings were initiated to demand and recover service tax from the appellant. As noted earlier, the first adjudication order was set aside by the Tribunal and the matter was remanded back, for a fresh adjudication. In the present impugned order, which is a result of denovo adjudication, the Commissioner confirmed service tax liability of Rs. 2,34,64,522/- under the category of intellectual property right service. He also imposed various penalties under Section 76, 77 and 78 of the Finance Act, 1994. 2. The learned Counsel appearing on behalf of the appellant submitted that : (a) the Commissioner has not complied with the direction of....
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.... patent of their undisclosed information cannot be the reason for categorizing such undisclosed information as IPR. The trade secret is not an invention in terms of Section 2 (j) of Patent Act. (e) The learned Counsel relied on certain decided cases of the Tribunal in support of his submissions. 3. The learned AR opposed the grounds of appeal. He submitted that the appellants had entered into various agreements with DSL. There are agreements for permitting DSL for usage of trade mark and logo which belong to the appellant. There is a separate agreement for grant of licence by the appellant for use of licenced information by DSL. The agreement defined licenced information as "all technical information, including the formulae, process, trade secret and other data in respect of products", which the appellant shall provide and disclose to DSL to facilitate the manufacturing all the products pursuant to the agreement. The products covered by the agreement are perfumery goods and aromatic spices to be manufactured by DSL. As such, the transfer of such licenced information for a consideration should be liable to tax under IPR services. The registration of such right under a particular ....
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....ndent on the fact that trade mark, design, patent etc. should be registered. He held that IPR relating to unregistered trade mark, patent etc. are also liable to service tax. We find such observation by the Original Authority missed the statutory scope of tax entry in terms of Section 65 (55a). It is clear that to be a taxable IPR under Finance Act, 1994, the same should be a right to intangible property namely trade marks, design, patent etc. under any law for the time being in force. It is clear and apparent that a right which is not recognized by any law for the time being in force in India cannot be brought under IPR for tax liability. 7. The Tribunal in Indian Farmers Fertilizers Co-operation Ltd. (supra) observed as below :- "14. As noted above, "know-how" as an intellectual property is sometimes also referred to a trade secret which enables its user to derive commercial benefit from it. A trade secret is a formulae, practice, process, design, instrument, pattern or compilation of information used by a business to obtain an advantage over competitors within the same industry or profession. Such trade secrets are sometimes referred to as "confidential information". A person....
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....m 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 copy right) 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 integrated circuits or undisclosed 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." ....
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....lectual Property Rights. In the impugned orders we do not find any such findings by the authorities." 9. In Catapro Technologies vs. CCE, Nashik reported in 2017 (48) S.T.R. 94 (Tri. - Mumbai), the Tribunal observed as below :- "5. It is apparent from the definition of the taxable service that the liability will arise in relation to intellectual property service provided by the holder of intellectual property right. This right is defined as 'any right to intangible property, 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'. in Section 65(55a) of Finance Act, 1994. Thus, while the taxable service stems from the relationship of two entities, the right that is vested in the holder is protected from the rest of the world within the jurisdiction of the law referred to in Section 65(55a). To be liable to the tax, the provider must be the holder of the intellectual property right which is one that is enforceable against all others, and not just against the recipient of the service. 6. The enforceability of the right vis-a-vis the recipient is protected by the law of contra....