CESTAT Rules, Service Tax Not Payable On Royalty Received For Group Companies' Use Of Copyrighted Logo
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai has ruled that royalty received by T.T. Krishnamachari & Co. from its group companies for using the copyrighted ‘TTK’ logo does not attract service tax under the category of Intellectual Property Rights (IPR) services. The Bench comprising Judicial Member Ajayan T.V. and Technical Member M. Ajit Kumar concluded that the benefit of the exemption under amended Notification No. 25/2012-ST, relating to temporary transfer or permitting use of copyright, squarely applies to the assessee.
The appellant, a partnership firm engaged in trading, distribution, warehousing and clearing and forwarding operations, had developed the ‘TTK’ logo, which is registered as an ‘Artistic Work’ under the Copyright Act, 1957. The logo is used by its group companies on packaging, containers, promotional literature and related materials in connection with the products they manufacture or distribute. The Department alleged that royalty earned for permitting this use constituted taxable consideration under IPR services and issued two Statements of Demand covering the periods April 2013 to March 2014 and April 2014 to March 2015. The adjudicating authority confirmed the demands along with interest and penalties under Sections 76(1) and 77 of the Finance Act, 1994.
On appeal, the assessee argued that the issue had already been settled in its favour by earlier orders of the Chennai Bench, including Final Order No. 43276/2017 and Final Order Nos. 40366–40372/2025. These orders held that the ‘TTK’ logo, being a copyrighted artistic work, is excluded from the ambit of IPR services, which do not cover copyright. It was pointed out that Notification No. 25/2012-ST, as amended by Notification No. 03/2013-ST, specifically exempts services relating to “temporary transfer or permitting the use or enjoyment of a copyright” pertaining to original literary, dramatic, musical or artistic works.
The Tribunal agreed with the appellant’s submissions and noted that the earlier orders in their favour had attained finality. The Bench also examined the nature of the logo and referred to detailed reasoning from prior decisions distinguishing a “house mark” from a trademark. It reiterated that the ‘TTK’ logo is registered under the Copyright Act, and infringement or enforcement relating to it would arise only under that Act—not under the Trade Marks Act. Consequently, the logo cannot be treated as a trademark for purposes of service tax under IPR services.
The Tribunal also relied on judicial precedents such as Astra Pharmaceuticals and ESPN Software India Pvt. Ltd., which draw clear distinctions between artistic works protected under copyright and brand names or trademarks used in the course of trade. The Tribunal emphasised that the legislative scheme expressly excludes copyright from the definition of “intellectual property right” in Section 65(55a) of the Finance Act, 1994, thereby removing such receipts from the levy. It further noted the Supreme Court’s ruling in Imagic Creative Pvt. Ltd., which underscored the mutual exclusivity of VAT and service tax. Holding the exemption fully applicable to the appellant, the Bench concluded that the demands confirmed in the impugned orders lacked merit and could not be sustained.
CESTAT set aside the Orders-in-Original dated 28 December 2016 and allowed the appeals with consequential relief, ruling that royalty received for use of the copyrighted ‘TTK’ logo is not liable to service tax under IPR services in view of the applicable exemption and prior binding precedents.
Appearance
Counsel for Appellant/ Assessee: G. Vardini Karthik
Counsel for Respondent/ Department: Anandalakshmi Ganeshram
Cause Title: M/s. T.T. Krishnamachari & Co. v. Commissioner of GST and Central Excise
Case No: Service Tax Appeal Nos. 40635 and 40636 of 2017
Coram: Judicial Member Ajayan T.V., Technical Member M. Ajit Kumar
