Relief to TATA Beverages: CESTAT Rules SCN Issued in 2010 for Alleged IPR Service Invalid as Business Transfer Details Disclosed in 2005 [Read Order]

The Kolkata Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that the Show Cause Notice (SCN) issued in 2010 for alleged IPR service was invalid citing that the business transfer details were disclosed in 2005.

TATA Global Beverages Ltd (appellant) is engaged in the business of growing, manufacturing and marketing /sale of tea. The appellant entered into an agreement for the transfer of its plantation business in South India with Kanan Devan Hills Plantation Company Private Limited (KDHP).

The consideration of Rs. 65.70 crores and Rs. 1.20 crores agreed for slump sale transaction, however these lump sum consideration was adjusted among various assets. The KDHP was permitted to use the term ‘Kanan Devan’ as part of their Corporate name.

The department issued Show cause notice stating that transfer of intellectual properties like Goodwill and the right to use the term ‘Kanan Devan’ is taxable under the category of Intellectual property right service (IPR service). Therefore, the department confirmed the Service tax. Aggrieved by the order, the appellant filed an appeal before CESTAT.

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The counsel for the appellant submitted that the demand of service tax for the transfer of intellectual properties was incorrect and factually misplaced. The counsel also argued that the demand raised is also liable to set aside as it was barred by the limitation.

The counsel also contended that the revenue raised the demand by invoking an extended period of limitation, which was not sustainable in the eyes of the law. The counsel also argued that the copy of transfer details was disclosed to the department in 2005, but the notice was issued in 2010 by invoking an extended period of limitation.

The two-member bench comprising R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical Member) observed that the transfer details were disclosed to the department in 2005 but the notice was issued to the appellant in 2010. Despite the business transfer information available to the department, they invoked an extended period and there was no suppression of facts.

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The tribunal observed that the demand confirmed by invoking extended periods of limitation was not sustainable. Therefore, the tribunal set aside the order of demand citing it was barred by limitation.  

To Read the full text of the Order CLICK HERE

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