The Mumbai CESTAT in the case of Y.M Krishna S.S.K Ltd. v. Commissioner of Central Excise, Pune-II,2014 (36) 838 (Tri. – Mumbai) has held that the no Service tax is payable under Intellectual Property Service in respect of selling agency agreement entered into between the Appellant and M/s Talreja Trade (HUF) for allowing the HUF to use the brand name ‘Pahili Dhar’ in selling the appellant’s products.

The Appellant is engaged in manufacturing country liquor (out of their raw material/packing material) under brand name “Pahili Dhar”. The Appellant had entered into selling agency agreement with HUF for sale of country liquor of their brand name wherein, the packing material was to be supplied by HUF and afterwards HUF was supposed to collect the sale proceeds from the customers and after deducting the price of the packing material, essence, etc., the remaining sale proceeds were to be handed over by him to the appellant.

The Department issued SCN alleging that the Appellant have allowed HUF to use its brand name for marketing country liquor and this activity falls under the category of Intellectual Property Services.

The Hon’ble CESTAT in the present case has held that the transaction is purely of sale of the goods through an agent and not a transaction of allowing another to use Intellectual property. Further the agreement clearly mentions that M/s Talreja Trade will not be entitled to the use of the brand name in any way. The agreement between the Appellant and M/s Talreja Trade was for allowing to use the brand name for sale of appellant’s products so as to ensure maximum production and sale of Country Liquor. The minimum guarantee of profit per month given or assured by the agent to the Appellant have been misunderstood as Royalty which was not the fact.