AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (9) TMI 436
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....e impugned order dated May 18, 2015, dropped the show cause notice for the reason that the grant of license under the Trademark License Agreement would amount to deemed sale under article 366 (29A) of the Constitution and, therefore, could not be subjected to levy of service tax. In support of his contention, the Principal Commissioner placed reliance upon the judgment of the Supreme Court in Bharat Sanchar Nigam Ltd. vs Union of India [2006 (2) S.T.R. 161 (S.C.)]. 3. Shri Ravi Kapoor learned authorised representative appearing for the Department made the following submissions: (i) The respondent had intentionally and deliberately bifurcated the gross value into two heads of royalty and right to use and had deliberately paid VAT on this portion of right to use in order to avoid paying service tax the rate of which was on the higher side as compared to VAT; (ii) Bifurcation of income in two heads of royalty and right to use is arbitrary. Permission to use the brand is strictly according to the licensor's guidelines and any benefit of goodwill created by licensee's use is mandated to flow back to the licensor; and (iii) Further, the fee payments towards ....
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....censee, an exclusive license to use the Trademarks in any manner during the Term of this Agreement, on the terms set out in this Agreement. 3.1.2 The Licensee hereby acknowledges and agrees that any goodwill created by the Licensee's exclusive use of the Trademarks shall inure to the sole and exclusive benefit of the Licensor. 3.1.3 The Licensee hereby agrees that the Trademarks shall not be used by the License in any manner prejudicial to the interest of the Licensor. 3.1.4 For the avoidance of doubt, the Trademarks licensed hereunder are exclusively licensed for use. 3.1.5 During the Term of this Agreement, the Licensor shall not grant to any third party, including any Future Group Companies, the license to use or enjoy the Trademarks in any manner. 3.1.6 During the Term of this Agreement, the Licensor shall not use or enjoy the Trademarks in any manner. xxxxx xxxxx 5. LICENSEE'S RIGHTS AND OBLIGATIONS 5.1 The use of Trademarks by the Licensee shall be in conformity with the recommended brand usage guidelines. The brand usage guidelines as on the Effective Date are set out in Schedule 3 to this Agreement. ....
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....lty component on which service tax was paid and the 'right to use' component on which service tax was not paid and only VAT was paid. The Chart is reproduced below: Period Total Value (in Rs.) Royalty (35%) Right to use (65%) Value (in Rs.) Value (in Rs.) Value (in Rs.) VAT Paid (in Rs.) 2008-09 162,255,994 56,789,598 6,223,926 105,466,396 4,218,656 2009-10 253,761,360 84,322,280 8,685,195 169,439,079 7,404,488 2010-11 331,249,642 115,939,193 11,941,737 215,310,449 10,765,522 2011-12 359,011,103 125,653,886 12,942,350 233,357,217 11,667,861 2012-13 317,865,761 111,253,016 13,750,873 206,612,745 10,330,637 2013-14 254,629,232 154,141,761 19,051,922 100,487,471 5,024,374 1,678,773,091 648,099,734 72,596,002 1,030,673,357 49,411,538 9. The learned authorized representative appearing for the appellant submitted that the "right to use" under the Trademark License Agreement had not been transferred in absolute and unrestricted terms and the legal right of possession and effective control remained wi....
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....ich is deemed to be a sale within the meaning of clause (294) of article 366 of the Constitution; or (iii) a transaction in money or actionable claim" 16. Section 66E of the Finance Act deals with 'declared services' and the relevant portion is reproduced below: "66E. The following shall constitute declared services, namely:- ......... (c) temporary transfer or permitting the use or enjoyment of any intellectual property right;" 17. The relevant clauses of the Trademark License Agreement have been reproduced above. Clause-3 deals with grant of license. Under it, the licensor has granted to the licensee an exclusive license to use the Trademark in any manner and during the term of the Agreement the licensee shall not grant to any third party, including any Future Group Companies, the license to use or enjoy the Trademarks in any manner nor will the licensor use or enjoy the Trademark in any manner. 18. The dispute in the present appeal relates to Trademarks License Agreement and is particularly on the 'right to use' component of the Agreement, which is to the extent of 65 per cent and not on the Royalty component, which to the extent of 3....
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....saction for the transfer of the right to use the good, the transaction must have the following attributes: a. There must be goods available for delivery; b. There must be 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 permission or licenses required therefore should be available to the transferee; d. For the period during which the transferee has such legal right, it has to be the exclusion of 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 license 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 rights to others." (emphasis supplied) 23. It can safely be said that under Sales Tax, there is transfer of possession and effective control in goods, while there is no such transfer of possession and effective control under Service Tax. 24. The Principal Commissioner, after analyzing the provisions of the A....