T T Krishnamachari And Co vs Cst Ch

[Cites 9, Cited by 0]

Custom, Excise & Service Tax Tribunal

T T Krishnamachari And Co vs Cst Ch - Ii on 19 March, 2025

CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI

REGIONAL BENCH - COURT No. I

Service Tax Appeal Nos. 41045 to 41051 of 2015
(Arising out of Order-in-Original Nos. 02-08/2014-2015 dated 27.02.2015 passed by
Commissioner of Service Tax II, Newry Towers, 2054/1, II Avenue, 12th Main Road, Anna
Nagar, Chennai - 600 040)

M/s. T.T. Krishnamachari & Co. ...Appellant
Post Box No. 4918,
No. 6, Cathedral Road,
Gopalapuram,
Chennai - 600 086.

Versus

Commissioner of GST and Central Excise ...Respondent
Chennai II Commissionerate,
Newry Towers, 2054/1, II Avenue,
12th Main Road, Anna Nagar,
Chennai - 600 040.

APPEARANCE:

For the Appellant : Ms. G. Vardini Karthi, Advocate
For the Respondent : Ms. O.M. Reena, Authorised Representative

CORAM:
HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL)
HON'BLE MR. AJAYAN T.V., MEMBER (JUDICIAL)

FINAL ORDER Nos. 40366-40372/2025

DATE OF HEARING : 23.01.2025
DATE OF DECISION : 19.03.2025

Per Mr. VASA SESHAGIRI RAO

Service Tax Appeals Nos. 41045 to 41051 of 2015

have been filed by M/s. T.T. Krishnamachari & Co.

(hereinafter referred to as 'Appellant') assailing the Order-in-
2

Original Nos. 02-08/2014-2015 dated 27.02.2015 passed by

the Commissioner of Service Tax-II, Chennai.

2.1 Brief facts of the issue involved in these appeals

pertain to non-payment of service tax on Intellectual

Property Rights Service. The Appellant, a partnership firm

engaged in trading and distribution of consumer durables

and health care products was registered with service tax for

Clearing and Forwarding service, Business Auxiliary service

and Renting of Immovable property service. The Appellant

was collecting Royalty charges from group companies, in

terms of agreements, for grant of permission for usage of

the logo "TTK" on their packaging, cartons, containers,

labels, brochures, etc. in connection with the products

manufactured, sold or distributed by them. The Department

alleged that service tax was payable under Intellectual

Property Rights Service, on the consideration received in the

form of Royalty Charges, for temporary transfer of

Intellectual Property Rights (IPR), as the logo "TTK" was

used as a Trademark rather than as an artistic work as

defined under Copy Rights Act, 1957 (CRA). The Appellant

maintained that service tax was not payable on the said

Royalty charges as the said logo was registered as an artistic

work under the CRA and hence excluded from the scope of

IPR service. Hence, the Department issued the following
3

Show Cause-cum-Demand Notices as per the details

tabulated below: -

Amount
Period Demanding Penalties
Sl.Nos. SCN/SOD No. & Date demanded
Involved provision proposed
(Rs.)

SCN No.30/2009 7/2007 to Proviso to
1 1,06,42,829 76 & 78
Dt. 6.03.2009 3/2008 Sec 73(1)

SCN No.493/2009 4/2008 to 1,33,88,286 Sec 73(1) 76
2
Dt.13.10.2009 3/2009

SCN No.626/2010 4/2009 to 76
3 1,05,86,648 Sec 73(1)
Dt.14.10.2010 3/2010

SCN No.471/2011 Dt. 4/2010 to 76
4 1,46,33,938 Sec 73(1)
14.10.2011 3/2011

SOD No.132/2013 4/2011 to
5 1,25,05,024 Sec 73(1) 76
Dt.22.04.2013 3/2012

SOD No.11/2014 Dt. 4/2012 to 37,89,226 Sec 73(1) 76
6
3.03.2014 6/2012
SCN No.241/2014 7/2012 to 76 & 77
7 1,18,58,001 Sec 73(1)
Dt.17.09.2014 3/2013

All the periodical demands were raised under Section 73(1)

and the notice issued under SCN No. 30/2009 dated

6.03.2009, had been issued invoking proviso to Section

73(1) of the Act, alleging suppression of facts. As a result, a

penalty under Section 78 has also been proposed in the said

notice in addition to a penalty under Section 76. The original

notice on the same issue was vide SCN No.56/2008 dated

14.03.2008 invoking extended period and the same was

adjudicated vide Order-in-Original No. 16/2009 dated

15.05.2009.

2.2 The Ld. Adjudicating Authority vide Order-in-

Original No. 02-08/2014-15 dated 27.02.2015 have

confirmed the demands proposed in the SCN/SOD and
4

imposed penalties under Section 76/78. Being aggrieved,

the Appellant is on appeal before this forum.

3. The main contentions of the Appellant specified

in the Grounds of Appeal have been summarized below: -

i. It was averred that the logo "ttk" could not be

construed as a trademark as each of their products

were separately registered trademarks with the letters

'TM' marked next to them which cannot be confused

with the "ttk" logo which is a part of the information in

relation to the product manufacturer/ producer.

Further, it was submitted that the said logo being

affixed on the product only provided relevant

information to the consumer and cannot be treated as a

trademark.

ii. It was submitted that the Department stand that the

logo was being used by the group companies as a

trademark and not as an artistic work was denied as

the agreements between the Appellant and the group

companies were not in the nature of licensing of

trademark but licensing of copy right in artistic work.

iii. It was pointed out that the finding in the impugned

order was misplaced in as much as the wordings in the

definition of Section 65(5a) ibid "under any law for the

time being in force, but does not include copyright" was
5

not interpreted in the right sense and the appellant

ought to be given the benefit.

iv. It was submitted that the impugned order had placed

reliance on the decision in the case of M/s. Grasim

Industries [2005 (185) ELT 123 (SC)], whereas the

ratio in the case of M/s. Astra Pharmaceuticals (p) Ltd.

[1995 (75) ELT 214 (SC)], under similar circumstances,

is squarely applicable to the present issue.

v. It was submitted that the impugned order was liable to

be set aside as non est in law as the adjudicating

authority ignored the ratio of the decisions cited by the

Appellant. The Appellant placed reliance on the

decisions in the case of Tarai Food Ltd. Vs. CCE,

Meerut-II, M/s. Brown and Burk Pharmaceuticals Ltd.

Vs. CCE, Chennai III [2007 (207) ELT 514 (Tri.-

Chennai)] and M/s. Alfred Berg & Co. India Pvt. Ltd. Vs.

CCE, Chennai [2007 (208) ELT 318 (Tri.-Chennai)].

vi. It was submitted that the 'ttk' logo only indicated the

name of the group company or manufacturer and does

not serve as an advertisement of a brand name or a

trade name that the customer is likely to associate with

a product on sale. It was pointed out that the

Appellants have a registered copyright in the artistic

work subsisting in the logo ttk and it is a fact that this

was being used as a house mark within all group
6

companies which does not in any way bring the use of

the logo within the definition of the trademark.

vii. It was submitted that no service tax was payable as

the royalty received by the appellant were subject to

sales tax or VAT. Further, it was submitted that the

logo used was an artistic work registered under the

copyrights act which is exempt from payment of service

tax as IPR service only taxed intangible property like

trademarks, designs, patents, etc. but excluded

copyrights from its purview.

viii. It was submitted that the allegation of suppression

was a baseless one which the department was hard

pressed to substantiate and therefore liable to be set

aside.

4. The Ld. Counsel Ms. G. Vardini Karthi

representing the Appellant reiterated the grounds of appeal

and pointed out that the issue is no longer res integra as the

Tribunal had on the same issue for earlier period vide Final

Order No. 43276/2017 dated 13.12.2017 decided the matter

in favor of the Appellant. It was therefore prayed for setting

aside the impugned order.

5. The Ld. Authorized Representative Ms.

O.M. Reena representing the Department reiterated the
7

findings of the lower Adjudicating Authority and submitted

that the logo TTK owned by the Appellant was in fact a trade

mark used in the normal course of the business by the group

companies of the Appellant and therefore the consideration

received as Royalty payment for such usage was liable for

payment of service tax under IPR service in as much as the

transfer of the permission to use the logo which is a

trademark would fall under IPR services.. Therefore, it was

submitted that the demand was sustainable and prayed for

dismissal of the appeal filed by the Appellant.

6. Heard both sides and carefully considered the

submissions and evidences on record.

7. The issues which arise for decision in these

appeals are: -

i. Whether the "ttk" logo of the Appellant used by its

group companies was an artistic work registered under

the copyrights act or it is a trademark? and,

ii. Whether the demand of service tax is sustainable?

8. The Ld. Counsel for the Appellant has stressed

that the logo is not a trademark but a copyrighted artistic

work and that the appellant is not liable to pay service tax

under IPR services on the royalty income. Against this, the
8

Department contends that the appellant was using the logo

as a trademark recognized under the Trademark Act and that

the appellants merely having registered the same under the

trademark. It is also submitted by him that the logo does not

have any artistic value and hence demand of service tax is

sustainable.

9. We find that the logo `ttk' were only used to

project the image of the manufacturer generally and did not

establish any relationship between the mark and the

products manufactured/ distributed by the group companies

of the Appellant. It only is a house mark which is usually

devised in the form of an emblem, word or both and it is for

identification of the manufacturer/distributor. Therefore, this

monograph which only identifies the manufacturer/distributor

would not make the product patent or proprietary. The

"House mark" is used generally as an emblem of the

manufacturer/distributor projecting the image of the

manufacturer, whereas "Brand name" is a name or

trademark either unregistered or registered under the Act.

Therefore, it is not necessary that "Brand name" should be

compulsorily registered. A person can carry on his trade by

using a "Brand name" which is not even registered. But in

violation/infringement of trademark, remedy available would
9

be distinctly different to an unregistered brand name from

that of remedy available to a registered brand name. We find

that the definition of service under 'IPR' excludes copyrights

and as the 'ttk' logo is registered under the copyrights act,

service tax demand is questionable. The impugned order has

heavily relied on the decision of the Hon'ble Supreme Court

in the case of M/s Grasim Industries cited supra but we find

that the issue to be decided in the present appeal is not

covered by the decision and hence will not find any support

to the cause of the department.

10. We find that the issue is settled in favor of the

Appellant by this Tribunal's earlier decision involving the

same Appellant for an earlier period following the decision of

the Hon'ble Supreme Court in M/s. Astra Pharmaceuticals

cited supra and the relevant extracts of this Tribunal's earlier

Final Order No. 43276/2017 dated 13.12.2017 has been

reproduced below: -

" 5.1 For better appreciation the relevant provisions are
noticed as under:-

"Section 65(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:

Section 65(55b) "Intellectual property service" means, -
10

(a) Transferring (temporarily), or

(b) Permitting the use or enjoyment of, any intellectual
property right.

Section 65(105)(zzr) "taxable service" means any
service provided or to be provided to any person, by the
holder of intellectual property right, in relation to
intellectual property service."

The term Trade Mark has been defined under clause (2b)
of Section 2 of Trade Mark Act, 1999

"Section 2(b) trade mark means a mark capable of being
represented graphically and which is capable of
distinguishing the goods or services of one person from
those of others and may include shape of goods, their
packaging and combination of colours; and

(i) in relation to Chapter XII (other than Section 107), a
registered trade mark or a mark used in relation to goods
or services for the purpose of indicating or so as to indicate
a connection in the course of trade between the goods or
services, as the case may be, and some person having the
right as proprietor to use the mark; and

(ii) in relation to other provisions of this Act, a mark used
or proposed to be used in relation to goods or services for
the purpose of indicating or so to indicate a connection in
the course of trade between the goods or services, as the
case may be, and some person having the right, either as
proprietor or by way of permitted user, to use the mark
whether with or without any indication of the identity of
that person, and includes a certification trade mark or
collective mark."

Section 2(m)-"mark" includes a device, brand, heading,
label, ticket, name, signature, word, letter, numeral, shape
11

of goods, packaging or combination of colours or any
combination thereof."

"Definition of Copyright"

"Section 14. Meaning of copyright -For the purposes of
this Act,

"copyright" means the exclusive right subject to do or
authorise the doing of the provisions of this Act, to any of
the following acts in respect of a work or any substantial
part thereof, namely: -

(a) in the case of a literary, dramatic or musical work, not
being a computer programme,-

(i) to reproduce the work in any material form
including the storing of it in any medium by
electronic means;

(ii) to issue copies of the work to the public not being
copies already in circulation;

(iii) to perform the work in public, or communicate it
to the public;

(iv) to make any cinematograph film or sound
recording in respect of the work;

(v) to make any translation of the work;

(vi) to make any adaptation of the work;

(vii) to do, in relation to a translation or an
adaptation of the work, any of the acts specified in
relation to the work in sub-clauses (1) to (vi);

(b) in the case of a computer programme,-

(i) to do any of the acts specified in clause (a);
12

(ii) to sell or give on commercial rental or offer for
sale or for commercial rental any copy of the
computer programme;

Provided that such commercial rental does not apply in
respect of computer programme where the programme
itself is not the essential object of the rental.

(i) to reproduce the work in any material form
including depiction in three dimensions of a two
dimensional work or in two dimensions of a three
dimensional work;

(ii) to communicate the work to the public;

(iii) to issue copies of the work to the public not
being copies already incirculation;

(iv) to include the work in any cinematograph film:

(v) to make any adaptation of the work;

(vi) to do in relation to an adaptation of the work any
of the acts specified in relation to the work in sub-
clauses (1) to (iv);

(d) in the case of a cinematograph film, -

(i) to make a copy of the film including a photograph
of any image forming part thereof;

(ii) to sell or give on hire or offer for sale or hire, any
copy of the film. regardless of whether such copy has
been sold or given on hire on earlier occasions;

(iii) to communicate the film to the public;

(e) in the case of a sound recording,-

(i) to make any other sound recording embodying it;
13

(ii) to sell or give on hire, or offer for sale or hire,
any copy of the sound recording, regardless of
whether such copy has been sold or given on hire on
earlier occasions;

(iii) to communicate the sound recording to the
public.

Explanation-For the purposes of this section, a copy which
has been sold once shall be deemed to be a copy already
in circulation."

Section 2(c) "Artistic work" means-

(i) a painting, a sculpture, a drawing (including a
diagram, map, chart or plan), and engraving or a
photograph, whether or not any such work possesses
artistic quality;
(ii) work of architecture; and
(iii) any other work of artistic craftsmanship"

5.2 As seen above, the definition of IPR service excludes
copyright. Undisputedly, the appellants have registered the
logo 'ttk' under the Copyright Act. The department alleges
that since they have referred the logo in their license
agreement as a "trade name and also because the logo is
used in relation to marketing and sale of goods, the same
would be a trademark. The Ld. Consultant for the appellants
has produced a copy of the registration of the logo under the
Copyright Act. The appellants have obtained the registration
of the logo in 1983. The clause and description of the work is
noted in the Certificate as 'artistic work. The various products
marketed and sold by the appellant as well as it's group
companies/licensees would show that such products have
distinct registered trademark and also uses the logo on the
packets. For example: Levokast, Apiverin-M, Prestige etc.,
are the registered trademark. The packets also contained the
logo. Such logo is used not only on the packets but also in
14

the letterheads of the Company. Some of the samples are as
under: -

.....

5.3 From the above documents it is seen that the goods do have a separate trademark such as Levokast, Apiverin-M, Prestige etc. Apart from this, the packings also contain the 'ttk' logo. Thus, though the goods use the logo, it cannot be said that it is a trademark for these goods, as these goods have separate registered trademark. Again, the appellants have registered the logo under the Copyright Act. Any infringement of right pertaining to the logo would fall under Copyright Act and not under Trademark Act. The provisions of Copyright Act describe the situations of protection afforded to the copyright. This is different from the rights attached to a trademark. The logo being registered as a copyright, in case of infringement of the same, the right falls within the Copyright Act and would be enforceable by the appellants under the said Act only and not under the Trademark Act. The arguments put forward by the Ld. AR that the depiction of logo does not have any artistic value and therefore not a copyright doesn't find favour with us. The Certificate of Registration issued by the Copyright Office after complying with necessary procedure cannot be totally disregarded. It is not proper for this Tribunal to enter into a discussion, what is registered does not have any 'artistic value' and is merely letters calligraphed in a particular manner etc. The Certificate is issued by a Competent Authority to issue the same.

5.4 In the case of ESPN Software India Pvt. Ltd. (supra), the Tribunal had occasion to analyse the dispute relating to cartoon characters. The assesse therein contended that these cartoon characters are artistic work and covered under copyright. Whereas, the Revenue alleged the same to be Trademark and raised the demand under IPR services. The main contention made by the Revenue in the said case was 15 that in the sub-licensing agreement as well as in the product licensing agreement, promotional licensing agreement and other agreements, the property shown in the schedule "powerful girls" had been referred as trademark. After analysing the definition of copyright and trademark, the Tribunal held that such cartoon characters fall under copyright only. The facts being similar in our view, the said decision is applicable to this case. Further, in the present case, the logo is registered under the Copyright Act. Relevant portion of the decision in the case of ESPN Software India Pvt. Ltd. is reproduced as under: -

"38. Product Licensing Agreement and Promotional Licensing Agreements were executed between TENA and TIPL TIIPL i.e. Appellant No. 2 executed sub-licensing agreements between TIIPL. and Bombay Dyeing and Manufacturing Co. Ltd., TIIPL and M/s. Brittania Industries and TIIPL and M/s. Bata India Ltd. In case of Bombay Dyeing agreement was made for sub-licensing the property "Powerful Girls" for use in home furnishing. In Schedule A sub-licensed properties were listed as PPG, Dexter Laboratory, Johny Bravo, Courage, Cow & Chicken, Codername Kids Next Door, CN Logo and all related Characters and Elements had been shown as Trademark of Cartoon Network. Similarly in case Brittania Industries sub-licensed property is Tom and Jerry for use on erasers, pencils and magnetic slap on a wrist bands for promotion of product of Brittania Industries. In Schedule A of Licensed Property and Trademark Notices of sub-licensing agreements PPG. Dexter's Laboratory, Johney Bravo, etc and all the related Characters and Elements are shown as Trademark of Cartoon Network. Similarly in case of Bata India sub-licences property is 'Ben 10' to be used for promotion of Bata School Shoes, shoe accessories and school bags From Schedule A of the agreement it is clear 16 that Character and Elements are shown as Trademark of Cartoon Network.

39. On-going through the definition of artistic work as defined under Section 2(c) of the Copyright Act, 1957, we find these Characters and Elements are covered under clause (i) as these come within drawing, engraving or a photograph.

40. In view of the above, we are of the view as these characters fall within the definition of artistic work in Section 2(c) of the Copyright Act are hence excluded from the definition of Intellectual Property. The demand confirmed is therefore unsustainable,"

5.5 The appellants have also argued that they have discharged VAT on the entire royalty income. VAT and service tax being merely exclusive a further demand on the royalty income is not sustainable. The Hon'ble Apex Court in the case of IMAGIC Creative Pvt. Ltd. (supra), had categorically held that payment of service tax and VAT are mutually exclusive. In the case of Astra Pharmaceuticals Pvt. Ltd. Vs. CCE, Chandigarh 1995 (75) ELT 214 (S.C.), the Hon'ble Apex court analyzed the meaning, scope and distinction between the house mark and product mark. The Hon'ble Apex Court has held that house mark/ product mark cannot be equated to that of a trademark. In para-6 of the judgment, the Hon'ble Apex Court observed as under:-

"6. As has been explained earlier the first part of the Explanation widens the ambit of the entry by extending it to any drug or medicinal preparation for use in internal or external administration for prevention of ailments in human beings or animals. But then it narrows it by restricting the applicability of the tariff item to only such medicines which bear either on itself or on its container or both a name which is not specified in a monograph in a Pharmacopoeia. This obviously is not applicable to the 17 appellant as the injections manufactured by the appellant are specified in a Pharmacopoeia. The other class of medicines to which this Explanation applies are those which have a brand name that is a name or a registered trademark under a Trade & Merchandise Marks Act. The medicine manufactured by the appellants is not registered under the Trade and Merchandise Marks Act. Therefore, it would attract levy only if its container or packing carried any distinctive marks so as to establish the relation between the medicine and the manufacturer. But the identification of a medicine should not be equated with the produce mark. Identification is compulsory under the Drug Rules. Technically, it is known as 'house mark'. In Narayan's Book on Trade Marks and Passing Off, the distinction between 'house mark' 'and product mark (brand name) is brought out thus, 677A. House mark and product mark (or brand name).

In the pharmaceutical business a distinction is made between a house mark and a product mark. The former is used on all the products of the manufacturer. It is usually a device in the form of an emblem, word or both. For each product a separate mark known as a product mark or a brand name is used which is invariably a word or a combination of a word and letter or numeral by which the product is identified and asked for. In respect of all products both the product mark and house mark will appear side by side on all the labels, cartons etc. Goods are ordered only by the product mark or brand name. The house mark serves as an emblem of the manufacturer projecting the image of the manufacturer generally."

The 'AP' or 'Astra' on the container or packing was used to project the image of manufacturer generally. It did not establish any relationship between the mark and the medicine. For instance, if the appellant instead of using Dextrose injections would have described it as Astra injections or Astra Dextrose injections then it could be said that a relationship between the monograph and the 18 medicine was established. In the case of appellant it was only a monograph to identify the manufacturer."

The Hon'ble Apex Court thus held that such mark does not establish any relationship to the product and the monogram was used to identify the manufacturer only.

6. From the above discussions, and following the position of law laid in the case of ESPN Software India Pvt. Ltd. (supra) as well as Imaic Creative Pvt. Ltd. (supra), we are of the view, that the Impugned order cannot sustain and requires to be set aside, which we hereby do. The appeal is allowed with consequential relief, if any, to the appellants"

11. Hence, in view of the above discussions and following judicial precedents, we are inclined to decide the issue in favor of the Appellant and consequently the impugned Order-in-Original Nos. 02-08/2014-2015 dated 27.02.2015 lacking in merits are set aside. The appeals filed by the Appellant are allowed with consequential benefits, if any, as per the law.

(Order pronounced in open court on 19.03.2025) (AJAYAN T.V.) (VASA SESHAGIRI RAO) MEMBER (JUDICIAL) MEMBER (TECHNICAL) MK

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Custom, Excise & Service Tax Tribunal

T T Krishnamachari And Co vs Cst Ch - Ii on 19 March, 2025