The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that no service tax is applicable on permanent transfer of Intellectual Property Rights (IPR).
The appellants, SKOL Breweries Ltd. are registered under the category of Sponsorship Service, InformationTechnology Software Service, Management Consultant, Consulting Engineers, Banking and Financial, Scientific and Consulting Service, Scientific Testing and Certification Service etc.
During one of the audits conducted for the period April 2005 to February 2010, the audit party sought details from the appellant with respect to expenditure in foreign currency incurred by the appellant, during the financial year 2006-2007.
Specifically, one of the items under scrutiny was with respect to assignment of trademark by Foster’s Australia Ltd. to the appellant for which the Deed of Assignment was executed and payment of Rs.162 crores was made by the appellant to Foster.
The Appellant filed reply to the audit objections raised by the respondent and clarified to the audit authorities that this was the case of permanent transfer of all rights, title and interest in the trademark/brand by Fosters to the appellant and the said transaction qualified as “permanent transfer‟ or “sale transaction‟ and therefore was not liable to service tax.
The Department was not satisfied with the reply of the appellant and thereafter a show-cause notice was issued raising a demand of Rs.20.03 Crores along with interest and penalty.
The Appellant filed a detailed reply to the show-cause notice along with all the documents and submitted that it is a case of permanent transfer of brand and is not subjected to service tax. After following the due process, the learned Commissioner passed Order-in-Original confirming the service tax proposed to be recovered in the show-cause notice along with interest and various penalties.
The issue involved in the present case is whether the appellant is required to pay service tax on a reverse charge basis for the payment made to Fosters Australia towards permanent transfer of Fosters trademark and brand under the Deed of Assignment.
The Coram consisting of S.S. Garg and P.Anjani Kumar held that the assignment of trademark and the IPR amounts to permanent transfer and no service tax is applicable on permanent transfer of IP Rights by Foster’s to the appellant.
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