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2022 (9) TMI 436 - Service Tax
Levy of service tax - right to use component of the Trademark License Agreement - grant of license under the Trademark License Agreement would amount to deemed sale under article 366 (29A) of the Constitution, or not - period of dispute in the present appeal is from 2008-009 to 2013-14 - HELD THAT:- It can safely be said that under Sales Tax, there is transfer of possession and effective control in goods, while there is no such transfer of possession and effective control under Service Tax.
A perusal of the terms of the Trademark License Agreement dated August 27, 2008 and the Retail License Agreement executed on October 01, 2007 would show that there is a noticeable difference between the two. In the case of the Retail License Agreement only a non-exclusive and non-transferrable license to use the trademark was granted by the respondent to Pantaloon. Pantaloon also agreed that the respondent would have the right to control the standard and quality of the products. There is also no restriction in granting the license to others during the license period. This agreement is clearly, therefore, outside the purview of article 366 (29A) (d) of the Constitution that defines tax on the sale or purchase of the goods. Service tax would, therefore, be chargeable.
However, in the case of the Trademark License Agreement an exclusive license to use the trademark in any manner during the term of the agreement was granted. Such a license could not be granted to any other person during the period of the agreement. This would clearly fall within the meaning of the phrase “transfer of right to use the goods” and would be covered by article 366 (29A) (d) of the Constitution. Service Tax would, therefore, not be payable.
The Principal Commissioner, therefore, committed no illegality in holding that service tax could not be levied on the “right to use” component of the Trademark License Agreement - Appeal dismissed.