CESTAT, CHENNAI BENCH
Areva T & D (India) Ltd.
Commissioner of Central Excise, LTU, Chennai
STAY ORDER NO.744 of 2012
APPLICATION NO. ST/STAY/ 385 of 2011
APPEAL NO. ST/578 of 2011
AUGUST 7, 2012
Mathew John, Technical Member
The appellants are registered with the service tax department for providing “Business Auxiliary Services”. During the course of verification of their accounts and records, it was noticed that Areva T&D Holding SA, France had entered into a Trademark License Agreement with the taxpayer whereby the appellant has been granted the rights to use “AREVA” Trademark for which they were required to pay licence fee on quarterly basis. Revenue was of the view that the service so received by the appellant from the foreign company is liable to service tax in the hands of the appellants as a receiver of such service as per provisions of section 66A of the Finance Act, 1994. Therefore, Revenue initiated proceedings for recovery of service tax on amounts paid by the appellant to the foreign company during the period January, 2010 to September, 2010. After due proceedings a demand of Rs. 2,24,73,879/- is confirmed against the appellant along with interest and penalties. Aggrieved by the said order, the appellants have filed this appeal before the Tribunal along with an application for waiver of pre-deposit of dues arising from the impugned order for admission of the appeal and for staying its collection during the pendency of the appeal.
2. The counsel for the appellant submits that Intellectual Property Right is defined under section 55(a) of Finance Act, 1994 and Intellectual Property Service is defined under section 55(b) of the said Act, which 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) “intellectual property service” means –
(a) transferring temporarily; orOnline GST Certification Course by TaxGuru & MSME- Click here to Join
(b) permitting the use or enjoyment of, any intellectual property right;
3. His argument is that trademark “AREVA” is not registered in India and therefore it is not an IPR “under any law for the time being in force” in India and therefore the service will not be taxable as per definition of the service at Section 55(a) and 55(b) supra. He also relies on the clarification issued by the C.B.E. & C. on 17-9-2004 reading as under :-
“9.1 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) and 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”.
4. He also relies on the clarification issued in June 2012, by C.B.E. & C. in the context of the new levy of service tax based on ‘Negative List Concept’ and the said clarification reads as under :-
“6.3.2 Is the IPR required to be registered in India? Would the temporary transfer of a patent registered in a country outside India also be covered under this entry?
Since there is no condition regarding the law under which an intellectual right should be registered, temporary transfer of a patent registered outside India would also be covered in this entry. However, it will become taxable only if the place of provision of service of temporary transfer of intellectual property right is in taxable territory”.
5. His argument is that under Trademarks Act, 1999, only trademarks registered in India are recognized, as may be seen from sections 28 & 29 of the said Act which provides relief for infringement of trademark rights. These sections provide relief only for trademarks registered in India and not for any other trademarks. Since the trademark is not registered in India in this case, it is his submission that the demand is not legally maintainable and therefore the appeal should be admitted without any pre-deposit.
6. Opposing the prayer, the learned AR for Revenue submits that the clarification dated 17-9-2004 excludes IPRs in relation to integrated circuits or undisclosed information which is not covered by Indian law. It is very clear that this clarification is in the context of patents. A patent is known only if there is full disclosure about the process or the product patented. In the case of trademark it is totally different and there is no information to be disclosed in the case of trademark because it is only a mark which is used to represent the owner of the trademark. He submits that the clarification issued in June, 2012 also does not deal with the issue whether services relating to unregistered trademark is liable to pay tax as per entries in force in the Finance Act, 1994 before the said date. This clarification also is in the context of patent as may be seen from the question and answer given. He argues that if the trademark “AREVA” is used by any person in India the appellants have their legal rights for stopping the person from using such trademark. Therefore, it cannot be argued that the impugned trademark is not a right under any law for the time being in force, in India.
7. We have considered the arguments on both sides. We note that the Trademarks Act, 1999 recognizes both registered Trademark and unregistered Trademark, though the rights in respect of both are significantly different. Section 11(3) of the Trademark Act relating to registration of a trademark in India is reproduced below :-
Section 11(3) A Trademark shall not be registered if, or to the extent that, its use in India is liable to be prevented –
(a) by virtue of any law in particular the law of passing off protecting an unregistered Trademark used in the course of trade; or
(b) by virtue of law of copyright.
The said Trademark even when it is unregistered is recognized in India because such Trademark cannot be registered by any other person. Further, Section 27 of the said Act reads as under :-
(1) No person shall be entitled to institute any proceeding to prevent, or to recover damages for, the infringement of an unregistered trademark.
(2) Nothing in this Act shall be deemed to affect rights of action against any person for passing off goods or services as the goods of another person or as services provided by another person, or the remedies in respect thereof.
From sub-clause (2) of the said section, it is clear that owner of an unregistered Trademark or any other person can institute legal proceedings if someone is trying to pass off the goods representing it as goods manufactured by the owner of the Trademark, even though such Trademark Is not registered.
8. Thus, the short point in question is whether only a registered trademark has a right under any law for the time being in force In India and whether any law other than enacted law In force In India will come within the meaning of “any law for the time being in force”.
9. We are prima facie not in agreement with the argument of the appellant in view of section 11(3) of the Trademarks Act, 1999 and section 27(2) of the said Act in view of the fact that the Trademark owner is legally entitled to enforce certain rights against any other person using such Trademark even though the Trademark Is not registered In India. Therefore, we feel that the appellants have not made a case for complete waiver of pre-deposit of dues arising from the impugned order for admission of the appeal. Therefore, we direct the appellants to make a pre-deposit of 50% of the tax demanded under the impugned order for admission of appeal within eight weeks from the date of receipt of the order. Subject to such pre-deposit, balance dues arising from the impugned order shall remain waived for admission of appeal and its collection stayed during the pendency of the appeal.
10. Compliance is to be reported on 10-10-2012.