2012 (11) TMI 927
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....r Gold". They are engaged in marketing, trading, export and import of jewellery, diamond ornaments, platinum ornaments, watches etc. They are also a registered dealer under the KVAT and CST Acts. 3. The company has entered into Franchisee Agreements with several companies, situated inside and outside Kerala and also abroad, as per which, on mutually agreed terms and conditions, these companies are allowed to use the Trade Mark owned by the petitioner. Petitioner admits that in return, it is receiving royalty, the rate of which is also specified in the agreement. Franchisee Services, being an activity attracting Service Tax under the Finance Act, 1994, the petitioner has obtained registration under Section 69 of the Finance Act. 4. For the year 2008-09, petitioner received royalty of Rs. 3,27,68,607/- from its franchisee companies for use of its trademark and for sharing business know-how and on this amount, they paid service tax payable. While so, the 1st respondent issued Ext.P1 notice stating that transfer of right to use any goods is taxable under Section 6(1) of the Act and that, Royalty received by the petitioner from its franchisees for use of its Trade Mark would attract V....
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.... this contention, the learned Government Pleader relied on various judgments, which will be referred to at the appropriate stage. 9. At my request for a specimen copy of the franchisee agreement, the counsel for the petitioner made available copy of the agreement dated 2/5/2007 between the petitioner and M/s. Malabar Cochin Arcade Pvt. Ltd., Calicut, having showroom at Ernakulam. In this agreement, among the various provisions, as far as the transfer of Trade Mark is concerned, Clauses 5.3, 5.4 and 5.5. provide thus: 5.3."NAME BOARD AND DISPLAY- The showroom shall have a name board "MALABAR GOLD" conspicuously displayed as per the design approved by MALABAR GOLD. MALABAR GOLD will specify the approved design from time to time by specific circulars. The FRANCHISEE will not use any other logo or name including the name under which the franchise is taken without the written approval of MALABAR GOLD. The FRANCHISEE agrees to display and maintain MALABAR GOLD'S trade marks, trade names, service marks, logos and advertising and promotional materials including posters at such premises, in the manner authorized by MALABAR GOLD from time to time. The FRANCHISEE agrees to maintain and ....
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....ng precedents. 12. Prior to the 46th amendment to the Constitution of India, the States were not empowered to levy tax on transfer of right to use goods. By the 46th Amendment, Article 366 (29A) was incorporated in the Constitution of India and Article 366 (29A)(d), being relevant, reads thus; 366(29A) "tax on the sale or purchase of goods" includes- (d) a tax on the 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; and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made" 13. In the Act, "sale" has been defined in section 2(xliii) and this section with its Explanation V, reads thus: 2.xliii)"sale" with all its grammatical variations and cognate expressions means any transfer whether in pursuance of a contract or not of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or for other valuable consideration, but does ....
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....se such equipment or apparatuses. 97.To constitute a transaction for the transfer of the right to use the goods, the transaction must have the following attributes: (a) there must be goods available for delivery. (b) there must be a consensus ad idem as to the identity of the goods; (c) the transferee should have a legal right to use the goods--consequently all legal consequences of such use including any permissions or licences required therefor should be available to the transferee; (d) for the period during which the transferee has such legal right, it has to be the exclusion to the transferor--this is the necessary concomitant of the plain language of the statute viz. a "transfer of the right to use" and not merely a licence to use the goods; (e) having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same right to others. 98. In my opinion, none of these attributes are present in the relationship between a telecom service provider and a consumer of such services. On the contrary, the transaction is a transaction of rendition of service. 17. Reading of these paragraphs show that....
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.... sale; This expression has been defined to mean all kinds of movable property, including livestock, all materials, commodities and articles other than what are excluded in the section itself. Therefore, in the light of this provision, what is to be examined is whether Trade Mark is a "goods" within the meaning of this section. 20. The question whether software programmes contain the characteristics of goods was considered by the Apex Court in its judgment in Tata Consultancy Services v. State of A.P. {(2005) 1 SCC 308} and it was held that goods include all materials, articles and commodities both tangible and intangible/incorporeal property which is capable of abstraction, consumption and use which can be transmitted, transferred, delivered, stored, possessed etc. On this reasoning, the Court held that software programmes are goods containing these characteristics. The relevant part of the judgment reads thus: "In India the test to determine whether a property is "goods", for purposes of sales tax, is not whether the property is tangible or intangible or incorporeal. The test is whether the item concerned is capable of abstraction, consumption and use and whether it can be tra....