By Puloma Dalal, Jayesh Gogri, Chartered Accountants
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Permitting to use brand name of motor vehicle for motor vehicle lubricant and oil manufactured by other parties amounts to intellectual property service.
Facts:
The appellant, a manufacturer of two wheeler vehicles entered into an agreement with oil manufacturers in terms of which the oil manufacturers were permitted to use brand name on the containers of products manufactured by them, for royalty as per terms of the agreement. Department took a view that it was taxable service falling under the category of “Intellectual Property Service” as the said agreement was registered under sections 9 & 11 of the Trade Marks Act of 1999 and invoking a longer period of limitation, service tax was demanded for October 2004 to January 2006. The Appellant stated that it relied on the Circular No. 80/10/04-ST dated September 17, 2004 that Intellectual property right within the meaning and for the purpose of section 65(55a) are confined to those Intellectual property rights governed by specific legislations in India. Further it may be noted that a person can certainly claim proprietary rights under common law in respect of such integrated circuits and undisclosed information but they are not covered under Indian legislation and hence not taxable as it is outside the ambit of the definition of Intellectual Property Right.
Held:
Admittedly, the goods manufactured by the oil companies are to be used in the vehicles manufactured by the appellant company and have a strong connection with the same. The appearance of trade mark “Hero Honda” & “Hero Honda 4T Plus” on oil products definitely indicates a connection between the said companies and the appellant’s product. Further, the facts of the case do not initiate entering of an agreement and thereby being registered under the Trade Marks Act of 1999. In case the oil company had used the trade mark without entering into agreement with the Appellant, it would have amounted to infringement of their right under section 29(4) of the Trade Marks Act. Further the Tribunal did not agree that the permission to use the said trade mark to the oil company could not be covered by the definition of “Intellectual Property Right” and “Intellectual Property Services” as appearing in the Finance Act, 1994 and hence demand was confirmed.
However, the Tribunal held that mere failure on the part of the assessee when the issue involved is a complicated interpretation of the provisions of the law cannot be equated with malafide suppression / misstatement and accordingly directed that a part demand would be within the limitation period may be requantified by the original authority to whom the matter was remanded for the said purpose. Penalty was set aside as no suppression was found.
