1998 (9) TMI 633 - HC - VAT and Sales Tax

High Court: Royalty charges for trade marks = 'sale' under Sales Tax Act

The High Court held that the transaction involving royalty charges for the use of trade marks constituted a 'sale' under the Maharashtra Sales Tax on the ... - Issues Involved:1. Whether the transaction amounted to 'sale' u/s 2(10) of the Maharashtra Sales Tax on the Transfer of the Right to use Any Goods for Any Purpose Act, 1985.2. Whether the respondent is liable to get registered under the said Act.Summary:Issue 1: Whether the transaction amounted to 'sale' u/s 2(10) of the Maharashtra Sales Tax on the Transfer of the Right to use Any Goods for Any Purpose Act, 1985.The core issue was whether the transaction between the respondent and M/s. Salstar Foods & Beverages Ltd., involving royalty charges for the use of trade marks, constituted a 'sale' as defined u/s 2(10) of the 1985 Act. The Tribunal had previously held that the transaction did not amount to a 'sale' because there was no transfer of ownership or possession of the trade mark. The Tribunal's decision was based on the argument that control over the property must be passed to the customer for it to be considered a transfer of the right to use the property.However, the High Court disagreed with the Tribunal's interpretation, emphasizing that the 1985 Act was specifically enacted to levy tax on the transfer of the right to use goods, including trade marks. The Court clarified that the transfer of the right to use a trade mark does not require the transfer of ownership or possession of the trade mark itself. The Court noted that trade marks are explicitly included in the Schedule of goods to the 1985 Act and that the amount received for the transfer of the right to use the trade mark is taxable under the Act.Issue 2: Whether the respondent is liable to get registered under the said Act.Given the Court's interpretation that the transaction amounted to a 'sale' u/s 2(10) of the 1985 Act, the respondent was indeed liable to get registered under the said Act. The Court held that the Tribunal was incorrect in its earlier decision, and the respondent's transaction involving the transfer of the right to use the trade mark for royalty was subject to tax under the 1985 Act.Conclusion:The High Court answered the question referred to it in the negative, i.e., in favor of the Revenue and against the assessee. The reference was disposed of with no order as to costs.