TMI Blog2016 (11) TMI 550X X X X Extracts X X X X X X X X Extracts X X X X ..... at NOIDA wherefrom offer was made. The ultimate result would be that the very foundation of argument that taxing authorities in Uttar Pradesh had no jurisdiction, disappears and vanishes. It cannot thus be said that impugned orders are patently without jurisdiction - Quantum of assessment made by Assessing Officer is not under challenge. Assessment was challenged before us only on the ground of jurisdiction, i.e., transfer of right to use goods came into effect outside India and, therefore, taxing authorities in State of U.P. have no jurisdiction to demand any tax, which question we have already answered against petitioner. We, therefore, leave it open to petitioner that if there is any dispute with regard to quantum of assessment made by Assessing Officer, same being a question of fact, it will be open to petitioner to raise such dispute by filing appeal under the statute. Jurisdiction of AO not questionable and is justified - petition dismissed - decided against petitioner. - WRIT TAX No. 657 of 2015, WRIT TAX No. 465 of 2016 - - - Dated:- 10-11-2016 - Hon'ble Sudhir Agarwal And Hon'ble Dr. Kaushal Jayendra Thaker, JJ. For the Petitioner : Nishant Mishra, Tar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2015, directing petitioner to produce books of accounts alongwith other relevant material for Assessment Year 2011-12. Notice was issued on premises that JFL is using trademark of petitioner, therefore, Royalty paid by it on sale of manufactured goods is taxable under U.P. Value Added Tax Act, 2008 (hereinafter referred to as the VAT Act, 2008 ). 6. Petitioner replied notice on 22.04.2015 stating that notice is without jurisdiction since agreement between petitioner and JFL was executed outside India, therefore, Respondent-3 has no jurisdiction to levy tax on transaction executed outside India. Respondent-3, however, passed Assessment Order dated 30.04.2015 holding petitioner liable to pay VAT and assessed tax liability for Assessment Year 2011-12 to ₹ 30,67,057/-. Consequently demand notice dated 01.07.2015 was issued by Respondent-4 directing petitioner to deposit ₹ 30,67,057/-. 7. For Assessment Year 2012-13, which is subject matter of connected Writ Petition No. 465 of 2016, show cause notices were issued on 14.03.2016 and 21.03.2016 and thereafter assessment order was passed on 31.03.2016 assessing tax liability to ₹ 4,63,289/-. 8. These assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r VAT Act, 2008, such transfer of right to use goods are outside the purview of Service Tax. It is submitted that Assessing Officer has rightly held that transaction is taxable under VAT Act, 2008 and arguments otherwise have no force. 11. Before coming to discussion of statutory provisions and judicial precedents to find out whether transaction in question is subject to VAT under VAT Act, 2008, it would be appropriate to have a glance over the nature of agreement and transfer of right to use goods between parties. 12. The principal body which owns, uses, promotes and license certain trade and business names, trade and service marks and commercial symbols in connection with operation of Domino's Pizza Stores , including the mark DOMINO'S PIZZA , is Domino's IP Holder LLC, organized under the laws of State of Delaware, United States of America (hereinafter referred to as IP Holder ). 13. Another Company was constituted at Netherland, namely, Domino's Pizza Overseas Franchising B.V. (hereinafter referred to as the Franchiser/DPOF ). 14. IP Holder entered into an agreement dated 27.03.1995 with M/s Domino's Pizza India Limited, after obtaining app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer of right to use any goods was executed in Netherland, therefore, it is an admitted fact. 19. In this regard we find that Assessing Officer has not gone into this question, whether agreement to transfer of right to use goods was executed in India or outside India but he has proceeded to decide matter on the premise that place of agreement is not relevant and instead it is place of business , as defined under VAT Act, 2008, which is crucial to decide taxability upon petitioner. 20. Since entire edifice of contention of learned counsel for the petitioner is founded on Constitution Bench decision in 20th Century Finance Corpn. Ltd. (supra), we may refer the same to find out, whether Assessing Officer has correctly appreciated the dictum laid down therein or not. 21. Majority judgment has been rendered by Hon'ble V.N. Khare, J. on behalf of himself, Justice Bharucha and Justice Mohapatra. The dispute referred for resolution was, where is the taxable event on the transfer of right to use any goods . Court also considered power of State Legislature to levy sale tax on transfer of right to use any goods envisaged under Clause (29-A)(d) of Article 366 of Constitution on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivered for use. (f) Article 266(29-A (d) further shows that levy of tax is not on use of goods but on the transfer of the right to use goods. The right to use goods accrues only on account of the transfer of right. In other words, right to use arises only on the transfer of such a right and unless there is transfer of right, the right to use does not arise. Therefore, it is the transfer which is sine qua non for the right to use any goods. If the goods are available, the transfer of the right to use takes place when the contract in respect thereof is executed. As soon as the contract is executed, the right is vested in the lessee. (g) Where the goods are in existence, the taxable event on the transfer of the right to use goods occurs when a contract is executed between the lessor and the lessee and situs of sale of such a deemed sale would be the place where the contract in respect thereof is executed. Thus, where goods to be transferred are available and a written contract is executed between the parties, it is at that point situs of taxable event on the transfer of right to use goods would occur and situs of sale of such a transaction would be the place where the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charge or pledge) for cash or deferred payment or other valuable consideration and includes -- (i) ... (ii) ... (iii) .... (iv) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. Clause (ii) of Explanation I to Section 2(h): (ii) in a case falling under sub-clause (iv), if the goods are used by the lessee within the State during any period, notwithstanding that the agreement for the lease has been entered into outside the State or that the goods have been delivered to the lessee outside the State. (emphasis added) 25. Court then held in para 45 of the judgment, as under: By virtue of clause (ii) of Explanation I to Section 2 (h), the ambit of sale has been widen by including outside sale as inside sale on mere location of goods for use within the State irrespective of the fact that the agreement for transfer of right to use has been executed outside the State or whether the sale is outside the State, the tax is chargeable within the State. And, further, on account of a special provision for rates of tax, the other provision such as single po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dates by parties but no place of signature has been mentioned at all. It does not appear that the document was prepared as executed when all the parties were present at one place. 29. The address of registered office of Franchiser/DPOF is that of Amsterdam, Netherland while that of Domino's Pizza India Limited is Nehru Place, New Delhi and head office at NOIDA, State of Uttar Pradesh. 30. The name of Company, M/s Domino's Pizza India Limited changed to Jubilant Foodworks Limited , i.e., J.F.L. This change was authorized by shareholders in general meeting dated 16.09.2009 but when this change actually took place after approval by concerned High Court is not stated anywhere in writ petition or in its enclosures. 31. Learned counsel for petitioner claims that this agreement is treated to have been executed on 23.09.2009. If that is so, there is no reason but to believe that it was signed and executed on 23.09.2009 at the Head Office of M/s Domino's Pizza India Limited since signatures of others are of subsequent dates, i.e., 01.10.2009 and 02.10.2009 and at difference places. It is also evident from record that initial letter dated 23.09.2009, referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed date of agreement as 23.09.2009 between Franchiser/DPOF and Domino's Pizza India Limited, but the fact as evident from record is that it was signed on behalf of Domino's Pizza India Limited by one Ajay Kaul, CEO-cum-Whole-Time Director without mentioning any date or place of his signature while on behalf of Franchiser/DPOF it was signed by Managing Director on 01.10.2009. There is another signature on behalf of Equity Trust Co. N.V. through its Managing Director dated 02.10.2009. This is evident from page 119 of paper book. 36. Clause 32 of this agreement says that agreement shall take effect upon its execution between parties. There is a covering letter appended to said agreement on page 83 of paper book, sent by Authorized Signatory for Domino's Pizza India Limited on 23.09.2009 to Franchiser/DPOF c/o Equity Trust Co. N.V., Amsterdam (Netherlands) and IP Holder, Michigan (USA). The said covering letter requests aforesaid two Companies to convey their consent in relation to proposals at Item No. (I) to (IV) of aforesaid letter and requested them to forward consent for record. Mode of communication is neither pleaded nor shown by placing relevant material on recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y merely intimates his intention to enter into a contract on the terms of offer. Offeror cannot impose upon the offeree, an obligation to accept, nor proclaim that silence of offeree shall be deemed consent. A contract being the result of an offer made by one party and acceptance of that very offer by other, acceptance of offer and intimation of acceptance by some external manifestation which the law regards as sufficient, is necessary. Court said: There should therefore be an offer by one party, express or implied, and acceptance of that offer by the other in the same sense in which it was made by the other. But an agreement does not result from a mere state of mind: intent to accept an offer or even a mental resolve to accept an offer does not give rise to a contract. There must be intent to accept and some external manifestation of that intent by speech, writing or other act, and acceptance must be communicated to the offeror, unless he has waived such intimation, or the course of negotiations implies an agreement to the contrary. (emphasis added) 41. It was also observed that Act, 1872 does not deal expressly as to how it will be adjudicated where the contract is mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f mutual promises, the offeror must receive intimation that offeree has accepted his offer and has signified his willingness to perform his promise. 43. Court also held that method of communication will depend upon nature of offer and circumstances in which it is made. 44. If offer and acceptance is not being made in presence of both parties at the same place and parties are at different places, there is an exception where negotiation is by post. It has been held that contract is complete when acceptance of offer is put into a course of transmission to the offeror. Court summarized exceptions to general rule requiring intimation of acceptance, as under: When by agreement, course of conduct, or usage of trade, acceptance by post or telegram is authorised, the bargain is struck and the contract is complete-when the acceptance is put into a course of transmission by the offeree by posting a letter or dispatching a telegram. 45. The said exception was not allowed by Court when contract was made by conversation on telephone. Court said that it is a case as if parties are present since each party is able to hear the voice of other. There is instantaneous communication of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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