TMI Blog2015 (2) TMI 656X X X X Extracts X X X X X X X X Extracts X X X X ..... edings. By Clause (2) Obligations and responsibilities of the proprietor are set out and by Clause (3) the "grant" in terms of the agreement is set out. So long as the agreement transfers the right to use intangible goods which are the trade marks in this case, then, there is no question of the petitioners escaping the consequences of the enactment. The enactment and the definitions which we have referred together with the substantive provisions does not envisage exclusive and unconditional transfer of the above right. The Act has been brought in and with a specific object. The definition of the term "goods" means all kinds of property (not being newspapers, or actionable claims or money, or stocks, shares or securities). Therefore in terms of this definition and the schedule entry No.7, intangible / incorporeal goods and particularly trade marks are brought within the purview of the enactment. Even the definition of the term "dealer" in section 2(4) would indicate that it means any person who whether for commission, remuneration or otherwise transfers right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 of 2012, Notice of Motion [L] No.214 of 2013 - - - Dated:- 20-1-2015 - S. C. Dharmadhikari And Sunil P. Deshmukh,JJ. For the Appellants : Mr Aspi Chinoy, Senior Counsel with Mr.Astad Randeria,Mr R K Satpalkar, Mr Pinkesh Shah i/b.Mulla and Mulla and C B C For the Respondents : Mr A A Kumbhakoni, Special Counsel a/w. Mr V A Sonpal and S B Lolage JUDGMENT S. C. Dharmadhikari,J. 1. By this Writ Petition under Article 226 of the Constitution of India, the petitioners are seeking the following reliefs: (a) this Hon'ble Court be pleased to issue a writ of Certiorari or a writ in the nature of Certiorari or any other appropriate writ, order or direction; (i) quashing and setting aside the said impugned orders being exhibits C1 to C4, D1 to D4, E hereto and K4A, K4B, K4C, K4D, K5A, K5B, K5C, K6A, K6B and K6C. (ii) quashing and setting aside the said Notices dated July 17, 2012 for recovery of the alleged sales tax dues for the period 19982002 being exhibits F1 to F4 hereto; (iii) quashing and setting aside the said Orders dated August 9, 2012 for levy of interest and penalty in respect of the said alleged sales tax dues for the period 1998 - 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal to refer the questions of law for opinion and answer of this Court expired. However, on the very next day, namely, 14th September, 2012 a Writ Petition in this Court has been filed, namely, the present Writ Petition. On 2nd November, 2012, an order is passed in the present Petition wherein a statement is recorded that in view of availability of the alternate remedy the petitioners would invoke it within two weeks from the date of the order. The present Writ Petition was kept pending. Mr. Kumbhakoni, therefore, submits that the petitioners are accepting the fact that the remedy provided under Section 61 is not only alternate but equally efficacious and they deliberately did not invoke it earlier but availed of purportedly the same after the limitation for availing it had expired. This conduct of the petitioners is intentional and deliberate. The Reference Application filed belatedly could not have been entertained by the Tribunal and it was rightly dismissed on 15th January, 2013. Thereafter the petitioner is pursuing this Writ Petition. Mr. Kumbhakoni submits that the petitioners are a Corporate entity and advised by legally trained and competent minds. They are not illite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point, we are not impressed by the objections raised by Mr. Kumbhakoni. The order passed on 5th February, 2014 has been perused by us in its entirety. This Court despite such an objection proceeded to grant rule on the Writ Petition and heard parties on the point of interim relief. After hearing them extensively the Court refused the interim relief. Against the order of this Court, the petitioners approached the Hon'ble Supreme Court by filing a Special Leave Petition being Petition for Special Leave (Civil) No.4701 of 2014. That was placed before the Hon'ble Supreme Court on 14th February, 2014 and the Hon'ble Supreme Court proceeded to dismiss it but at the same time requested this Court to dispose of the Petition as early as possible. In the light of the same and finding that the availability of an alternate equally efficacious remedy does not mean there is an absolute bar in entertaining a Writ Petition under Article 226 of the Constitution of India that we reject the preliminary objection raised by Mr. Kumbhakoni. We are not entertaining it at this belated stage as the Writ Petition cannot be dismissed on this short point. Having found that there are extensive plea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... followed a common and standardized Code of Conduct in all their dealings with other companies and third parties as well as adopt and subscribe to standardized marketing indicia in respect of the products and services of the subscribing companies. Thus, the agreement draws up a scheme known as TATA Brand Equity and Business Promotion Scheme to achieve these objectives and the obligations in respect thereof have been set out in this agreement. The petitioners, therefore, claim that such an agreement will not attract the law in question and which is styled as Maharashtra Sales Tax on the Transfer of Right to use any Goods for any Purpose Act, 1985 (for short, referred to as the Act of 1985 ). 12. The petitioners do not dispute that the agreements with these subscribing companies were examined in the year 2003 by the Sales Tax Officer, Enforcement Branch and he came to the conclusion that the transaction embodied in the same was covered by the Act of 1985. Therefore he issued notices for assement for the years 199899, 199900, 200001 and 200102. Annexures B1 to B4 are the copies of these notices. Following the same, he passed four orders of assessment of dated 2nd August, 2003 (Anne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Deluxe Caterers Pvt. Ltd. Vs. State of Maharashtra in Second Appeal Nos.1589 to 1591 of 2006 decided on 9th February, 2011 and M/s. Melrose Trading Corporation Pvt. Ltd Vs. The State of Maharashtra in Second Appeal Nos. 503, 504 and 505 of 2007 decided on 30th September, 2011. 17. The essential grievance of Mr. Chinoy is that when the orders passed in the case of M/s. Smokin' Joe (supra) and M/s. Diageo India (supra) apply then, the Tribunal should have applied them and the judgment of the Hon'ble Supreme Court in the case of Bharat Sanchar Nigam Limited Vs. Union of India and others reported in (2006) STC Vol. 195 Pg. No.91. In the identical circumstances as that of M/s. Smokin' Joe (supra) and M/s. Diageo India (supra) the petitioners should have been granted reliefs. The petitioners heavily relied upon the judgment of the Hon'ble Supreme Court in the case of BSNL (supra) and particularly paragraphs97 and 98 thereof. If the facts and circumstances were identical, then, the least that was expected from the Tribunal was to consider the submissions of the petitioners seriously and not brushed them aside and equally the orders passed by it from time to time. They ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it should not proceed to take a view contrary to it creating a judicial uncertainty. There should not be opposite conclusion as it would be destructive to the institutional integrity. Mr. Chinoy has invited our attention to the judgment of the Hon'ble Supreme Court in the case of Sub Inspector of Rooplal V. Lt. Governor reported in (2000) 1 SCC 644. Mr. Chinoy has also relied upon the judgment of the Hon'ble Supreme Court in the case of East India Commercial Co. Ltd. Calcutta and Anr. Vs. Collector of Customs, Calcutta reported in AIR 1962 SC 1893. 21. Thus, Mr. Chinoy submits that having regard to the nature of the Brand Equity and Business Promotion Agreement, the incident thereof is a right to use the trade mark and it is not a agreement for transfer of the trade mark. It is not a composite agreement covered by Article 366(29A) of the Constitution of India. The Tribunal has completely ignored the clauses of the agreement and hence its order is vitiated by an error of law apparent on the face of record. 22. Mr. Chinoy has contended that the Tribunal's order is perverse because the judgment in the case of BSNL was binding on it. There is an apparent inconsistency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f. There could be multiple transfers of right to use and in such circumstances so also when the Act does not contemplate cessation of user by the transfer or, then, levy cannot be avoided. The Tribunal's essential conclusion is, therefore, unassailable. The Tribunal may not have assigned detailed reasons for distinguishing the orders passed in the case of M/s. Smokin' Joe's (supra) and M/s. Diageo India (supra) but the foundation on which it has proceeded is sound in law. So long as the tribunal has not ignored the agreement or the stipulations and clauses therein, the provisions of the Act, then, its order cannot be termed as a perverse. 26. Mr. Kumbhakoni has summarized his arguments by a short note as well. In above circumstances and relying upon this note additionally it is submitted by him that the Writ Petition be dismissed. 27. For properly appreciating the rival contentions reference to the Act is necessary. The act is entitled as the Maharashtra Sales Tax on the Transfer of Right to use any Goods for any Purposes Act, 1985. It is an Act to levy and collect the tax on the transfer of the right to use any goods for any purpose (whether or not for a specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) the transfer of right to use any goods agreed to on or after the appointed day. 4. Levy of tax There shall be levied a tax on the turnover of sales in respect of the transfer of the right to use goods specified in the Schedule, at such rate not exceeding fifteen paise in the rupee, as the State Government may, by notification in the Official Gazette, specify from time to time [and different rates may be specified for different goods specified in the Schedule] 29. A bare perusal of these sections would indicate that subject to the provisions contained in the Act and the Rules made thereunder the tax is leviable on the turnover of sales in respect of the transfer of the right to use any goods and agreed to before the appointed day but the right to use is exercised on or after the appointed day or agreed to prior to the appointed day and wherein the right to use has been continued after the appointed day to the extent of sale price received or receivable in respect of such use on or after the appointed day and the transfer of right to use any goods agreed to on or after the appointed day. Levy of tax is on the turnover of sales in respect of the transfer of the right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teps with a view to prosecute, defend and enter into legal proceedings. By Clause (2) Obligations and responsibilities of the proprietor are set out and by Clause (3) the grant in terms of the agreement is set out. Clause 3.1 reads as under : 3.1 The Proprietor hereby grants to the Subscriber for the term of this Agreement and subject to its terms a personal but nonexclusive and non-assignable subscription to use the Business Name, the Marketing Indicia and a right to enter into a separate Registered User's / Licence Agreement for the use of the Marks in relation to its products and / or services in the Territory and/or Other Use in relation to the Subscriber's business. The Subscriber would be entitled to use any mark or symbol newly developed by the Proprietor for projecting the Group image, provided always that the Subscriber adheres to the Code and further that the Subscriber would assist the Proprietor in protecting and enforcing the said mark or symbol; PROVIDED HOWEVER that where on the date of execution of this Agreement the Subscriber has already been granted a Registered User of the Proprietor's existing Trade Marks and an Agreement to that effect is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of Clause 2 and notwithstanding any approval or agreement by the Proprietor pursuant to Clause 3.1 all conditions, warranties, statements, liabilities and guarantees whether statutory or otherwise as or relating to the products and services are the responsibility solely of the Subscriber and the Proprietor shall not be liable for any damage caused by the third party acts. 36. The proprietor shall not be liable for contract, tort or otherwise in respect of any of the acts set out in clause8.1( b). Then by clause (9) the TATA Code of Conduct is set out and by clause (10) the acknowledgment of rights is recorded. That right of the Proprietor is acknowledged by the Subscribers to the agreement. Then clause (12) is relied upon with its sub clauses so as to urge that there will be control of the Proprietor on the usage and the grant in terms of the clauses of the agreement. 37. The argument of the respondents and which commends to us is that a person may have various rights in respect of any goods, namely, to sell, to possess, to use, to consume etc., but, from and out of these rights, right to use goods is the subject matter of the act. It is transfer of the right to use goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is capable of being transferred and if transferred it may be subjected to tax. The Act does not give any indication as is rightly urged before us that the right to use the incorporeal / intangible goods should be exclusively transferred in favour of the transferee. The nature of the transfer or the nomenclature assigned to the act of will therefore not necessarily be decisive. Mr. Chinoy does not dispute that the right to use the goods is incapable of being transferred. The goods could be intangible as well. 41. We have referred to the clauses in the agreement between the petitioner No.1 and the subscribers in detail only to emphasise that it is not the argument of the petitioners that the right to use is not transferred. However, their argument is that it is not exclusive but conditional. Secondly, it is clear from the clauses of the agreement that the proprietor continues to control even the limited right conferred by the above clauses in favour of the subscribers. We are of the opinion that so long as the agreement transfers the right to use intangible goods which are the trade marks in this case, then, there is no question of the petitioners escaping the consequences of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agreement styled as TATA Brand Equity Business Promotion Agreement which contains stipulations transferring the right to use the marks, we are in agreement with Mr. Khumbhakoni that the Tribunal committed no error of law apparent on the face of record or acted perversely in dismissing the petitioners' appeals. 44. The argument of Mr. Chinoy is premised on the law laid down in the decision of the Supreme Court in the case of BSNL (supra). We would carefully peruse the said decision. In BSNL case (supra), the three Judge Bench of the Hon'ble Supreme Court was called upon to decide as to whether services which have been rendered by the BSNL could be brought within the purview of a tax and envisaged by entry No.54, list II of the Seventh Schedule to the Constitution. The argument was that the nature of the transaction by which mobile phone connections are enjoyed it is a service and the Central Government alone can levy service tax under entry No.97 of list I or entry No.92C of list I after 2003. If the nature of the transaction partakes character of both sale and service then the mute question whether both the legislative authorities could levy separate taxes together ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with a composite contract. It held that the test therefore for composite contracts other than those mentioned in article 366(29A) continues to be - did the parties have in mind or intend separate rights arising out of the sale of goods. If there was no such intention there is no sale even if the contract could be disintegrated. The test for deciding whether a contract falls into one category or the other is as to what is the substance of the contract. That is how the Hon'ble Supreme Court evolved the dominant nature test. 47. We are afraid that this controversy and dealt with by the Hon'ble Supreme Court is not the subject matter before us. The observations and conclusions of the Hon'ble Supreme Court cannot be seen dehors this essential controversy and arising from the services rendered by the BSNL. The Hon'ble Supreme Court in the light of the constitutional challenge has applied the dominant nature test. That is how it eventually concluded and in favour of BSNL that the goods do not include electromagnetic waves or radio frequencies for the purpose of article 366(29A)(d). The goods in telecommunication are limited to the handsets supplied by the service provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer of such goods nor any transfer of right to use such equipment or apparatuses has been referred and set out. Then comes para98 which reads as under : 98. To constitute a transaction for the transfer of the right to use the goods the transaction must have the following attributes: (a) there must be goods available for delivery; (b) there must be a consensus ad idem as to the identity of the goods; (c) the transferee should have a legal right to use the goods consequently all legal consequences of such use including any permissions or licenses required therefore should be available to the transferee; (d) for the period during which the transferee has such legal right, it has to be the exclusion to the transferor this is the necessary concomitant of the plain language of the statuteviz. a transfer of the right to use , and not merely a licence to use the goods; (e) having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same rights to others. ` 50. Para-98 is relied upon by Mr. Chinoy. However, that cannot be read in isolation and out of context. It must be read in the backdrop of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee to the Additional Commissioner of Sales Tax. This was for determination of the question, where it was liable to pay tax on the amount of royalty received by it for transfer of trade mark under the Act of 1985. The Additional Commissioner of Sales Tax (Enforcement Branch) by his order dated 3.3.1989 held that by the agreements in question there was a transfer of right to use the trade mark of the assessee to its customers and amounted to sale under Section 2(10) of the Act of 1985. The assessee was thus held to be liable to pay tax. That order was appealed to the Tribunal. The Tribunal set aside the order of the Additional Commissioner and held that the transaction did not amount to transfer of right to use the trade mark by the assessee to its customers and no tax could be levied on the royalty received on said transfer. The Revenue applied for reference of the ground of law arising from this order of the Tribunal. That is how the question of law framed by this Court at para1 came up for consideration. After noting the rival contentions, the Division Bench held as under : 5. We have considered the rival submissions in the light of the facts of the case. There is no d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for cash, deferred payment or any other valuable consideration. From a conjoint reading of the above provisions, it is thus clear that tax is leviable under the Act on the amount received by the assessee for the transfer of the right to use any goods for any purpose. In the instant case, the assessee received a sum of ₹ 1,500/by way of royalty on the transfer of right to use the trademark of which the assessee is the owner. The right was transferred by an agreement with the transferee by which the transferee was allowed to use the trademarks of the assessee on payment of consideration by way of royalty at the rate specified therein. It was made clear in the agreement that what was transferred to the transferee was only the right to use the trademark in the manner set out therein and not the right or interest of the assessee in the trademark. The assessee's case is that mere user of the trademark without transfer of any right in the trademark would not amount to transfer of right to use the trademark within the meaning of clause (10) of section 2 of the Act. However, on perusal of the clear provisions of the 1985 Act, we find it difficult to accept the same. This contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Andhra Pradesh High Court in Rashtriya Ispat Nigam Ltd. (supra) was a case of transfer of right to use machinery. It was in that context, the above decision came to be rendered. But the position in case of trademark is different. For transferring the right to use the trademark, it is not necessary to handover the trademark to the transferee or give control or possession of trademark to him. It can be done merely by authorising the transferee to use the same in the manner required by the law as has been done in the present case. The right to use the trademark can be transferred simultaneously to any number of persons. The decision of the Andhra Pradesh High court in Rashtriya Ispat Nigam Ltd. (supra) thus has no application to the transfer of right to use a trademark. 53. In terms of the conclusions reached that there is no dispute that the trade mark is specially included in the schedule of goods to the Act of 1985 and entry No.7 that the question was answered in favour of the Revenue against the assessee. The amount received by the assessee on the transfer of right to use the sale was held as liable to be taxed under the Act of 1985. Thus, the peculiar provision of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner is liable to pay the tax. The petitioner, however, contends that there is no transfer of the right to use the trademark and logo and that the agreement contemplates the petitioner allowing the assignee to use the former s formulas and recipes ,make available to data about suppliers of raw materials and the latter agreed not to make any alterations or changes in the formulas. Thus, indisputably the agreement between, the petitioner and the assignee is not only for transfer of right to use the trademark and logo but also obligation of the petitioner to suggest various business modalities and provide formulas and recipes. Can it then be said that there is no transfer of right to use the goods as contemplated under section 5E of the GST Act, which we quote hereunder: 5E. Tax on the amount realized in respect of any right to use goods: Notwithstanding anything contained in this Act, (a) Every dealer who transfers the right to use any goods for any purpose, whatsoever, whether or not for a specified period, to any lessee or licensee for cash, deferred payment or other valuable consideration, in the course of his business shall, on the total amount realized or realizabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od that there will be no exclusive entrustment of the logo and trademark to the party of the second part and the party of the first part will use the same for its own operations. 4. The party of the first part hereby agrees to suggest suitable items of confectionery products keeping in view the facilities available with the second party, provide formulas and recipes for such products and periodically suggest measures for cost reduction. 5. The party of the first part will also suggest locations and areas for getting maximum advantage for their products, the method of advertising their products and proper structuring of the prices. 7. The party of the second part shall use the logo and trademark only at the places permitted by the first party. 9. In consideration of the party of the first part permitting usage of logo and trademark and providing various supports and amenities as detailed above, the party of the second part shall pay a sum of ₹ 500 (rupees five hundred only) per tonne of production as royalty. 10. The royalty amount mentioned above shall be calculated on the monthly production and shall be paid to the first party within 15 days from and of the mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trademark and bunny logo. 10. This court, after giving anxious consideration, is of the opinion that even if the consideration cannot be separated nor is it discernible as to which part of the consideration for which service, it does not make any difference nor the obligation undertook by the petitioner to provide supporting services dilute clause 2 which speaks of transfer of right to use the trademark and logo. None of the decisions relied on by the counsel would support the petitioner s contention. It is wellsettled that the nature of transfer of right to use on the plain language of section 5E of the GST Act is immaterial. The transfer of right to use any goods for any purpose whatsoever falls within the ambit of section 5E of the GST Act and merely because the agreement speaks of other aspects in addition to creating a right in the assignee to use the trademark and logo does not make any difference especially when the goods so transferred are incorporeal or intangible in character like copy right, patent, trademark) etc. 56. Pertinently in paras15 16, a reference was made to the judgment of the Hon ble Supreme Court in the case of BSNL (supra) and the same was disti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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