SUMMARY OF CASE LAW
The transfer of brand name does not have any meaning for the buyer until and unless the know-how for the manufacture of the formulations sold under that particular brand name, is also transferred.
7. We have carefully considered the rival submissions and perused the records. The scientific or technical consultancy service has been defined under section 65(92) of the Finance Act, 1994 as under:-
“Any advice, consultancy or scientific or technical assistances rendered directly or indirectly by a scientist or a technocrat or any science or technology institution or organization, to a client in one or “more discipline of science or technology.”
The second para of clause (a) of the Agreement for Transfer of Know-how for Formulations (page 42 of the party’s appeal papers) reads as under: –
“transferer has transferred trade marks used for the products listed in the schedule annexed hereto for a consideration and as the transferee has:, for the purpose of more beneficial use and exploitation of the said trade marks, requested the transferer to provide technical know-how for the products bearing the said trade marks….”
This implies that the transfer of technical know-how for the formulations is intrinsically linked with the transfer of trade mark/brand name. The transfer of brand name does not have any meaning for the buyer until and unless the know-how for the manufacture of the formulations sold under that particular brand name, is also transferred. Similarly, the relevant portion of clause (b) (page 52 of the appeal papers) of agreement for Transfer of know-how for bulk drugs is reproduced below:
“transferer has transferred know-how for manufacturing formulations (ready to use dosages foams) using the bulk drug . Atnelol for a consideration and the transferee has for the purpose of the more beneficial use and exploitation of the said know-how for manufacturing formulations requested the transferer to provide technical know-how for the bulk drugs used in the manufacture of the said formulations.Online GST Certification Course by TaxGuru & MSME- Click here to Join
This means that the transfer of technical know-how of formulations was of no use unless the transfer of technical know-how for the bulk drugs was also effected. Thereafter, there was another agreement called the Formulations Supply Agreement by which the applicants were required to not only manufacture the formulations in the applicant’s own factory, but also to provide technical assistance and advice and training to officers of CHCL. From the above, it appears that all the 4 agreements referred to above were meant for the manufacture of the branded formulations under the advice and technical assistance of the applicants. Had CHCL wanted to start manufacturing the Aten formulations on their own, they would have sought the assistance/service of a scientific or technical consultant, who would have given them the same service which the applicants have done in this case. The Formulation Supply Agreement was a pre-condition for the other agreements elating to transfer of brand name and transfer of know-how of bulk drugs, and formulations.
7.1 As per the definition of “Scientific and Technical Consultancy Service*’, the advice, consultancy or technical assistance should be rendered by one of the following persons/entities, each being- a distinct category, viz.
(i) a scientist
(ii) a technocrat
(iiij science or technology institution
(iv) an organization
It cannot be the case of the applicants that they are not an organization. Prima facie view of the Tribunal in the case of Mita Harig (India) Ltd. (supra) observing that manufacture does not appear to be covered within the category of “organization” and hence remanding the case to the lower authority to consider this aspect cannot be regarded as the firm ani Una I view of the Tribunal in the matter.
8.1 In any case, the applicants having transferred the trade marks on a permanent basis to CHCL are not covered by the new service relating to transfer of intellectual properties introduced w.e.f. 10/9/2004 and hence this point raised by the applicants is not relevant.
9. As regards the taxability under the category “Market Research Agency”. The definition under section 65(41) of the Finance Act, 1994, of the service is as under:
” any commercial concern engaged in conducting market research in any manner, in relation to any product, service, or utility, including all types of custormised and syndicated research services.”
As Per para 2.2 (page 72 of the appeal papers) of the revised agreement of marketing assistance, the following marketing assistance services were to be provided by the applicants, viz.
(a) Products promotion services
(b) market development (product growth achievement services).
Para5.1.1 of the marketing assistances agreement (page 73) lists the services covered under the category `product promotion services’ and 5.2.1 lists the services required under the category `market development services’. A perusal of these services prima facie reveals that these were nothing but the service of a market research agency as it involved the applicants to conduct market research in relation to their product Aten as also for the new dosage forms and strengths of the products proposed to the introduced during the year.
12. The applicants have not been able to make out a strong prima-facie case for total waiver of pre-deposit of the amounts demanded from them.