TaxTMI 
TaxTMI 
2019 (12) TMI 184
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.... 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 agreements with independent commercial seed producers wherein the seed companies were also required to pay Royalty or breeding charg....
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.... 13 along with the details of Royalty received by the appellant, to which the appellant filed its reply vide letter dated 11.06.2013. The Revenue sought additional information vide their letter dated 19.07.2013 like invoices, agreements, etc., which were also furnished by the appellant vide its letter dated 29.08.2013. It is also the case of the appellant that with the introduction of Negative List with effect from 01.07.2012, the appellant started paying Service Tax on the Royalty amounts received by it on and from 01.07.2012 since, according to the appellant, the Royalty was not a part of the Negative List. 2.1 The Revenue thereafter issued a Show Cause Notice dated 19.10.2013 inter alia alleging that the appellant was a holder of Intellectual Property Rights (IPR) in respect of the parent seeds supplied by them; that such Intellectual Property Rights were covered in the definition under Section 65 (55a) of the Finance Act, 1994, being the right under the Protection of Plant Varieties and Farmers' Rights Act, 2001;that the appellant was supplying parent seeds for commercial exploitation whereby it was providing Intellectual Property Services by permitting the use or enjoyment ....
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....intellectual property right means 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;" • The Commissioner/Adjudicating Authority has, without examining the applicability in the proper perspective, simply held that the supply of parent seeds for production and marketing of hybrid seeds would amount to Intellectual Property Services covered under Section 65 (105) (zzr); • Section 65 (105) (zzr) requires certain conditions to be satisfied and the mere activity of supplying parent seeds for commercialization is not at all covered; • With regard to the condition that the service should be provided by the holder of Intellectual Property Right, he submitted that the appellant was not the holder of Intellectual Property Right. "Right holder" has only been defined under Rule 2 (d) of the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007which reads as under : "2. Definitions. . . . (d) " right holder" means a natural person or a legal entity, which accord....
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....al in the case of M/s. Lurgi India International Services Pvt. Ltd. Vs. Commissioner of Central Excise, Customs and Service Tax, Hyderabad reported in 2019-TIOL-1351- CESTAT-HYDinvolving identical issue wherein the decision of the Mumbai Bench of the Tribunal in the case of M/s. Reliance Industries Ltd. Vs. Commr. ofC.Ex. & S.T., LTU, Mumbai reported in 2016 (44) S.T.R. 82 (Tri. - Mumbai)has been followed. 4.2.2 He further relied on the decisions in the cases of M/s. Puma Ayurvedic Herbal (P) Ltd. Vs. Commissioner of C.Ex., Nagpur reported in 2009 (196) E.L.T. 3 (S.C.) andM/s.Elite Detectives Pvt. Ltd. Vs. C.S.T., Bangalore reported in 2006 (4) S.T.R. 583 (Tri. - Bang.) to contend that the onus of proving the alleged classification of service before fastening the appellant with the tax liability is on the Revenue, which has not at all been established by the Revenue and that therefore, the impugned order is liable to be set aside. 4.3.1 Ld. Senior Advocate would further contend that at the most, the agreement could be an agreement for transfer of trade secrets provided under the confidentiality clause, which per se would not amount to transfer of Intellectual Property Law as ....
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.... of C.Ex. reported in 1989 (43) E.L.T. 195 (S.C.) and M/s.Anand Nishikawa Co. Ltd. Vs. Commissioner of Central Excise, Meerut, reported in 2005-TIOL-118-SC-CX.He also placed reliance on the following judgements : (i) Anantpur Textiles Ltd. Vs. C.C.E., Calcutta - 1994 (72) E.L.T. 48 (Tri.); (ii) Hindalco Industries Ltd. Vs. C.C.E., Allahabad - 2003 (161) E.L.T. 346 (Tri. - Del); (iii) Kirloskar Oil Engines Vs. C.C.E., Nasik - 2004 (178) E.L.T. 998 (Tri. - Mum.); (iv) Paro Food Products Vs. C.C.E., Hyderabad - 2005 (184) E.L.T. 50 (Tri. - Bang.); (v) U.T. Ltd. Vs. C.C.E., Calcutta-I - 2001 (130) E.L.T. 791 (Tri. - Kol.); (vi) Gujrat Intelligence Security Vs. C.C.E., Vadodara -2010-TIOL-825-CESTAT-AHM. 4.4.3 For the very same reasons, Ld. Senior Advocate submits that there cannot be any demand towards penalty under Sections 76, 77 or 78 of the Finance Act, 1994 and nor could there be any interest under Section 75 that could be demanded since the issues involve interpretation of statute/complex legal provision inasmuch as the appellant only supplied parent seeds whereas the Revenue has held that the services rendered by the appel....
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....g protection from infringements. The levy of Service Tax cannot depend on whether an IPR like trademark, design, patent, etc., is registered or not; • The definition of ' taxable service' also does not require for the purposes of levy of Service Tax all the requirements of registration under any law for the time being in force and hence, the owner or any other person who holds the IPRs that are recognized under any law for the time being in force, provides any service in relation to such Intellectual Property Service for which a consideration is received in return, shall be liable to Service Tax; • The IPRs held by the assessee during the period of dispute, which came to be transferred temporarily to the customers under licence agreement for a consideration in the form of Royalty, is recognized and prescribed under the PPV Act. Hence, whether the assessee was holding the IPRs during the disputed period or not is not relevant; • The appellant has filed applications for registration during 2009, 2010, 2011 and one application in 2012, apart from five such applications during 2013. Filing of such applications itself indicates that those rights we....
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....nly then the same is registered and the certificate of 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. 9. In view of the above, therefore, what is clear is that 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. 10.1 The Revenue has mainly referred to the agreements between the appellant and its customers and various clauses therein and inter alia observed that the appellants are the absolute owners and holders of IPR, by which the appellants are fastened with tax liability. To our understanding, 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/omi....
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....ation to Intellectual Property Service. Intellectual Property Service is defined under Section 65(55b) to mean (a) transferring (temporarily); or (b) permitting the use or enjoyment of, any intellectual property right. And Intellectual Property Right as defined under Section 65(55a) means 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. 4.1 Short question to be decided is whether the transfer of technical 'know how' received by the Appellant is a service which may be categorized under "Intellectual Property Right Services". We find that the definition of Intellectual Property Right must be satisfied to term the services received by the Appellant as Intellectual Property Right Services. We find no clue at all in the records as to which type of Intellectual Property Right is being assigned to the "Technical knowhow" received by the Appellant. It is obvious from the definition of Intellectual Property Right that the right has to be a specific Right under a specific Law. Examples are given under the definition such as the Trade Mark which ....
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....rat High Court in the Appellant's own case reported in 2010 (19) S.T.R. 807 as also by the Hon'ble Delhi High Court in the case of CCE v. Consulting Engineering Services India (P) Ltd.2013 (30) S.T.R. 586. As the service in the case of Investa Technologies S.A.R.L, was rendered prior to 10-9-2004, the date when the taxing entry was brought to the Statute the mere subsequent payment in respect of services that are already being rendered cannot be brought to tax with respect to the rate applicable on the date on which the payment was effected." The very same view has been followed by this very Bench of the Tribunal in the case of M/s. Lurgi India International Services Pvt. Ltd. (supra). 12.2 The cumulative takeaway from the above orders is that in order to fasten the Service Tax liability, the person providing the service (technical knowhow) has to be registered with the Patents Authority in India and that if the IPR is registered in any foreign country, but is not registered in India, the same will not attract the Service Tax. 13. From the above, we find that on merits, the issue in the case on hand is no more res integra and accordingly, hold that the impugned order and t....