Customs, Excise & Service Tax Appellate Tribunal, Chennai: In an appeal filed against order of the demand of service tax by the Adjudicating authority, the two-member Bench of Vasa Seshagiri Rao (Technical Member) and P. Dinesha (Judicial Member)* allowed the appeal and held that the use of trade marks and technology by the appellant under Production Services Agreement with DTS Inc., a Corporation incorporated in the United States of America (‘DTS’) did not constitute ‘intellectual property rights’ within the meaning of Section 65(55a) of the Finance Act, 1994 (‘the Act’). The Tribunal stated that the mark in question was not registered in India and therefore, the related services were not ‘intellectual property services’ within the meaning of Section 65(55b) of the Act. Thus, service tax couldn’t be levied.
Background:
The appellant rendered sound recording and production services for which it collected fees from its customers. The appellant was appointed as a non-exclusive provider of production services for films produced and released in India for DTS. The appellant was under the Production Services Agreement and was permitted to use the imported equipment of DTS to create DTS soundtracks and provide production services in accordance with DTS guidelines. As a consideration under the agreement, the appellant paid a license fee to DTS for every soundtrack produced. The agreement also permitted the use of some technology trade marks of DTS by the appellant.
The Adjudicating Authority formulated the issue for consideration to be whether the use of such trade marks and technology by the appellant amounted to the import of intellectual property service and whether, these imports of services were liable to service tax on reverse charge basis. The Adjudicating Authority then considered the provisions of 65(55a) and 65(55b) of the Act as well as the provisions of Section 65(105)(zzr), to conclude that intellectual property services were rendered by DTS to the appellant. He concluded that this was an import of services which were liable to tax on reverse charge basis under Section 66-A of the Act read with rule 2(1) (d)(iv) of the Service Tax Rules, 1994.
The present appeal filed by the appellant against the demand of service tax by the Adjudicating Authority invoking Section 73(1) and 73(2) of the Act.
Analysis, Law and Decision:
The issue for consideration was whether only intellectual property registered in India or governed by Indian law will be liable to service tax.
The Tribunal noted that the basis of the levy by the Revenue was that the activities of DTS under the agreement constituted “Intellectual Property Services” within the meaning of Section 65 (55b) of the Act. Section 65(55b) of the Act provides that to constitute “Intellectual Property Services”, the actions contemplated therein must be in respect of “any intellectual property right”.
The Tribunal followed the order passed in Intas Pharmaceuticals Ltd. v. CST, 2022 SCC OnLine CESTAT 217 wherein it was held that “Intellectual Property right” as defined in Section 65(55a) implies that the Intellectual Property Right should be protected under any Indian law in force, and only then it becomes taxable service. The principle laid down was that intellectual property rights should be registered under Indian law to be taxed.
The Tribunal noted that intellectual property in question was not registered in India. Thus, they did not constitute ‘intellectual property rights’ within the meaning of Section 65(55a) of the Act. Consequently, the related services were not ‘intellectual property services’ within the meaning of Section 65(55b) of the Act. Thus, the levy of tax could not be upheld, and the appeal was allowed.
[Real Image Media Technologies (P) Ltd. v. CCE (GST), Service Tax Appeal No. 42106 of 2015, decided on 29-10-2025]
Advocates who appeared in this case :
For the Appellant(s): R. Anish Kumar
For Respondent(s): O.M. Reena, Authorised Representative