Whether providing trade secret to the competitor firm covered under Intellectual Property Right Services?

PJ/Case Laws/2012-13/1392

Case: - M/s THERMAX LTD Vs COMMISSIONER OF CENTRAL EXCISE, PUNE-I

Citation: - 2013-TIOL-94-CESTAT-MUM

Brief facts: - Brief facts of the case are that the appellant is a manufacturer of ion exchange resins. In USA, one Shri Narendra Singh who was working with M/s Purolite International Ltd., a competitor of the applicant, left the job and provided trade secret for manufacturing of ion exchange to the applicant. Their competitor M/s Purolite International Ltd. filed a suit in the USA court and the applicant was charged with that they are using the trade secret of M/s Purolite International Ltd. Court proceedings were initiated against the applicant. Thereafter, the applicant entered into an agreement with M/s Purolite International Ltd., to settle the dispute out of court. As per the settlement, they paid considerations for the use of trade secret and became the co-owner of the Purolite's technology and information transferred by Shri Narender Singh to the applicant. The Revenue is of the view that the consideration paid by the applicant to Purolite is covered under Intellectual Property Right under reverse charge mechanism, therefore, the applicant is liable to pay service tax on the entire consideration.

Appellant’s Contention: - The learned counsel for the appellant contended that the above consideration is not for the service rendered. It is out of court settlement of dispute between them and Purolite. He further submitted that the applicant has become co-owner of the technology used by the Purolite with undivided shares. He also contended that the activity of transfer of trade secret i.e. technology and information is not covered under Intellectual Property Right applicable in India. Therefore, the impugned demands are not sustainable.

Respondent’s Contention: -On the other hand, the learned AR reiterated the findings of the impugned order and submitted that the Commissioner has considered the issue in detail and arrived at a decision. As the applicant is covered under Intellectual Property Right service therefore the applicant be asked to pre-deposit the entire demand at this stage.

Reasoning of Judgment: -Heard and perused the impugned order and relevant provisions of law. The intellectual property right 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. While framing the charge against the applicant, the adjudicating authority has not specified specifically under which part of the Intellectual Property Right applicable in India the applicant is covered.

In view of the above observations the impugned demands are not sustainable. Therefore, prima facie the applicant has made out a case for waiver of pre-deposit of the entire demand. Accordingly, commissioner grant waiver of pre-deposit of dues adjudged in the impugned order and stay recovery thereof during the pendency of the appeal.

Decision: - Stay petition allowed.

Comment:- The analogy drawn from this case is that stay of demand can be granted when it has not been clearly specified in the order that how the activity of providing trade secret to the competitor firm is covered under the intellectual property right services.

Comments

PJ/Case Laws/2012-13/1392

Post a Comment

Query