2024-VIL-1301-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Liability on Transfer of Goodwill, Intellectual Property Rights Services - Appellant received income from "support services", "license fee" and "other income", but was only paying service tax on the "service fee" received under "Business Support Services" - Department alleged that the income received as "license fee" was actually consideration for rendering "Intellectual Property Rights (IPR) Services" and demanded service tax, interest and penalties - Whether the income received by the appellant as "license fee" for transfer of the "Goodwill" of the business is taxable under the category of "Intellectual Property Rights (IPR) Services" – HELD - The words “Goodwill in name” used in addition to other rights are patently clear to show that Goodwill in name and Goodwill in Business were intended to be two different things though both are intangible in nature. “Name” is the brand/trade mark, the intellectual property whereas “Business” is the reputation - the Goodwill Valuation Report also reveals that the valuation was of the ‘goodwill of firm’ as a going concern and it was not the value of a trade mark. In view thereof, what that the valuation took into account is the long standing of the Firm, the professional manner in which the Firm was run and handled its clients and the probability of their returning to the Firm. It is clear that valuation was for an intangible property but being different from the Intellectual Property (Trade Mark) - the "Goodwill" transferred by the appellant is the Goodwill of the Business, which is an intangible property but different from Intellectual Property (Trademark) - Goodwill is not recognized as an "Intellectual Property Right" under any law in India, and hence the income received as "license fee" cannot be taxed under the category of "Intellectual Property Rights (IPR) Services". In various judgements the Supreme Court has distinguished Goodwill from Trademark and held that Goodwill has no independent existence and is directly related to the business or profession - the nature of services provided by the appellant to the law firm is that of "Business Support Services" and not "Manpower Recruitment or Supply Agency Service" - the essence of "Business Support Service" is to outsource a specified work to another person in lieu of compensation, whereas "Manpower Recruitment or Supply Agency Service" is limited to the supply of manpower. In the instant case, the appellant was responsible for the effective outcome of the assigned work using its own manpower, equipment, and expertise, which is characteristic of "Business Support Service" and not "Manpower Recruitment or Supply Agency Service" - order under challenge has wrongly confirmed the demand of Service Tax under Manpower supply service – the impugned order is set aside and the appeal is allowed - Whether the extended period of limitation has been rightly invoked by the Department – HELD - the extended period of limitation has been wrongly invoked by the department - the appellant was regularly paying tax and filing returns, and there was no act of suppression or misrepresentation by the appellant - mere failure to declare does not amount to willful suppression, and there must be some positive act from the assessee to find willful suppression.
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