2025-VIL-2106-CESTAT-CHD-ST
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SERVICE TAX CESTAT Cases

Service Tax – Denial of exemption – Demand of tax – Appellants are engaged in manufacture and sale of various fast moving consumer goods – Vide licensing agreements, licensors granted Appellants the non-exclusive right to use Intellectual Property Rights (IPR) in connection with design, production, marketing and sale of products – Appellant classified services under category of IPR and claimed benefit of Exemption Notification – Department issued show cause notice alleging that services received by Appellant were classifiable under category of Franchise Service and therefore, Appellant was not eligible to avail benefit of Exemption Notification – Commissioner confirmed demand of Service Tax – Whether services received by Appellant from their overseas companies are services related to IPR or Franchise Service – HELD – According to Appellant, services received by Appellant would fall under category of IPR service, while according to Department, services received by Appellant would fall under category of franchise service. Agreement between Appellant and licensors is only in relation to grant of license with respect to IPR in connection with design, production, distribution, marketing and sale of products. Arrangement between Appellant and licensors will not constitute a franchisee agreement, since licensor does not have any significant control over operations of Appellant. Services are rightly classified by Appellant under IPR Service and same are not classifiable as Franchise Service and therefore, Appellant is eligible to avail benefit of Exemption Notification. Impugned order passed by Commissioner is set aside – Appeal allowed
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