HC rejects TTK Group’s plea on service tax levy

By: |
Chennai | November 22, 2014 12:50 AM

The Madras High Court has dismissed a petition by TTK Group seeking prohibition on levying...

The Madras High Court has dismissed a petition by TTK Group seeking prohibition on levying of service tax on the royalty resulting from the transfer of right to use its logo by the company’s subsidiaries.

The court, while observing that the writ petition was not maintainable, ruled that the issue raised by the petitioner being one related to classification, there was a clear bar of jurisdiction imposed under the statute.

TTK & Co which has presence across several segments of industry including consumer durables, pharmaceuticals & supplements and bio-medical devices had registered its logo ‘ttk’ as an ‘artistic work’ under the Copy Rights Act, 1957.

It had permitted its group companies, including TTK Prestige and TTK LIG, to use the same logo. The company entered into agreements with its group companies, which have been permitted to use the artistic work in their packages, cartons and containers, receiving royalty in respect of the same.

Post introduction of the service tax under the Finance Act, 1994, the commissioner of service tax, Chennai, while checking the books, had directed that TTK was liable to pay service tax on the transaction of transfer of right to use copyright. TTK is said to have explained to the commissioner that there was no liability to pay service tax on the transfer of use of copyright.

Notwithstanding this, the commissioner issued show cause notice to the company demanding service tax to the tune of R1.82 crore, on the royalty received for the period between 2004 and 2007.

As against the notice, the company preferred an appeal before the Custom Excise & Service Tax Appellate Tribunal (CESTAT) and in the meantime also moved a writ petition at Madras High Court, obtaining an interim order. Thereafter, the company withdrew the appeal filed before the CESTAT.

Justice TS Sivagnanam said that the issue as to whether service tax was liable to be paid on the nature of transaction done by the petitioner with its group companies, whether the logo which was registered under the Copy Right Act was used as an artistic work or merely with the purpose to show that the products marketed by their group companies also belong to the TTK group, were all issues which involve adjudication of disputed questions of fact. These issues cannot be permitted to be raised for being adjudicated in a writ petition, he said.

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