TMI Blog2003 (12) TMI 611X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner to pay tax liability of Rs. 5,41,01,250. 3.. According to the petition averments, under a memorandum of understanding dated May 24, 2000, three companies namely (i) Wintac Formulations Pvt. Ltd., which later on changed to Hari Formulations Limited, which company subsequently merged with the BPRL Fine Chemicals Ltd., the petitioner in W.P. No. 22009 of 2002; (ii) the petitioner in W.P. No. 22013 of 2002, namely, M/s. Bangalore Pharmaceutical and Research Laboratory Private Limited and the petitioner in W.P. No. 22015 of 2002; (iii) Recon Ltd, which is now changed to Wintac Limited with Cadila Healthcare Ltd., agreed to float a joint venture company by name Recon Health Care Limited agreeing to transfer their trademarks/brands, marketing and distribution personnel including the personnel connected with finance, accounts, taxation, administration, legal and pharma development to the newly floated joint venture company. Pursuant to the abovesaid memorandum of understanding, these three companies have executed three different documents in favour of Recon Healthcare Ltd. (a joint venture company) for valuable consideration. The three agreements executed by the respecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner in the second petition also executed noncompetition agreement dated June 30, 2000 as per annexure E to the writ petition agreeing not to compete with the assignee for a period of 3 years in respect of the products mentioned in the Schedule to the said document by receiving a sum of Rs. 40 lakhs. 5.. Similarly, the petitioner in the third petition, pursuant to the memorandum of understanding has sold and assigned its trademarks in respect of certain products in favour of Recon Healthcare Limited on June 30, 2000 by receiving consideration of Rs. 11 crores. The details of trademarks sold in favour of the Recon Healthcare Limited is mentioned in the Schedule to annexure C to the writ petition. Certain items of technical know-how of the petitioner were also sold under an agreement of transfer of know-how in favour of Recon Healthcare Limited, by receiving a consideration of Rs. 25 crores. The list of products for which know-how is transferred in favour of the Recon Healthcare Limited is also enclosed at annexure D to the writ petition. Similarly, the petitioner also entered into an agreement known as non-competition agreement, agreeing not to compete with the business s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is yet to consider the replies sent by the petitioners. According to the State, the trademarks, technical know-how, noncompetition rights are incorporeal and intangible rights and that the sale of such rights attracts the provisions of Sales Tax Act. 8.. Relying upon Vikas Sales Corporation v. Commissioner of Commercial Taxes reported in [1996] 102 STC 106 (SC), counsel for the respondents contends that sale of these rights amount to sale of incorporeal rights and treated as a special property and it attracts sales tax. It is also contended that the sale of these rights are nothing but sale of Rep-licence and sale of intellectual property rights. It is further contended that the writ petitions filed by the petitioners are not maintainable. The respondents also contended the petitions as premature, as the notices challenged by the petitioners are only a show cause notices issued by the respondents, for which a detailed reply has been given by the petitioners. The respondents further contended that the properties sold by the petitioners under annexures C, D and E are to be considered as sale of goods or not, is a disputed question of fact which has to be ascertained only after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d non-competition rights have no situs and that they are not goods within the State of Karnataka and even if it is considered as goods, the said goods are not sold in Karnataka and therefore, KST Act does not apply to the present transaction. In support of the said contention, he has relied upon [1897] 1 QBd 175 (Smelting Company of Australia v. Commissioners of Inland Revenue). 11.. He further contended the property in trademarks and technical know-how passed on from the transferor to the transferee at Delhi, where the documents in each case were executed and as has been decided by the Supreme Court the KST Act must be read down to the effect that it would not apply to transactions if the transaction took place outside the State. In support of the said contention, he has relied upon [2000] 119 STC 182 (SC); (2000) 6 SCC 12 (20th Century Finance Corpn. Ltd. v. State of Maharashtra). Lastly, he contended that respondents have no right to issue show cause notices, which are now questioned in these petitions. If the second respondent does not have jurisdiction to issue notice as per annexure A to each of the writ petitions, the petitioners can maintain writ petition under article 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yet to be granted by the authorities and the sale of such transfer amounts to sale of Rep-licence and attracts sales tax. In support of his contention, he has relied upon the judgment of the Supreme Court Vikas Sales Corporation v. Commissioner of Commercial Taxes reported in [1996] 102 STC 106. 14.. Having heard the learned counsel for the parties, the following points will emerge for consideration: (1) Whether the petitioners can challenge show cause notices issued by the second respondent on the ground that second respondent has no jurisdiction to issue such notice? (2) Whether the transfer of trademark, technical know-how and non-competition agreement are to be held as sale of goods? (3) Whether the petitioners are entitled to any relief? 15.. In the light of the submissions made by Sri Chidambaram, learned Senior Counsel for the petitioners and Sri Anand, learned Government Advocate, this Court has to consider whether the petitioners can challenge the show cause notices issued by second respondent and if this Court holds that the petitioners can maintain petitions challenging the show cause notices, then only this Court has to consider whether the transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002 has also sold trademark in respect of certain products manufactured by the petitioner, which is available at page 78 of the writ petition. By comparing these three Schedules, this Court has noticed that the first petitioner has sold the trademark in respect of Alphacillin, Amebis forte, Amebist and Hepoferrin and most of the trademarks sold by the first petitioner are also sold by the second petitioner. Similarly, the third petitioner also sells some of the products sold by the first and second petitioner. For example, in W.P. No. 22013 of 2002, the petitioner has sold Vasolar and the trademark pertaining to the said product is also sold by the petitioners in the remaining writ petitions. The trademarks of Imol, Eyemol are also sold by the petitioner in the first writ petition which also find place at page 83 in the second writ petition. Therefore, this Court is of the opinion that the respondents have to ascertain whether the documents executed by the petitioner in each of the petitions at annexures C, D and E are really sold and assigned the trademarks, technical know-how in respect of the trademarks which are yet to be granted in their favour. If the memorandum of un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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