TMI Blog2016 (12) TMI 821X X X X Extracts X X X X X X X X Extracts X X X X ..... goods and other aspects amount to service, both taxes on different aspects are leviable and dominant intention test is no more available. Petition dismissed - decided against petitioner. - Writ Tax No. 146 of 2013, Writ Tax No. 636 of 2015 - - - Dated:- 9-12-2016 - Hon'ble Sudhir Agarwal And Hon'ble Dr. Kaushal Jayendra Thaker, JJ. For the Petitioner : S.K. Tyagi, Alok Kumar For the Respondent : C.S.C. ORDER ( Delivered by Hon'ble Dr. Kaushal Jayendra Thaker, J. ) 1. In both these writ petitions, same petitioner-M/s G.D. Goenka (P) Ltd. has challenged notices issued by Deputy Commissioner, Trade Tax Circle-II, Agra. 2. In Writ Petition No. 146 of 2013, it has challenged notices dated 21.12.2012 and 15.01.2013 issued under Section 28(3) of U.P. Value Added Tax Act, 2008 (hereinafter referred to as the VAT Act, 2008 ) in respect of Assessment Years 2010-11 and 2009-10 respectively. In Writ Petition No. 636 of 2015 it has challenged assessment order dated 26.06.2015 for Assessment Years 2012-13 and 2008-09 and consequential demand of tax of ₹ 14,17,575/- and ₹ 8,35,993/- respectively. 3. The common questions raised in both th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approached Franchisor, i.e., petitioner, to use its brand name, i.e., G.D. Goenka Public School for running said school under the guidance of petitioner and remain at par with standards of Franchisor in technical, pre-opening, academic and operational matters for betterment and welfare of children by spreading standards of education under various terms and conditions mentioned in memorandum of understanding. (E) The Franchisor, i.e., petitioner in its turn is willing to appoint Franchisee and Franchisee is willing to accept such appointment for Agra on the terms and conditions contained in agreement. (emphasis added) 6. Some relevant terms and conditions of agreement, for our purpose, are reproduced as under: 3. DURATION FRANCHISOR hereby grants to the FRANCHISEE the non exclusive license for use of the said Brand name for running the School and under the guidance of the FRANCHISOR and to remain at par with the standards of 'FRANCHISOR' in technical, pre-opening, academic and operational matters, for betterment and welfare of children by spreading the standards of education, under various terms and conditions mentioned in this MOU. The present MOU shall c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d furnishings including but not limited to School building, open space, play grounds, hostels, laboratory(s) and apparatus, library and books, auditorium, gym, swimming pool, activity rooms, sports equipments and goods, utensils, furnishings, computers and all such other equipment supplies and services necessary for the operation of the School as may be advised and approved by FRANCHISOR and thereafter shall be so maintained by FRANCHISEE as to remain new and contemporary as specified by FRANCHISOR. The renovation and repair at the School shall be carried out in accordance with schedules and the specifications approved by the FRANCHISOR, and the FRANCHISEE shall take prior written approval of FRANCHISOR before commencement/change of any such work. 4.6 The selection of all furniture and furnishings and other operating equipments and supplies to be ordered and installed in the School shall be as per schedules and specifications approved by the FRANCHISOR from time to time. 4.7 That the FRANCHISEE shall construct and develop the School property strictly in accordance with rules and building bye-laws prevailing in the Area at the relevant time and shall adhere to all norms re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NCHISEE undertakes and agrees that all such alterations, repairs, renewals, additions or improvement etc. will be made with as little hindrance as possible to the operation of the School. If any extraordinary repairs to or replacement of any heavy equipment shall be required at any time to maintain the School property in good operational condition or by reason of any laws or regulations now or hereinafter enforced or by reason of any municipal order or otherwise or because FRANCHISOR recommends the desirability thereof, then in such an event all such repairs, changes and replacements shall be made by FRANCHISEE at its own cost and expenses and with as little hindrance to the operation of the School as possible. 4.13 It is agreed that FRANCHISEE shall honor and strictly enforce all programmes, procedures, systems, policies, decisions in respect to academic and administrative area, which FRANCHISOR in its discretion decides to make applicable for the running of the School and in regard to various other services rendered to the students and staff and personnel. It is agreed that in order to have the intended chain effect and common good, FRANCHISEE shall honor all programme which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scretion decide and develop for its schools, [hereinafter collectively referred to as the said 'Brand name'] to be used exclusively for 'School', situated at Magtai, Bodla - Bichpuri Road, Agra, owned by FRANCHISEE only during the term of this MOU and cannot be used anywhere else. The said Brand name whether registered or not, shall for all times constitute the property of FRANCHISOR only. It is clarified that the FRANCHISEE is not authorized permitted, or granted any licenses to use G.D. Goenka Public School and/or FRANCHISOR Logo on any other stationery, internal/external correspondence like letter head, envelope, business cards or advertisements etc., or in any other form whatsoever which is not as per the terms and conditions stated in this MOU. 5.2 The use by the School of such names, logos, signs, symbols, slogans, motto, design trademark etc., in the manner above stated shall at all times be subject to and in accordance with the provisions contained in this MOU and FRANCHISOR shall at all times have the exclusive right to change, direct or withdraw the use of such, signs, symbols, motto, designs trademark etc., as it may in its sole discretion decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in any intellectual property created as a result of the execution of this MOU. The FRANCHISOR shall be assigned all rights in and to any property created by the FRANCHISEE as a result of this MOU in perpetuity throughout the universe, including, without limitation, all title and interest in the copyright therein and all renewals and extensions thereof; any and all trademarks, service marks, trade name, trade dress or related rights and the goodwill associated therewith; all audio rights; publishing rights; and all other ancillary, allied and subsidiary rights therein and thereto. 5.9 The FRANCHISEE agrees that FRANCHISEE will be deemed to immediately exclusively and irrevocably assign FRANCHISOR with full title guarantee, by way of present and future assignment, all rights throughout the world in perpetuity including copyright, design rights in and to the Property, without the need for further documentation. In furtherance to the same, FRANCHISEE certifies and assigns specifically the future works to be created as part of performance of this MOU. For the purpose of this Clause, property would include, without limitation, all material, data created by FRANCHISEE as part and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts through electronic media and print media like CDs, Emails, television, newspaper, pamphlets, radio and any other advertisement material at its own cost subject to: i. The FRANCHISEE shall get all advertisements and material approved in writing from the FRANCHISOR before its issuance and circulation in the market and to public at large. ii. FRANCHISEE, under any circumstances, itself or through its agent/advertiser cannot release any statement, interview, press release etc. without prior written consent of FRANCHISOR and without getting the content of same approved from the FRANCHISOR. iii. FRANCHISEE shall not circulate any circular, study material, notice/information to its staff members, students, parents, any third party without first getting the same approved in writing from FRANCHISOR. iv. FRANCHISEE shall not use or print any brochure, advertising material and fact sheets, or other stationery, which does not confirm to the standards as made applicable by FRANCHISOR. v. FRANCHISEE shall send all advertising material, fact sheet etc. for prior written approval of FRANCHISOR before printing, distribution and usage of the same. vi. On all advertis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, whichever is earlier. Save and except in case the FRANCHISOR opts to provide a cure period to the FRANCHISEE for rectification of the default or material breach within a period of 30 days from the receipt of the termination Notice by the FRANCHISEE. Provided in such case if the FRANCHISEE is unable to cure or rectify the breach/default as stated in the termination notice within the notice period of 30 days to the satisfaction of the FRANCHISOR then the MOU shall stand terminated without any further notice at the expiry of the notice period of 30 days. 17.3. Further provided that giving of the said option of rectification of default or material breach, to the FRANCHISEE by the FRANCHISOR shall be sole discretion of the FRANCHISOR and not a right of the FRANCHISEE. A material breach or cause for revocation, by way of example, would include but not be limited to the following conditions: 17.3.1 That FRANCHISEE fails to maintain and upgrade the School as per the technological and other developments at par with other FRANCHISOR Schools. 17.3.2 That there is evidence that FRANCHISEE has misled the FRANCHISOR on account of collection of revenue. 17.3.3 That the FRAN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iately cease and desist from the use of the said Brand Name 'G.D. GOENKA PUBLIC SCHOOL' and trade name of FRANCHISOR and any other sign, mark, slogan, symbol or other distinguishing characteristic owned by or associated with FRANCHISOR or the Brand name G.D. GOENKA. Failing which the FRANCHISOR shall be at liberty to take any such action as available under law against the FRANCHISEE. 17.7. It is clarified that termination of the MOU by the FRANCHISOR shall not entitle the FRANCHISEE to any payment on account of any business loss, loss of anticipated profit or any other losses or claims in respect of such termination. 17.8. Termination or earlier determination of this MOU shall not relieve or release FRANCHISEE from making payments which FRANCHISEE may owe or owed to the FRANCHISOR or any other entity or authority under the terms of the MOU. 17.9. The FRANCHISEE shall at its own expense return to the FRANCHISOR forthwith upon termination or earlier determination of the MOU all information, whether confidential or not, documentation data, documentation data, materials etc. in its possession belonging to the FRANCHISOR together with any copies thereof or any oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness and sale as defined under Section 2(e), (h), (m), (q), (r), (s), (x) and (ac) of VAT Act, 2008. It read as under: (e) business in relation to business of buying or selling goods includes- (i) any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern; (ii) the execution of any works contract or the transfer of the right to use any goods for any purpose (whether or not for a specified period); (iii) any transaction of buying, selling or supplying plant, machinery, raw materials, processing materials, packing materials, empties, consumable stores, waste or byproducts, or any other goods of a similar nature or any unserviceable or obsolete or discarded machinery or any parts or accessories thereof or any waste or scrap or any of them or any other transaction whatsoever, which is ancillary to or is connected with or is incidental to, or results from such trade, commerce, manufacture, adventur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of a works contract; (viii) any person who carries on the business of transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash or for deferred payment or other valuable consideration; (ix) a railway container contractor, an air cargo operator, a courier service provider, who fails to disclose the name and complete address of consigner or consignee or if discloses such name or address of consigner or consignee is found bogus, forged or not verifiable; or the owner or person in-charge of a vehicle who obtained authorization for transit of goods from the officer in charge of entry check post but failed to deliver the same to the officer incharge of the exit check post; (x) an owner or person in-charge of a godown or warehouse who stores commercial goods, other than those of transporters except those referred to in sub-clause (ix); Provided that a person who, not being a body corporate, sells agricultural or horticultural produce grown by himself or grown on any land in which he has an interest, whether as owner, usufructuary mortgagee, tenant, lessee or otherwise, or who sells poultry or dairy products from fowls o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (v) the supply of goods by an association or body of persons (whether incorporated or not) to a member thereof for cash, deferred payment or other valuable consideration; (vi) the supply, by way of or as part of any service or in any other manner whatsoever of goods, being food or any other article for human consumption or any drink (whether or not intoxicating) where such supply or service is for cash, deferred payment or other valuable consideration, and such delivery, transfer or supply of any goods under sub-clause (i) to sub-clause (vi) above shall be deemed to be sale of those goods by the person making the delivery, transfer or supply and a purchase of those goods by the person to whom such delivery, transfer or supply is made. (emphasis added) 11. The definition of sale on goods was incorporated in VAT Act, 2008 in the light of definition of tax on sales or purchase of goods as contained under Article 366(29A) of Constitution and it would be appropriate to refer the same also hereunder: (29-A) tax on the sale or purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to use such goods is made. Court thus formulated question as under: Whether a State can levy sales tax on transfer of right to use goods merely on the basis that the goods put to use are located within its State irrespective of the facts that - (a) the contract of transfer of right to use has been executed outside the State; (b) sale has taken place in the course of an inter-State trade; and (c) sales are in the course of export or import into the territory of India. (emphasis added) 13. Contention on behalf of assessee before Supreme Court was that State Legislature cannot so frame its law so as to convert an outside sale or a sale in the course of an inter-State trade or commerce, into a 'sale' inside the State. Interpreting Article 366 (29-A) (a) to (f) of Constitution, Court by majority held: (a) Sub- clause (a) to (f) of clause (29A) of Article 366 are not actual sales within the meaning of sale but are deemed sales by legal fiction created therein. (b) Where situs of sale has not been fixed or covered by any legal fiction created by appropriate legislature, location of sale would be the place where property in goods passes. (c) Where a party h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round that the goods are located in that State for use. 14. Conclusions of Constitution Bench's majority judgment, are in para 35, which reads as under: (35) As a result of the aforesaid discussion our conclusions are these: (a) The States in exercise of power under Entry 54 of List II read with Article 366 (29A) (d) are not competent to levy sales tax on the transfer of right to use goods, which is a deemed sale, if such sale takes place outside the State or is a sale in the course of inter-State trade or commerce or is a sale in the course of import or export. (b) The appropriate legislature by creating legal fiction can fix situs of sale. In the absence of any such legal fiction the situs of sale in case of the transaction of transfer of right to use any goods would be the place where the property in goods passes, i.e. where the written agreement transferring the right to use is executed. (c) Where the goods are available for the transfer of right to use the taxable event on the transfer of right to use any goods is on the transfer which results in right to use and the situs of sale would be the place where the contract is executed and not where the go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 2(h) of the Act shall be read down to this effect that it would not be applicable to the transaction of transfer of right to use any goods if such deemed sale is (i) an outside sale, (ii) sale in course of the import of the goods into or export of the goods out of the territory of India and (iii) an inter-State sale. (emphasis added) 17. After the judgment in 20th Century Finance Corpn. Ltd. (supra) there is a change in statute and now VAT Act, 2008 has been promulgated repealing Act, 1948. 18. VAT is exigible on sale or purchase of goods as defined under Article 366 (29A) of Constitution read with Section 2(ac) of VAT Act, 2008. There are certain transactions which normally would not have come within the ambit of term sale or purchase but due to legal fiction provided by legislature by amending Article 366(29A) of Constitution, such transactions have been included within the term sale . A transfer of right to use any goods for any purpose for valuable consideration is one of such legal fiction brought within the ambit of sale . 19. Learned counsel for petitioner relied on a three Judge judgment in Bharat Sanchar Nigam Ltd. and another (supra) wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oducing Clause (29A) in Article 366 of the Constitution. 22. Now the deemed sale includes a transfer of property in goods for valuable consideration . Agreement, whether exist or not, is not a necessary component to bring a transaction within the term sale or purchase under Article 366 (29A) of Constitution. This has been explained by a Constitution Bench in Sunrise Associates Vs. Government of NCT of Delhi and others, 2006(5) SCC 603. Court has said that anything which is subject matter of ownership would come within the term property . When we talk in terms of sale it would mean transfer of ownership in goods but in the context of deemed sale under Article 366(29A) of Constitution, it will include transfer of right to use ownership in goods . 23. In the context of sale of lottery ticket, Constitution Bench in Sunrise Associates (supra) held that a lottery ticket, if sold, by itself does not involve sale of goods, like purchase of railway tickets which gives right to a person to travel by railway. It is nothing other than a contract of carriage. The actual ticket is merely evidence of the right to travel. A contract is not property, but only a promise supported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore clear that the amount received by the cellular telephone company from its subscribers towards SIM Card will form part of the taxable value for levy of service tax, for the SIM Cards are never sold as goods independent from services provided. They are considered part and parcel of the services provided and the dominant position of the transaction is to provide services and not to sell the material i.e. SIM Cards which on its own but without the service would hardly have any value at all. 21. Thus, it is established from the records and facts of this case that the value of SIM cards forms part of the activation charges as no activation is possible without a valid functioning of SIM card and the value of the taxable service is calculated on the gross total amount received by the operator from the subscribers. The Sales Tax authority understood the aforesaid position that no element of sale is involved in the present transaction. 25. In the light of above observations we find that nature of transaction in the present case is different and hence judgment in Bharat Sanchar Nigam Ltd. and another (supra) does not help petitioner to exclude liability of VAT under VAT Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Commercial Taxes, 1997(57) ECC 1 held that it is exigible to trade tax. Its correctness was doubted and this was considered by another three Judge Bench in Yasha Overseas Vs. Commissioner of Sales Tax (supra). Relying on the meaning of term goods , used in a fiscal statute imposing tax of sales, includes all kinds of moveable property. The word property may denote nature of interest in goods and when used in this sense, means title or ownership in a thing. The word may also be used to describe the thing itself. The two concepts are different. A distinction must be kept in mind when considering use of word in connection with sale of goods. It quoted from Dictionary of Commercial Law by A. H. Hudson (1983 Edn.), which reads as under: `Property' -- In commercial law this may carry its ordinary meaning of the subject-matter of ownership. But elsewhere, as in the sale of goods it may be used as a synonym for ownership and lesser rights in goods. Hence, when used in the definition of goods in the different sales tax statutes, the word property means the subject-matter of ownership. The same word in the context of a sale means the transfer of the ownership in go ..... X X X X Extracts X X X X X X X X Extracts X X X X
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