M/S Poonam Roofing Products Pvt. Ltd. v. Commissioner of Central Excise, Pune-III

COURTCustoms, Excise and Service Tax Tribunal
JUDGES/CORAMShri Ramesh Nair, ShriRaju


These appeals have been filed by M/s Poonam Roofing Products Pvt. Ltd. against confirmation of demand of Service Tax along with interest and imposition of penalty under Section 78 of the Finance Act, 1994.


The facts of the case are as follows: The Appellant are the owners of brand name ‘SWASTIK’ and had entered into an agreement with M/s New Sahyadri Industries Ltd. for permitting them to use the said trade name. As per the agreement, the appellants were charging 0.01% of the value of the sale of the goods from M/s New Sahyadri Industries Ltd. He pointed out that Revenue has treated this amount as a consideration for the taxable service provided under Intellectual Property Service and demanded Service Tax on the same. The appellants argued that they have paid VAT on this receipt treating brand name as goods. They further pointed out that under the VAT Laws, brand name is treated as good and therefore, transfer of right to use of goods is taxable under VAT and since they have paid the VAT, there cannot be any liability of Service Tax.


The main issues in the case were:

  1. Whether the trade between the parties can be termed as a service or goods?
  2. Whether the appellants are liable to pay service tax when they have already paid VAT or not?

Summary of court decision and judgment

It is apparent from the agreement that, (i) No exclusive right to use the trade mark ‘Swastik’ has been given to M/s New Sahyadri Industries Ltd. The appellants are free to give this trade mark to other even in the same territory. (ii) M/s New Sahyadri Industries Ltd. are not free to permit use of the trade mark to anybody else i.e. they cannot sub-license. If M/s New Sahyadri Industries Ltd. wishes to permit to any other support for use then they have to seek permission of the appellant. The trade mark cannot be assigned to anybody by M/s New Sahyadri Industries Ltd. While the agreement is for a period of 10 years, both parties have option to terminate the agreement by giving the notice of three months.

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The agreement in the instant case is an agreement of permissive use of the trade mark ‘Swastik’ and no transfer of right to use of the said trade mark. In these circumstances, we do not find any merit in argument of the appellant that the said transaction is not liable to Service Tax under Finance Act, 1994.

The appellant had obtained registration under the category of Intellectual Property Service only on 25.6.2007 and were filing nil returns against this service. During auditing of the records of the appellant, the Department came to know that the appellant was not discharging their Service Tax liability on this service. It is a fact that in their Service Tax-3 returns for the relevant period, the Appellant had wilfully misstated that they have received zero amount towards provision of this service. Thereby appellants’ contention that the impugned services were non-taxable is not legally correct. Thus, wilful misstatement on the part of the appellant stands established. In so far as the invocation of extended period is concerned, the Court find that the elements for imposing the penalty are identical to those necessary to invoke the extended period of limitation. In these circumstances, no separate specific findings are needed for imposition of penalty under Section 78 of the Finance Act, 1994. The appeals thereby stood dismissed.


By analysing the question as whether the transfer is of goods or services, the court has made a sound observation that the agreement is of permissive use of trademark and not a transfer of right to use the trademark; thus making it liable to service tax. The question has been time and again dealt promptly by the court in n number of case but the cases does not hold universal or common conditions to be imposed over all case as the factual aspects of each case are to be strongly taken into consideration before relying on the judgments of the previously dealt cases. Towards the question of VAT and service tax the Court has rightfully refrained from pondering over the issue as it goes beyond its jurisdiction.

Also Read  R v. M’ Naghten


The right to use a trademark over complementary products and the transfer of the right to use such trademark differs from each other and the Court in this case has commendably penned the difference and delivered an appropriate judgment. 

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