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TMI Blog2023 (9) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... s in question, namely, 2005-2006, 2006-2007, 2007- 2008, 2008-2009, 2009-2010 and 2010-2011 and, finding that the assessee had not declared the said turnover in their monthly/annual return, reopened and completed the assessments under Section 25 (1) of the Kerala Value Added Tax Act, 2003 (hereinafter referred to as 'KVAT Act'). Aggrieved by the order of the assessing officer, appeals were preferred by the assessee, which were allowed in their favour. The State filed a second appeal before the Tribunal challenging the order of the Appellate Assistant Commissioner, and the same was dismissed by the Appellate Tribunal by Annexure-C order, which is challenged in these revisions. 3. The issue before the authorities was regarding the taxability of receipts towards royalty and the transfer of the right to use intangible property. According to the assessing authority, under Entry 68 of the III Schedule, intangible items such as copyright, patent, etc., are specifically included, and under Section 6(1)(c) of the KVAT Act, 2003, transfer of the right to use any good for any purpose for a specified period is taxable at 4%. The assessing officer held that courts had held that trademark i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC)] and Tata Consultancy Services v. State of Andhra Pradesh [(2005) 1 SCC 308] for allowing the appeal. 5. The State had challenged the orders of the Deputy Commissioner (Appeals), and all the appeals were heard and considered jointly by the Appellate Tribunal. The State essentially contended that under Entry 68 of the Third Schedule, intangible items like copyright, patent, etc., are specifically included, and under Section 6(1)(c) of the KVAT Act, transfer of right to use for any purpose, taxable at the rate of 5%. The State also contended that trademark is intangible goods that can be transferred, and the royalty received is liable to tax. It also argued that the decision of the Division Bench in Malabar Gold (supra) was not applicable and relied on the following judgments before the Tribunal. (1). Kream Foods Pvt. Ltd. v. State of Kerala (24 VST 333) (2). Mechanical Assembly System (India) Pvt. Ltd. v. State of Kerala (144 STC 536 Ker.) (3). Nutrine Confectionery Company Pvt. Ltd. v. State of Andhra Pradesh (40 VST 327 A.P.) (4). Tata Sons v. State of Maharashtra (80 VST 173) 6. The assessee contended before the Tribunal that the arguments of the State could no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter of fact, it should have considered whether there was a "transfer of the right to use goods". He also argued that the Division Bench decision in Malabar Gold (supra) had not attained finality as it is under appeal before the Supreme Court. He finally argues that the issue is covered in his favour by the judgment in Commissioner Service Tax, Delhi v. Quick Heal Technologies Ltd. [(2023) 5 SCC 269] and that the revision petitions are liable to be allowed. 9. Per contra, Sri. Jaykrishna argued that there had been no exclusive transfer and that what has been granted is only a licence, and the same is evident from the agreements executed between them and those who used the same subject to the conditions therein. It is also argued that this position of law is clearly stated by the Madras High Court in the judgment reported in AGS Entertainment Pvt. Ltd. v. Union of India [(2013) 65 VST 88]. He also argued that on the basis of the various sections in the Copyright Act, he could not have sold the same exclusively, and in the absence of an exclusive sale, no sales tax could have been levied. It is also his argument that the transaction is covered by the provisions of the Central Serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that the decision of the Division Bench in Malabar Gold regarding the trademark would come to the rescue of the assessee. As noted above, the judgment in Malabar Gold (supra) has not become final as it is challenged before the Supreme Court. That apart, it cannot be held that it is a requirement of law that there should be a transfer of the entire right to the exclusion of the transferor for there to be a transfer of the right to use. The transfer of the right to use goods is distinct and separate from the transfer of goods. The Tribunal has clearly erred in considering the question as to whether there is a transfer of the property in goods. It has clearly misdirected itself in not finding out whether there has been a transfer of the right to use goods, and if it is answered in the affirmative, surely the activity is exigible to sales tax. The Appellate Authority, as well as the Tribunal, was carried away by the judgment of the Division Bench in Malabar Gold (supra), the principle laid down in which has to be held to be doubtful after the judgment in Quick Heal Technologies (supra). The Tribunal rightly found that the goods were involved in the transaction in question but still ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods, the taxable event is the execution of the contract for delivery of the goods, and if that has taken place, it was immaterial whether the transfer was exclusively or to the exclusion of all others. In the instant case, the transferee obtained a legal right to use the goods for the period during which he had such legal rights, which had to be to the exclusion of the transferor. We hold that the Tribunal has clearly gone wrong in law while dismissing the appeals preferred by the State. The order of the Tribunal impugned before us is set aside.
13. Regarding 2005-2006, OTR 23/2019, we note that there is a plea of limitation raised by the assessee. Accordingly, we remit OTR 23/2019 back to the assessing officer to consider the question afresh and pass a speaking order dealing with the contentions of the assessee. The questions of law are answered in favour of the State and against the assessee. All the other O.T. Revisions are allowed by setting aside the order of the Tribunal impugned before us. The order of the assessing authority, except for the year 2005-2006, (challenged in OTR 23/2019), will stand restored.
The O.T. Revisions are disposed of as above. X X X X Extracts X X X X X X X X Extracts X X X X
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