Custom, Excise & Service Tax Tribunal
Reliance Industries Ltd vs Commissioner Of Central Excise & ... on 21 June, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT No. I Appeal No. ST/50/12 (Arising out of Order-in-Original No. 06/COMMR (KAP)/LTU-M/ST/2011 dated 27.10.2011 passed by Commissioner of Central Excise & Service Tax, LTU, Mumbai) For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical) ================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
Reliance Industries Ltd.
Appellant Vs. Commissioner of Central Excise & Service Tax, LTU, Mumbai Respondent Appearance:
Shri Vipin Kumar Jain, Advocate Ms. Shilpa Balani, Advocate for appellant Shri D. Nagvenkar, Addl. Commr (AR) for respondent CORAM:
Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical) Date of Hearing: 10.02.2016 Date of Decision: 21.06.2016 ORDER NO Per: M.V. Ravindran By the impugned order the Respondent has confirmed the demand of service tax along with interest and penalty on the Appellant, under the Reverse charge mechanism, on the premise that it ought to have discharged service tax under the head of Intellectual Property Services (IPR for short) on the amount remitted by it to various overseas entities towards the right to use/enjoy confidential/technical know-how and patents held by such overseas entities.
2. It is an undisputed fact that out of the six different agreement in terms of which the right to use/enjoy confidential/technical know-how and patent have been granted, only the patent in respect of Investa Technologies s.a.r.l., is registered in India under the Patents Act 1970. In respect of the remaining agreements, there is no patent, which is registered under the Patents Act, 1970.
3. The Appellant had resisted the demand on the following counts:
(a) A perusal of the definition of the terms Intellectual Property Right, and Intellectual Property service as defined in Section 65(55A) and Section 65 (55b) would show that it is only such Intellectual Property i.e. recognised/enforceable under the laws for the time being enforced in India, taxable.
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,
(i) transferring, [temporarily]; or
(ii) permitting the use or enjoyment of, any intellectual property right;]
(b) The CBEC has in its Circular No.80/10/2004-ST dated 17.9.2004 clarified that the expressions law for the time being in force, in the context of IPR services mean such laws as are applicable in India.
(c). That confidential information/technical know-how (undisclosed information) is undisputedly, not recognised as an IPR and consequently there can be no tax under the head of IPR services in respect of the same.
(d). With respect of Investa Technologies, the agreement had been entered into 14.8.2004 much prior to the taxable head of IPR Services have been introduced in the Finance Act, 1994 with effect from 10.9.2004.
(e) The extended period of limitation was not invokable inasmuch as the entire transaction was revenue neutral.
4. The Learned AR appearing on behalf of the revenue has reiterated the findings of the Revenue and submitted that the service were aptly classified under IPR and that the extended period of limitation has rightly been invoked.
5. We have heard the submissions of both sides. The primary issue that arises for determination is whether an Intellectual Property Right, which is not recognised under the Indian laws for the time being in force would constitute an Intellectual Property Right, the temporary transfer or the right to use or enjoyment of which is liable to tax under the head of IPR services.
6. While deciding this we have to bear in mind that India is a signatory to the Paris Convention for the Protection of Industrial Properties. The said convention was the first major step taken to help creators of intellectual property to ensure that their intellectual works were protected in other countries. In furtherance to the same a Patent Cooperation Treaty, was signed by member countries, the same has been embodied in Chapter XXII of the Patents Act, 1970. The said treaty spells out a detailed mechanism for the filing of international applications by an inventor and provides that once such an application is made and registered in the member country, then the IPR would be protected in that member country. Thus, there appears to be a codified law providing for recognition and Protection under the Indian Laws even in respect of Patents registered overseas. In our view when the legislature has specifically provided that an Intellectual Property Right, that could be taxed as an IPR service is a right to an intangible property, which is recognised under any law for the time being in force, obviously the law being referred to here has to be an Indian Law and not the recognition of the intangible property right under the law of a third country. If an intangible property right was to refer to a right which is recognised by any country, then the legislature would not have used the expression under any law for the time being in force. The legislature would have merely stated that an intellectual property right would mean any right to an intangible property. There would have been no need for it to qualify the same with a recognition under any law for the time being in force.
7. It would be clearly incongruous to suggest that an intellectual property right such as a patent or a trade mark is not protected or recognised by the Indian Law, yet the grant of the right to use or a temporary transfer of such a patent or trade mark, which is otherwise not recognised in Indian as a Intellectual Property Right would attract liability to service tax under the head of IPR services. The legislature has in accordance with the global treaty for protection of IPR world over laid down the agreed procedure that any inventor if required to follow, so as to have the patent and trademarks recognised and protected under the Indian laws. If any inventor does not seek protection of its intellectual property under the Indian laws, the same cannot be regarded as an intellectual property right for the purpose of taxing the grant of right to use such a right. The question whether such a service could be taxed under a different head is irrelevant and does not arise as there is no such case made out in the notice.
8. It is also relevant to note here that if the interpretation suggested by the Respondent to the effect that Intellectual property right even if not recognised in India could still be taxed under the head of IPR services if taken as correct it would lead to the expression under any law for the time being in force being rendered redundant an otiose. It is a settled principle of law laid down by the Apex Court in the case of Aphali Pharmaceuticals Ltd Vs State of Maharashtra 1989 (44) ELT 613 that any interpretation which has the effect of rendering any part of the statute redundant and otiose it is to eschewed in favour of an interpretation that would harmonise the same.
9. The CBEC has also in its Circular dated 80/10/2004-ST dated 17.9.2004 was issued while explaining the scope and ambit of the different heads of taxing services which were introduced by the Finance (No.2)Bill 2004 has clarified in no uncertain terms that the phrase law for the time being in force implied such laws as are applicable in India and that IPR covered under Indian law in force were alone chargeable to service tax. It was further clarified that IPRs like integrated circuits or undisclosed information, which was not recognised under Indian laws would not be covered under the said taxable services of IPR. We are in complete agreement with this clarification issued by the CBEC and do not find any reason to disagree with the same. In view of the above, there can be no liability to tax under the head of IPR services in respect of an Intellectual Property Right that is not recognised by the law in India. In the facts of the present case except for the Patent with respect to Investa Technologies S.A.R.L. which was recognised under the Patents Act 1970 in India none of the alleged Intellectual Property Rights are recognised under the Indian law and as such there cannot be any tax on the same under the head of IPR services, as the same do not qualify as an Intellectual Property Right, the transfer (temporary) or permitting the right to use or enjoyment of which is liable to service tax.
9.1 We also note that a co-ordinate bench of the Tribunal has in the case of TCS vs CST 2016 (41) STR 121 (T) taken a view similar to the one taken by us above. The relevant observations of the Tribunal read as under :
4.?The taxable service under consideration is defined under Section 65(105)(zzr) to mean any service provided or to be provided to any person, by the holder of Intellectual Property Right, in relation 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 know-how 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 is a right provided under Trade Marks Act. Similarly the right mentioned as design in the definition is a right under the Designs Act. Therefore we find that the technical know-how received by the Appellant and the royalty payment made by the Appellant to Unisys is nowhere established to result from the use of any Intellectual Property Right.
4.2?We may further go on to add that the Intellectual Property Right should be a right under the Indian law. Intellectual Property Right not covered by the Indian laws would not be covered under taxable service in the category of Intellectual Property Right Services. We are fortified in our view by Board Circular F. No. 80/10/2004-S.T., dated 17-9-2004 which clarified that 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) that 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.
11. Insofar as the agreement with Investa Technologies S.A.R.L. is concerned the same was entered into on 14.8.2004, prior to IPR services being brought into the net of service tax w.e.f 10.9.2004. The service itself having been rendered prior to the introduction of the levy, the mere fact that payments for the same were made on a staggered basis over a period of time cannot be a ground for levying service tax merely with reference to the date on which payments were being made. We find that during the relevant period the issue as to whether a transaction is leviable to service tax and if so at what rate was required to be reckoned with reference to the date when the service was rendered and not with reference to the date on which payment is made. The law in this regard is settled by the decision of the CESTAT reported in 2008 (10) STR 243 which was affirmed by the Honble Gujarat High Court in the Appellants own case reported in 2010 (19) STR 807 as also by the Honble Delhi High Court in the case of CCE vs Consulting Engineering Services India (P) Ltd 2013 (30) STR 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.
12. We also note that the entire dispute being revenue neutral, there could have been no intention to evade payment of duty and consequently the extended period of limitation was per se not invokable. It is settled law laid down in the following amongst other judgements a series of judgement including that of the Apex Court that in a case where credit is available to an assesse itself it cannot be said that there is any intention to evade payment of duty, which is a pre-requisite for invoking the extending period of limitation. In the instant case also if any tax was payable it could have been available immediately to the Appellant, thereby rendering the entire dispute being revenue neutral. This being the case the invocation of extended period of limitation is clearly not justified:-
a) Reliance Industries Ltd vs CCE 2009 (244) ELT 254 (Tri)
b) CCE vs Indios Abeis Ltd 2010 (254) ELT 628 HC Guj
c) Mafatlal Industries Ltd vs CCE 2009 (241) ELT 153 (T); affirmed by the Apex Court by dismissing the Civil Appeal reported in 2010 (255) ELT A77 (SC)
d) Nirlon Ltd vs CCE 2015 (320) ELT 22 (SC)
13. The appeal is accordingly allowed and the impugned order is set aside with consequential relief in accordance with law.
(Pronounced in Court on 21.06.2016) (C.J. Mathew) Member (Technical) (M.V. Ravindran) Member (Judicial) nsk ??
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1 12Appeal No. ST/50/12