TMI Blog2015 (11) TMI 754X X X X Extracts X X X X X X X X Extracts X X X X ..... ST Act. It is also noteworthy that, for the amount received by the assessee as 'brand franchise fees' from the CBUs, admittedly, the assessee is paying Service Tax, as the same is covered as Intellectual Property Service under sub-Section 55(b) of Section 65 of the Finance Act, 1994. - levy of tax, penalty and interest, in the case of manufacture of beer, on the amount received by the assessee as 'brand franchise fees' from CBUs for the assessment years in question, cannot be justified in law. Since it is not disputed that under the agreement, the trade mark-'Kingfisher' is transferred to the licensee dealers, with a right to use the trade mark and exploit the same for commercial use, which was on payment of royalty to the assessee, the same would amount to transfer of right to use the intangible goods, being the trade mark-'Kingfisher', which would thus be subject to tax under KST Act. It is not disputed that in case of drinking water-'Kingfisher', the effective control over the brand name is transferred to the licensees to use and exploit the brand name for commercial use, which would amount to transfer of right to use goods, liable to tax under the KST Act. As such, the findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-transferable and non-exclusive basis. However, the right to market, sell, distribute and package the beer, according to the know-how and specifications prescribed by the assessee, was to remain under the supervision and control of the assessee, as per a registered user right. Under the agreement, it was specifically provided that the CBUs shall sell the entire beer manufactured in their jurisdiction to the assessee or its indentors. The agreement also provided that any liability attributable to the CBUs on bulk beer up to the Bright Beer tanks (BBT), was to be of the assessee. Thus, according to the agreement with regard to beer, the CBUs neither had any right over the product, nor did they have any right to sell or exploit the beer so produced, nor fix any price of the produce. It all belonged to the assessee. 5. With regard to 'Kingfisher' packaged drinking water, the agreements with the manufacturers were different than that with the CBUs in the case of manufacture of beer. In the case of manufacture of beer, the beer so manufactured by the CBUs remained to be the sole property of the assessee, whereas it was not so in the case of manufacture of 'Kingfisher&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the assessee was exempted from payment of tax in the case of beer. The Tribunal, by its order dated 17-01-2014, allowed the appeal filed by the assessee and dismissed the appeal of the Revenue. Aggrieved by the same, these revision petitions have been filed by the Revenue for the relevant assessment years 2003-04 and 2004-05. 9. We have heard Sri.N.Shivayogiswamy, learned Additional Government Advocate for the Revision Petitioner-State of Karnataka, as well as Sri.N.Venkataramana, learned Senior counsel appearing along with Sri.P.Dinesh, learned counsel for the respondent-assessee in all the Revision Petitions, and have also perused the records. With the consent of the learned counsel for the parties, these Revision Petitions have been heard and are being finally disposed of at the admission stage itself. 10. The submission of Sri.Shivayogiswamy, learned Additional Government Advocate appearing for the Revision Petitioner is that the Tribunal has wrongly held that no tax would be leviable on brand franchise fees which has been charged by the assessee from the Contract Bottling Units (CBUs) for manufacturing beer under the brand name/trade name of the assessee, as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 2(m) of the KST Act: Goods means all kinds of movable property (other than newspapers, actionable claims, stocks and shares and securities) and includes livestock, all materials, commodities and articles (including goods, as goods or in some other form involved in the execution of a works contract or those goods to be used in the fitting out, improvement or repair of movable property) and all growing crops, grass or things attached to, or forming part of the land which are agreed to be severed before sale or under the contract of sale. Section 5-C of the KST Act: Levy of tax on the transfer of the right to use any goods. - Notwithstanding anything contained in sub-section (1) or subsection (3) of Section 5, but subject to subsection (5) and (6) of the said Section, every dealer shall pay for each year a tax under this Act on his taxable turnover in respect of the transfer of the right to use any goods mentioned in column (2) of the Seventh Schedule for any purpose (whether or not for a specified period) at the rates specified in the corresponding entries in column (3) of the said schedule. Provided that no tax shall be levied under this section if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e; 14. There can be no doubt that sale of goods can be taxed under Constitution of India, which would include tax on transfer of right to use any goods for any purpose. The price of such sale is to be taxed. Goods is defined under the KST Act which may be tangible or intangible. In the present case, the transfer of right to use brand name/trade name would be intangible goods. 15. We shall first consider the case relating to the sale of beer. With regard to taxability on the payment of the 'brand franchise fees' received by the assessee in the case of manufacture of beer, with the brand name/trade mark continuing to belong to the assessee, what we have to first consider is, whether there is complete transfer of right to use the said property (being brand name/trade name) in favour of the manufacturer (CBUs) or not? 16. The manufacturer, as per the agreement, has the right to use the brand name only for, and on behalf of, the assessee, and does not acquire any right over such brand name/trade mark belonging to the assessee, as it is not free to sell the product in the market, to customers of its choice. It is also not disputed that the manufacturing is done as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of manufacture of beer, the amount paid towards 'brand franchise fees' is to the assessee, and admittedly the assessee, has not transferred any right to the manufacturer of beer to exploit the brand name for its own use. The manufacturers (CBUs) do not get effective control of the brand name for full commercial exploitation. As such, it cannot be considered as 'sale' of intangible goods by the assessee, which would be subject to Sales Tax under the KST Act. It is also noteworthy that, for the amount received by the assessee as 'brand franchise fees' from the CBUs, admittedly, the assessee is paying Service Tax, as the same is covered as Intellectual Property Service under sub-Section 55(b) of Section 65 of the Finance Act, 1994. 19. The law is well settled that double taxation on the same goods is not permissible. The Apex Court in the case of Bharath Sanchar Nigama Limited v. Union of India [2006] 2 STR 161 (S.C.) has held that the transaction can be either covered under the Sales Tax or Service Tax, but not both, as the same would be mutually exclusive of each other. 20. The Tribunal, while dealing with this issue, has held that the Brand Franchi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
