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2024 (6) TMI 489
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....rder dated 31 March, 2021 passed by respondent no. 2-Joint Commissioner of State Tax (for short, "reviewing authority") under Section 25 of the Maharashtra Value Added Tax Act, 2002 (for short "MVAT Act") exercising the review jurisdiction. By the impugned order, respondent no. 2 has reviewed the order dated 16 March, 2015 passed by the assessing officer finalizing the petitioner's assessment for the financial year 2010-11. Consequent to the impugned order, a notice of demand dated 31 March, 2021 is issued to the petitioner under Section 32 of the MVAT Act, which is also assailed by the petitioner. 2. Thus, the primary question which arises for consideration in the present proceedings is as to whether the respondents in the facts of the case could tax sale of the petitioner's 'Base Domestic Formulation Business' as a "going concern" (slump sale) under the provisions of the Maharashtra Value Added Tax Act, 2002. A. Facts:- 3. The facts as discerned from the petition are:- During the financial year 2010-11, the petitioner entered into a Business Transfer Agreement dated 21 May, 2010 (for short "BTA") with one M/s. Abbott Healthcare Pvt. Ltd. (for short "Abbott Healt....
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....he stamp duty purposes and as permissible in law, hence, VAT could not be levied on the assets transferred, as a part of the business transfer. 8. The petitioner responded to such notice by its reply dated 05 May, 2017 contesting the revenue's case in the review notice. In its reply, the petitioner inter alia contended that the itemized value of assets does not affect the nature of the transaction as a "transfer of business". The petitioner also contended that transfer under BTA was in the nature of "transfer of business" as a going concern would not attract tax under the provisions of the MVAT Act, hence, it was not taxable. There were several other contentions raised on facts and law. 9. On such notice, a personal hearing was held by respondent no. 2 on 22 August, 2017 and 22 March, 2021 when the authorized representative of the petitioner made extensive submissions, on the basis of the case as made out in the petitioner's reply. Also, the representative of Abbott Healthcare was heard by teleconference. The petitioner also submitted a synopsis of its case under the petitioner's letter dated 22 March, 2021. 10. It is on such backdrop, respondent no. 2 passed the i....
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....d order of respondent No. 2 is purely based on the facts of the case and the applicability of relevant law. It is hence contended that this Court ought not to entertain the present petition owing to the reason that the petition requires this Court to dwell on the factual controversy, also for such reason, this writ petition ought not to be entertained. 14. On merits of the petitioner's case, it is contended that initiation of an action for review of the assessment order dated 16 March, 2015 by issuing show cause notice and the order passed on the review proceedings and the consequent demand notice, are well within the jurisdiction of respondent No. 2 under the provisions of Section 25 of the MVAT Act, hence, it is not correct for the petitioner to contend that the proceedings are without jurisdiction or in excess of jurisdiction or they are on wrongful assumption of jurisdiction. Also the allegations of the petitioner that the impugned order is in violation of the principles of natural justice, is stated to be too casual for the reason that right from the issuance of show cause notice till the impugned order was passed, the petitioner was heard through its representative on a nu....
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..... The petition is thus not maintainable. 17. In regard to applicability of service tax, it is contended that the applicability of service tax does not in any manner exclude applicability of VAT. It is contended that it is established that the transaction in question is amenable to VAT, as held in the impugned order. The contention of the petitioner to the effect that the impugned order accepts the transaction to be a Business Transfer is denied, in contending that this would amount to an erroneous interpretation of the impugned order by the petitioner. The petitioner's contention that itemized valuation of the assets as transferred would not be relevant, when the sale of business was as a going concern is alleged to be untenable from the interpretation of legal materials and the reading of the document(s) as a whole. It is next contended that the agreement for sale and clauses therein are not consistent with the transaction of sale of business as a going concern for the reason that there are several clauses which provide for exclusion of assets in sale of business transaction, which according to the Revenue, is inconsistent with the petitioner's claim of the sale of business....
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....ugned order is beyond the scope of show cause notice is also not well founded for the reason that the show cause notice in clear terms had recorded that the sale of the business of domestic and generic formulation was incorrectly accepted in the assessment order and on such issue and other allied issues, the review proceedings were being initiated. It is next contended that the petitioner's case that the impugned order is beyond the show cause notice cannot be sustained also for the reason that the petitioner had defended action of levy of tax on the transfer of Intellectual Property Rights and other intangible assets as is evident from copy of reply dated 05 May, 2017 and synopsis of submissions dated 22 March, 2021 of the petitioner. It is contended that the petitioner has not been taxed on the entire sale consideration of the business, as tax has been levied only on the value of Intellectual Property, and other intangible assets, for which a separate agreement was entered between the parties i.e. firstly the agreement dated 21 May, 2010 and thereafter the agreement dated 08 September, 2010 titled as 'Registered User Agreement and Trade Mark Licence Agreement'. 21. It is n....
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....ted that the excluded assets and excluded liabilities are substantial in nature. The following statement in the affidavit needs to be noted:- "It is a case of slump sale not liable to tax according to the Petitioner, suffice it to say that the authority has not at all levied tax on the value of consideration for business transfer but levied tax on part of the assets such as intellectual property rights along with other intangible assets separately agreed to be transferred with restrictions and limitations." 25. It is next contended that proposal to levy tax under service tax law or dropping the same partially has no bearing on the taxability under MVAT Act. In such context, it is contended that under the definition of "business" as defined by Section 2 (4) of the MVAT Act and the Explanation (iv) thereto provides that any transaction in relation to the commencement or closure of business shall be deemed to be transaction comprised in business. It is stated that the transfer of business in question is covered under the definition of "business" and liable to tax. That slump sales are not being exempted from tax under the GST regime, it is also liable to be taxed under the....
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....letely vested with the business would constitute a "transfer of business" and would not be liable to VAT, as such a transaction is not considered as having been undertaken "in the course of business". (iii) In the present case, the petitioner has transferred the pharmaceutical business to Abbott Healthcare and as a consequence thereto, thereafter, has not conducted such business, post the date of the transfer. Since 2010, the buyer alone is conducting such business. Hence, applying the settled principles of law, there can be no levy of VAT in respect of the transaction, subject matter of the agreement. In supporting such submission, reliance is placed on (i) Deputy Commissioner (C.T.), Coimbatore vs. K. Behanan Thomas (1976) SCC OnLine Mad 421, (ii) Commissioner of Sales Tax, Maharashtra State, Bombay vs. Sundardas Harjiwan (1986) SCC OnLine Bom 404, (iii) Premier Automobiles Limited vs. Income-tax Officer & Anr. (2003) SCC OnLine Bom 1282, (iv) Coromandal Fertilisers Limited, Sec'bad vs. State of A.P. & Ors. (1998) SCC OnLine AP 615, (v) Ram Sahai vs. Commissioner S.T (1962) SCC OnLine All 232, (vi) Dy. Commissioner of....
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.... years. After transfer of the business, when the buyer was to sell the acquired products in the market, there would be a likelihood of a doubt in the mind of the public in general on the genuineness of the product and its source. Hence, to avoid such situation in the public mind for the products, that too in pharmaceutical space, there was a compelling need for temporary use of the seller corporate name and corporate logo etc. in connection with the transferred business and the nature of business transaction under the BTA can be taken away or be different because of the mere temporary non-exclusive use allowed to achieve the principal objective of the business transfer. (vii) Such temporary/non-exclusive use does not derogate the agreement or the treatment of transfer of a business. (ix) It is submitted that the taxes sought to be imposed under the law are required to be levied on the true nature of the transaction. In such context it is submitted that it is well settled law that a composite and integrated contract cannot be vivisected to fasten a tax liability. In support of his submission, reliance is placed on the decision in Union of India Vs. Playworld Electr....
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....fore the relevant officer. It is hence submitted that on a cumulative reading of Section 25 of the MVAT Act with Rule 30 of the MVAT Rules and Form 309, it was explicit that the respondents are required to (i) issue a notice to the affected party and (ii) grant a hearing to the affected party if it has any objections to the proposed order. It is submitted that in the present case, the notice in question forming the basis for review was to the effect that the transaction in question is not a slump sale for the reason that under Schedule 3.3 to the BTA included various assets and allocation of cash consideration for the purpose of stamp duty. The opinion of the department, therefore, was that the petitioner (dealer), had bifurcated the consideration of the different assets and for such reason, although the transaction was not a slump sale, incorrectly the petitioner was granted benefit of a slump sale by the assessing officer. It is for such reason, it was proposed to review the assessment order. On such backdrop, it is submitted that in passing the impugned order dated 31 March, 2021, reviewing the original assessment order, the proposed basis of the review has been completely forsa....
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.... served on the petitioner on 08 April, 2021, hence, as per the settled principles of law, it would be required to be considered to have been passed on the day on which it is served on the adverse party. It is thus submitted that the impugned order is barred by limitation. In this context it is submitted that although a specific ground was taken to this effect in the writ petition which has not been dealt in the reply affidavit dated 14 September, 2021 filed on behalf of the respondents, which according to the petitioner is the core issue of the maintainability of the impugned order. 31. It is next submitted that the impugned order and the impugned notice of demand are bad in law on the ground that there is no application of mind by the respondents for many reasons. In this context, it is submitted that the jurisdictional service tax authorities under the Finance Act, 1994 had also raised on the petitioner a service tax demand vide a notice dated 15 October, 2015, on identical issues as raised in the impugned order. The respondent authority had taken recourse to such order passed by the service authorities to the effect that the allegations from the service tax demand notice were....
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...., learned Counsel for the respondent in opposing the petition has made the following submissions: i. At the outset it is submitted that the petition ought not to be entertained when there is an alternate remedy available to the petitioner to assail the impugned order by way of an appeal before the Maharashtra Sales Tax Tribunal which would be the competent forum to examine all issues as raised by the petitioner. It is submitted that merely making allegations of breach of principles of natural justice are not sufficient to maintain the petition under Article 226 of the Constitution of India. It is submitted that the petitioner intends to avoid pre-deposit of an amount of Rs. 15 crores as against the demand of Rs. 2607 crores. It is, therefore, submitted that the petition be dismissed on this count alone. ii. On the petitioner's contention that the impugned order is in violation of the principles of natural justice, it is submitted that it is not in dispute that the petitioner was heard by the Reviewing Authority before passing the impugned order. It is submitted that in fact the entire procedure as adopted by the respondent in adjudicating the review proceeding was....
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....impugned order is non est and the show cause notice is without authority of law, it is submitted that the respondents have adhered to the mandate of Section 25 of the MVAT Act, and on a proper procedure being followed, the impugned order was passed by the reviewing authority as per law. v. It is next submitted that the petitioner's contention that VAT is not payable on the BTA on the ground that the reviewing authority was considering the transaction in the manner as considered by the service tax authority, is not tenable. In such context it is submitted that the Supreme Court has held IPR to be goods in Vikas Sales Corporation Vs. Commissioner of Commercial Taxes (1996) 102 STC 106. Also as per the Entry 39 of Schedule "C" of the MVAT Act, intangible or incorporeal rights as per the notification issued by the State Government are taxable. vi. It is next submitted that the contention of the petitioner that the transaction cannot be vivisected in regard to its different components as the transaction under BTA is a slump sale, also ought not to be accepted as levy of tax is on transfer of rights to use intellectual property for a limited period, is a transfer of rig....
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....erred and in fact, there is a transfer of certain business assets, hence, it is a case of sale of assets alongwith the licence to business and not a transfer of business with the assets and liabilities. viii. It is next submitted that even otherwise the argument that the petitioner's sale of business is not outside the "course of business", for the reason that the business itself is an asset of the petitioner and it is a valuable property. It is not an immovable property which is fastened to the land and/or attached to the earth, it is an intangible and incorporeal property, covered by the definition of 'goods' as defined under Section 2 (12) of the MVAT Act. As per Section 3 of the MVAT Act, the petitioner is a dealer and would be liable to pay tax till the petitioner's business certificate/licence is cancelled, as for a transaction of sale is liable to be taxed. Since on the date of the BTA, the certificate of the petitioner was not cancelled. ix. It is submitted that the case of the petitioner that the transaction of transfer is not in the course of business, it is submitted that since as per Section 2 (4) and Explanation (iv) below it, any transaction in conne....
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....33) of the MVAT which which defines "Sale", "Sale Price", "Tax" and "Turnover of sales" respectively. xiii. It is submitted that the petitioner's transaction fulfills all such requirements/criteria hence the BTA was liable to tax. xiv. It is next submitted that the petitioner's contention that the show cause notice itself was vague is not tenable, as it was clear that the claim of the petitioner of a slump sale was incorrectly accepted and the turnover of sales being not brought to tax by the assessing officer was the issue called upon to be answered by the petitioner. It is submitted that the petitioner has not contended in the reply to the show cause notice that it has not understood the nature of the notice and in fact the petitioner at all material times was aware of such notice, hence, the show cause notice could not have been said to be a vague show cause notice. xv. In support of the above submissions, reliance is placed on the decision of the Supreme Court in the case of Vikas Sales Corporation Vs. Commissioner of Commercial Taxes (supra), a decision of the Bombay High Court in M/s Mestra A G Switzerland vs The State Of Maharashtra & Ors. Writ Pet....
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....one through his submissions and conclude that is a slump sale and does not fall under the definition of sale hence not Taxed. ......" (emphasis supplied) 36. Such assessment order continued to operate for a period of two years. Thereafter the respondents invoked the provisions of Section 25 of the MVAT Act and initiated proceedings to review the assessment order dated 16 March, 2015, by issuing a notice under Section 25 read with Rule 30 of the MVAT Rules inter alia setting out the gist of the order proposed to be passed against the petitioner. As such notice has a significant bearing on the proceedings and as to what was called upon to be answered/replied by the petitioner, it may be necessary to extract the "Gist of the order proposed to be passed", which reads thus:- "Gist of the order proposed to be passed GIST While scrutinizing assessment record for F.Y. 2010-11 assessing authority has allowed transaction of sale of business of domestic and generic formulation to M/s. Abott Healthcare as slump sale along with assets and liabilities. However after perusal of business transfer agreement in general and Schedule 3.3 in particular it is noticed ....
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....learly based on erroneous appreciation of the factual scenario and incorrect interpretation of the legal provisions. It was stated that the allegation of understatement of liability on the ground that assets transferred under the slump sale are liable to be taxed as sale of goods, for the reason that Schedule 3.3 of the BTA contained separate valuation of assets, was wholly unfounded and made on surmises and fallacious presumptions, without appreciating the factual and legal position qua the nuances of the slump sale. The following primary contentions were raised by the petitioner alongwith supporting decisions, in its reply to the show cause notice to contend that sale of business as a going concern was not taxable under the MVAT Act:- (i) sale of business does not fall within the definition of 'goods'; (ii) sale of business is distinguishable from 'sale in the course of business'; (iii) the petitioner (noticee) does not qualify as a 'dealer' as defined under Section 2(8) of the MVAT Act qua the sale under the BTA; (iv) there is a clear distinction between 'transfer of business' vis-à-vis 'closure of business'; (v) transfer under....
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....and their affiliates temporarily for a fixed period, without any limitation on the seller or their affiliates to use the trademarks. Similar observations were made in respect of the 'trade name' and 'logo' of the petitioner of having been transferred temporarily for a fixed period. It was observed that the intellectual property rights transferred under the BTA included the goodwill of seller and its affiliates solely with respect to the business and the transferred assets ('the goodwill') as mentioned under Section 2.1 (xxii) of the BTA. It was also observed that under Section 10.6 (n) of the BTA, Abbott Healthcare was described as 'purchaser of the goodwill', hence, as set out in the BTA, the intangible properties transferred by the seller (petitioner) to the buyer (Abbott Healthcare), included the petitioner's goodwill. For such reasons as along with the other rights namely permitting the use of the petitioner's corporate name and logo, the petitioner's goodwill having been transferred to Abbott Healthcare temporarily for a fixed period, it amounted to sale of goods so as to be included in the sales turnover of the petitioner for the financial year in question. 41.....
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....TA. Such event of 'right to use' or 'lease' is covered under the definition of sale under the MVAT Act. Let us observe S.2 (24) of the MVAT Act ....." (emphasis supplied) 42. Thus, the reviewing authority considering the clauses in regard to the intellectual property rights (trade name, logo, goodwill, etc.), has held that the transaction was a sale within the meaning of Section 2 (24) of the MVAT Act. In this regard, the following observations were made:- "Here, we can observe that (i) There is sale - as the contingency of allowing 'the right to use' is covered under the definition of sale under the MVAT Act as per S.2 (24) quoted as above. (ii) There is 'goods' - as the intellectual property rights for which ownership rights are retained by the seller, is covered as 'goods' as per Schedule Entry C-39 of the MVAT act, which reads, "Goods of intangible or incorporeal nature as may be notified, from time to time, by the State Government in the Official Gazette." Also, with the intention to take back the proprietary rights after 9 months and 8 years, probably the dealer wants to continue in the business. (and has continued as PEL). Idea....
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....on 30 of the MVAT Act upon the petitioner to pay the tax (VAT) of Rs. 26,06,79,63,675/- which included the VAT amount of Rs. 8,79,93,12,633/- and interest under Section 33(3) of Rs. 17,26,86,51,042/- to be deposited by the petitioner within 30 days of the order. The said notice reads thus:- "SALES TAX DEPARTMENT Government of Maharashtra NOTICE OF DEMAND (Under Section 32 of the Maharashtra Value Added Tax Act, 2002) To, M/s. PIRAMAL ENTERPRISES LIMITED. TIN NO. 27130000022V 1. Take notice that the total amount including tax, interest and penalty payable by you for the period from 01-April 2010 to 31-Mar-2011 has been determined by undersigned as per the Order No. B-3413 dated 31.03.2021 at Rs. 26067963675.00 as shown in the table below:- Description Amount in Rs. i) Balance Amount of VAT payable 8799312633.00 ii) Balance Amount of VAT Refundable 00.00 Iii) Interest payable 30(3) 17268651042.00 iv) Penalty payable 00.00 v) Amount forfeited if any 00.00 vi) Total Amount payable 00.00 Vii) Refund admissible 00.00 Viii) Refund already granted 00.00 ix....
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....ppropriate to note in some detail the relevant contents of the BTA, so as to appreciate the basic nature of the transaction between the parties. G. Relevant extract of the Business Transfer Agreement:- "WHEREAS, Seller desires to sell, assign, transfer, convey and deliver to Purchaser, and Purchaser desires to purchase and acquire from Seller the Business comprised of the Transferred Assets as a going concern on a slump sale basis (as defined in Section 2 (42C) of the Tax Act) and in connection therewith Purchaser is willing to assume the Assumed Liabilities, all upon the terms and subject to the conditions set forth in this Agreement; WHEREAS, the Promoter Group has agreed to vote at the shareholders' meeting of Seller contemplated by Section 7.5(c) all of the shares of Seller owned by the Promoter Group in favor of the entry into this Agreement by Seller and the transactions contemplated hereby and to be bound by the terms of the no negotiation and non-compete covenants set forth in Sections 7.6 and 10.6 of this Agreement; WHEREAS, the Guarantor has agreed to guarantee the performance of all of Purchaser's obligations pursuant to this Agreeme....
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....g technical know-how, process know-how, technology, technical data, trade secrets, confidential business information, manufacturing and production processes and techniques, regulatory requirements and information, clinical data and protocols, research and development information (including all research and development data, experimental and project plans and pipeline product information) which in each case is not known within the wider pharmaceutical industry; (h) all rights in databases, data collections and data exclusivity; and (i) all copies and tangible embodiments of any of the foregoing (in whatever form or medium); including in each the right to sue for past, present or future infringement, misappropriation or dilution of any of the foregoing; .... "Owned Intellectual Property" means all Purchased Intellectual Property owned by Seller; "Patents" means all national, regional and international patents, patent applications, patent disclosures, utility models, utility model applications, petty patents, design patents and certificates of inventions, and all related re-issues, re-examinations, divisions, revisions, restorations, renewals, ex....
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....designated by Seller, in each case, (A) and (B), which are reflected in line items on the Final Statement of Closing Net Working Capital (the inventories described under clauses (A) and (B), collectively, "Inventory"); (ii) all third party Accounts Receivable; (iii) all rights in and to the products of the Business, including the Products; (iv) all rights in and to the products of the Business under research and development, including the R&D Products; Return (v) the furniture, fixtures, office equipment and laboratory equipment located at the Baddi Manufacturing Plant and any Leased Business Real Property; (vi) all other movable assets, properties, resources, facilities, utilities and services, including machinery, equipment, systems, implements, apparatus, instruments, mechanical and spare parts, fixtures, trade fixtures, tools, tooling, dyes, production supplies, storage tanks, pipes and fittings, utilities, utensils, furniture and fixtures, office equipment, communication facilities and capital work-in-progress, training materials and equipment, supplies, owned and leased motor vehicles, laptops, mobile phones and personal digital as....
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....t the Consent of any third Person) to Seller that is used by Seller or its Affiliates primarily in the Business at any time prior to the Closing Date, (the "Purchased Software"); (xv) all Governmental Authorizations, in each case to the extent assignable with or without the Consent of the issuing Governmental Authority, (xvi) all books, records, files, studies, manuals, reports and other materials (in any form or medium), including all advertising materials, catalogues, price lists and cost information, business and marketing plans, advertising and promotional materials, customer, distributor, third party manufacturer and supplier lists and information, mailing lists, distribution lists, client and customer lists, referral sources, supplier and vendor lists, purchase orders, sales and purchase invoices, correspondence, clinical data and protocols, production data, purchasing materials and records, research and development files, records, data books, Intellectual Property disclosures and records, manufacturing and quality control records and procedures, product shipping or storing requirements and information, service and warranty records, equipment logs, operating....
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....ion Roussel Limited related to the research, development, formulation, manufacture, sale, marketing and distribution of Haemaccel solely within India, Nepal and Sri Lanka. Notwithstanding the foregoing, the transfer of the Transferred Assets as a going concern on a slump sale basis pursuant to this Agreement does not include the assumption of any Liability related to the Transferred Assets and/or the Business unless Purchaser or one or more of its Affiliates expressly assumes that Liability pursuant to Section 2.3. ... ... ... (d) all rights to the products set forth on Exhibit I and Exhibit J; (e) the Contracts, Registrations, Intellectual Property rights and all other assets, rights and properties which the Affiliates of Seller (NPIL Pharmaceuticals (UK) Limited and NPIL. Holdings (Suisse) S.A.) acquired from DeltaSelect GmbH, AltaSelect S.r.1., TheraSelect GmbH and NovaSelect S.p.A. related to the research, development, formulation, manufacture, sale, marketing, distribution, importation and exportation of Haemaccel in certain countries outside of India, Nepal and Sri Lanka; (f) original copies of all minute books, records, stock ledgers, Tax ....
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.... in each case, to the extent of any Liability arising out of or relating to: (i) any breach of, or failure to comply with, prior to the Closing, any covenant or obligation in any such Contract; (ii) any event that occurred prior to the Closing which, with or without notice, lapse of time or both, would constitute such a breach or failure; or (iii) any obligation which was required to be fulfilled by Seller prior to the Closing); (c) all Liabilities assumed by Purchaser under Section 7.8 relating to Mixed Contracts and Mixed Accounts; (d) all Transferred Employment Liabilities; and (e) all Liabilities arising out of acts, omissions or events, or relating to, or occurring in connection with, the operation of the Business or the Transferred Assets or otherwise on or after the Closing, or based upon the acts or omissions of Purchaser and its Affiliates occurring on or after the Closing. .... .... ... .. Section 2.5 Intellectual Property (a) Excluding any use in respect of the Other Businesses, effective as of the Closing, Seller shall grant (to the extent Seller has rights to) to Purchaser and its Affiliat....
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....hat Purchaser shall be registered as registered user in respect of the Seller Corporate Name for the purposes contemplated by this Section 2.5(c). Any use by Purchaser or its Affiliates of the Seller Corporate Name is subject to their use of the Seller Corporate Name with the standards of quality in effect for the Seller Corporate Name as of the Closing Date. Any goodwill from the use of the Seller Corporate Name by Purchaser and its Affiliates shall inure solely to the benefit of Seller. Purchaser and its Affiliates shall indemnify and hold harmless Seller and its Affiliates for any Losses arising from or relating to the use by Purchaser or any of its Affiliates of the Seller Corporate Name. (d) ......... ARTICLE 3 PURCHASE PRICE Section 3.1. Consideration (a) Subject to the terms and conditions set forth in this Agreement, Purchaser shall pay to Seller, in consideration for the sale, assignment, conveyance, transfer and delivery of the Business comprised of the Transferred Assets to the Purchaser and the assumption by Purchaser of the Assumed Liabilities, the Indian Rupee equivalent of Three Billion Seven Hundred Twenty Million Dollars (USD 3,720,....
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....shall deliver to Seller a schedule setting forth the allocation of the Cash Consideration among the Transferred Assets for purposes of calculating the stamp duty payable on the transfer of those Transferred Assets which are subject to stamp duty, which such schedule shall be attached hereto as Schedule 3.3. The Parties shall treat the transactions contemplated by this Agreement in all filings with Governmental Authorities for all stamp duty purposes consistent with the allocation set forth on Schedule 3.3." Schedule 3.3 Allocation of Cash Consideration for Stamp Duty Purposes Sr.No. Type of Asset Allocation Amount (in USD) 1. Tangible Immovable - Baddi Plant $35,475,041 2. Tangible Immovable - Baddi Ash Disposal Site $61,603 3. Tangible Immovable - Baddi Housing Colony $881, 261 4. Trademarks and Associated Rights $1,778,000,000 5. Novation - Pierre Fabre $85,000 6. Novation - Pierre Fabre: Navelbine $33,000 7. Novation - Pierre Fabre: Avene $5,000,000 8. Novation - Intek $10,000,000 9. Novation - AstraZeneca $40,000,000 10. Novation - Allergen $4,000,000 11. Novation - No....
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....context of what has been agreed to in schedule 3.3 i.e. for stamp duty purposes only, as itself seen from the title of schedule 3.3. Applying the settled principles of law, the BTA being a commercial document, would be required to be understood in the manner and intention the parties have desired and as reflected and indicative of in the various clauses (sections). It would be thus difficult for any authority or even for the Court to attribute a different intention not only to the clauses of the BTA, but also in regard to the lump sum consideration in regard to the transfer of the said business as agreed between the parties. Thus, necessarily section 3.3 would be required to be read along with schedule 3.3 of the BTA and attributed a meaning as conferred by the parties, failing which it would amount to misreading of the BTA and/or its purport. 49. On the conspectus of the aforesaid discussion on the implications brought about by the BTA, we now proceed to examine the above questions. 50. At the outset, it would be necessary to note the relevant provisions of the MVAT Act which are as under:- H. Relevant provisions:- "Section 2. Definitions :- In this Act, un....
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....or as the case may be, an agent, residing in the State of a non-resident dealer, who buys or sells goods in the State for the purposes of or consequential to his [engagement in or in connection with or incidental to or in the course of, the business], (d) any society, club or other association of persons which buys goods from, or sells goods to, its members; Explanation.- For the purposes of this clause, each of the following persons, bodies and entities who [sell any goods] whether by auction or otherwise, directly or through an agent for cash, or for deferred payment, or for any other valuable consideration shall, notwithstanding anything contained in clause (4) or any other provision of this Act, be deemed to be a dealer, namely:- (i) Customs Department of the Government of India administering the Customs Act, 1962; (ii) Departments of Union Government and any Department of any State Government; (iii) Local authorities; (iv) Port Trusts; [(iv-a) Public Charitable Trust;] (v) Railway Administration as defined under the Indian Railways Act, 1989 and Konkan Railway Corporation Limited; (vi) In....
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.... purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (v) the supply of goods by any association or body of persons 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 made or given for cash, deferred payment or other valuable consideration; (33) "turnover of sales" means the aggregate of the amounts of sale price received and receivable by a dealer in respect of any sale of goods made during a given period after deducting the amount of- (a) sale price, if any, refunded by the seller, to a purchaser, in respect of any goods purchased and returned by the purchaser within the prescribed period; and (b) deposit, if any, refunded in the prescribed period, by the seller to a purchaser in respect of any goods sold by the dealer. Explanation I.- In respect of goods delivered on hire-purchase or any system of p....
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.... Provided that, if after the assessment order is passed, the dealer submits the return for the said period alongwith evidence of payment of tax due as per the return or submits evidence of return for the said period having been filed before the passing of the assessment order along with evidence of payment of tax due as per the return, then the Commissioner shall cancel, by order in writing, the said assessment order and after such cancellation, the dealer may be assessed in respect of the said period under the other provisions of this section: Provided further that, such cancellation shall be without prejudice to any interest or penalty that may be levied in respect of the said period: Provided also that, no order under this sub-section shall be passed after three years from the end of the year containing the said period.] ......... 24. Rectification of mistakes :- (1) The Commissioner may, at any time within two years from the end of a financial year in which any order passed by him has been served, on his own motion, rectify any mistake apparent on the record, and shall within the said period or thereafter rectify any such mistake which....
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.... (3) If the State Government or the Commissioner has initiated any proceeding before an appropriate forum, against a point which is decided against the State by a judgment of the Tribunal, then the Commissioner may, in respect of any order, other than the order which is the subject matter of the judgement, call for the record, conduct an examination as aforesaid, record his findings, call for the said books of accounts and other evidence, hear the dealer and pass an order as provided for under this section as if the point was not so decided against the State, but shall stay the recovery of the dues including interest, penalty or amount forfeited, in so far as they relate to such point until the decision by the appropriate forum and after such decision may modify the order of review, if necessary, after giving the dealer a reasonable opportunity of being heard. (4) No proceedings under this section shall be entertained on any application made by a dealer or a person." "SCHEDULE C (See sections 2(26), 5 and 6) List of goods for which the rate of tax is [2% or 3% or 4% or 5%] Note. - The abbreviation "%" in relation to the rate of tax indicates that tax ....
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....e year in which the order passed by the subordinate officer has been served on the dealer. Schedule 'C' of the MVAT Act provides for list of goods for which the rate of tax is 2% or 3% or 4% or 5%. As noted above item no. 39 of Schedule 'C' provides for 5% tax on goods of intangible or incorporeal nature as may be notified from time to time, by the State Government in the Official Gazette. 52. Thus, on the applicability of Section 25 in the context of the assessment order dated 16 March 2015 is concerned, the scope of jurisdiction of the Commissioner would be two fold, firstly to examine whether any turnover or sale or purchase was not brought to tax or was brought to tax at a lower rate or was incorrectly classified and/or whether any claim was incorrectly granted or that the liability to tax was under stated, or in any case the order was erroneous insofar as it was prejudicial to the interest of the revenue. 53. As Section 25 would take into its ambit the turnover of sales which is not brought to tax, it would be required to note that Section 2 (33) which defines 'turnover of sales' defines it to mean the aggregate of the amounts of sale price received and receivable by a d....
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.... are considered to be goods, which ought not to be in dispute [see Vikas Sales Corporation Vs. Commissioner of Commercial Taxes (supra) and Mahyco Monsanto Biotech (India) Pvt. Ltd. vs. Union of India & Ors. 2016 SCC OnLine Bom 5274], however, the question is whether considering the complexion and the nature of the agreement between the parties as contained under the BTA, the reviewing authority could have at all adopted such approach. As noted above, the contention of the petitioner is that such approach of the reviewing authority not only amounts to misreading of the BTA, but also not recognizing the correct position in law. We find ourselves in agreement with such contentions of the petitioner for more than one reason. 57. The first and foremost reason is to the effect that in doing so, the reviewing authority has adopted a pick and choose approach in dissecting the agreement and more particularly Section 3.3 read with Schedule 3.3 to give a different meaning to such part of the BTA dealing in regard to the intellectual property rights, so as to construe the same to be not part of a slump sale underlying the agreement. In other words, it can be said that the reviewing authori....
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....lled beyond the contours of the BTA. In exercise of the review jurisdiction, the reviewing authority has intended to attribute a different meaning to Section 3.3 read with Schedule 3.3 when he discusses the effect of the said clauses when tested on the touchstone of his jurisdiction under Section 25 of the MVAT Act. The jurisdiction of the reviewing authority was to confine himself to the provisions of Section 25 in undertaking review of the assessment order. He could have re-examined the agreement only in the context of what has been provided by sub-sections (a) and (b) thereof and not otherwise, however, the reviewing authority exercising the review jurisdiction has travelled far beyond such explicit jurisdiction when he vivisects the BTA to take a view to levy tax on the BTA forming an untenable opinion on reading of Schedule 3.3. The review jurisdiction cannot be a jurisdiction under which the reviewing authority would intend to tax something which on a holistic reading of the BTA was per se not taxable under the MVAT Act. Such position would be clear from the following discussion. 60. The grounds on which the review jurisdiction was to be exercised by the reviewing authorit....
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....cise, clear and unambiguous manner to the noticee in the perspective, such issues were intended to be comprehended by the authority. In our opinion, failure to follow such basic tenets would certainly result in a prejudice to the parties resulting in breach of principles of natural justice, thereby vitiating the order being passed. The principles of law in this context are well settled in catena of decisions of the Supreme Court, as also relied upon on behalf of the petitioner. However, we would not burden the judgment in discussing such well settled position in law. 61. Be that as it may, what was necessary for the reviewing authority, was not to deviate itself from the well accepted norms and approach of a holistic reading of such commercial document to ascertain as to what was the real intention of the parties in entering the BTA, and what is the cumulative and commercial effect of different clauses of the agreement when tested on the anvil of the provisions of the MVAT Act, to ascertain whether schedule 3.3 read with the other clauses of the agreement would amount to sale of goods, so as to fall within the definition of turnover of sales under the MVAT Act. On a holistic rea....
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....f of Purchaser), and to third party manufacturers (but only to the extent necessary to manufacture on behalf of Purchaser)) to use the Seller Corporate Name for purposes of making, having made, using, selling, offering to sell, importing or exporting generic pharmaceutical products in finished form in India, Nepal and Sri Lanka; provided, however, that the present license shall not be construed to limit the right of Seller and its Affiliates to use the Seller Corporate Name in the Other Businesses. Seller hereby acknowledges and agrees that Purchaser shall have the right to become the registered user of the Seller Corporate Name within India, Nepal and Sri Lanka and accordingly the Parties hereto shall make the necessary applications to the registrar of Trademarks under the (Indian) Trade Marks Act, 1999 and similar applicable Laws in Nepal and Sri Lanka for and to the intent that Purchaser shall be registered as registered user in respect of the Seller Corporate Name for the purposes contemplated by this Section 2.5 (c). Any use by Purchaser or its Affiliates of the Seller Corporate Name is subject to their use of the Seller Corporate Name with the standards of quality in effect f....
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....contended that sale of business as a going concern, was not taxable under the MVAT Act, and more particularly when the petitioner's business was being sold as a going concern. The petitioner had appropriately stated as to why itemized value of the assets and liabilities set out in Schedule 3.3 would not affect the nature of the transaction which was to transfer the on-going business to Abbott Healthcare. It was clearly stated that the itemized lists of assets and liabilities were provided only for the purpose of computation for the purpose of stamp duty in respect of such transfer and which very well fell within the acceptability of a formed slump sale as permitted under Section 2 (42C) of the Income Tax Act (as it stood at the relevant time) read with explanation (2) thereof, the relevant extract of which reads thus:- "Section 2 (42C) - Slump Sale means the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales." Explanation 2 to Section 2 (42C) of the Income Tax Act reads thus:- "For the removal of doubts, it is hereby declared that the dete....
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....f corporate name and logo to enable successful transition of the business from the petitioner to Abbott Healthcare. It was informed to the reviewing authority that the business sold by the petitioner was alongwith the products which were associated with the petitioner since many years and that after the transfer of business, Abbott Healthcare was required to sell the acquired products in the market and such situation ought not to be of any doubt in the minds of public on the genuineness of the products and its source. Hence, to avoid such situation in the public mind qua the products, that too in pharmaceutical sphere, it was explained that there was compelling need for use of seller's corporate name and corporate logo etc. in the transfer of the business under the BTA. Although such explanation was offered, it is seen that there is no discussion whatsoever, in this regard, in the impugned order. This shows complete non application of mind to the material aspects of the BTA as urged by the petitioner, and which was not only from what could be derived from the BTA and the effect schedule 3.3 read with Section 3.3 of the BTA had created in regard to the transfer of business. 69. T....
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....ed in the commentary of the learned authors "Chaturvedi & Pithisaria" - Income Tax Law, Eighth Edition needs to be noted which reads thus: 56. Business re-organization-extensive amendments in relation to amalgamation, demerger and slump sale. 56.1 The business and economic environment of the country has thrown up the need for simplification and rationalization of laws relating to business re-organization for rationalization of the production system and better utilization of resources which have become necessary with a view to enabling the Indian industry to restructure itself to become globally competitive. It was in this background that the tax concessions to conversion of firms into companies or proprietary concerns into companies were provided in the Finance (No. 2) Act, 1998, and were widely welcomed. Following this up, the Finance Act, 1999, has carried out a number of amendments for the entire gamut of business reorganization. These include rationalization of the existing provisions relating to amalgamation of companies, new provisions relating to demerger of companies and sale or transfer of business as a going concern through slump sale. 56.2 Amal....
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.... clarified that the determination of the value of an asset or a liability for the sole purpose of payment of stamp duty, registration fees or other similar taxes or fees shall not be regarded as assignment of values to individual assets or liabilities. [Clause (h), Section 3] 56.5 These amendments will take effect from 1st day of April, 2000 and will, accordingly, apply to the assessment year 2000-01 and subsequent years. [Section 58]'. ... ..." 72. Learned Authors Sampath Iyengar in their celebrated commentary 'Law of Income Tax' 13th Edition, referring to the decision of the Supreme Court in CIT Vs. Mugneeram Bangur & Co. (1965)57 ITR 299(SC) have observed that after the decision of the Supreme Court in the said case, it was always understood that in the case of sale of a business as going concern, there would not be any liability with reference to the assets comprised therein and that liability for capital gains can be computed by treating the business as a whole and as a single asset distinguishing it from a severable or item-wise sale. It is stated that such principle was observed in the Sales Tax cases, so that no sales tax liability is incurred in sa....
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....ontext of taxability of a slump sale of business. 76. In Deputy Commissioner (C.T.), Coimbatore Vs. K. Behanan Thomas (supra), the Court was concerned with the Tamil Nadu General Sales Tax Act, wherein the assessee was finally assessed to tax on a total taxable turnover of Rs. 1,59,291.31 and Rs. 1,37,880.50 respectively for the year 1967-68 by the Deputy Commercial Tax Officer/Assessing Officer. On further scrutiny of the records, the Assessing Officer noted that out of the consideration of Rs. 19,500/- for the transfer of its Ooty branch, a sum of Rs. 18,929.71 representing the sale value of the closing stock held at Ooty branch was wrongly exempted from payment of tax, hence the assessee was not eligible for exemption under the Sales Tax Rules. Accordingly, notice was issued to the assessee calling for its objections to the proposed revision of assessment. The assessee responded to the notice by contending that the business at Ooty branch as a whole was sold and that the branch business was also to be considered as a business as defined under Section 2 (d) of the Tamil Nadu General Sales Tax Act, 1959, and that the sale value of the stock held was eligible for the exemption f....
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.... mentioned in section 2 (d) (i) of the Act. Consequently, such sale proceeds being totally outside the scope of the Act cannot form part of the turnover as defined in the Act and hence such turnover is not exigible to tax under the provisions of the Act. If so, the question of such sale proceeds being deducted from the total turnover under rule 6 (d) of the Tamil Nadu General Sales Tax Rules, 1959, will not arise because that rule contemplates determination of the taxable turnover by deducting the items mentioned therein from the total turnover of a dealer. Once it is found that the sale proceeds in question did not form part of the turnover at all, there is no question of the same being deducted from the total turnover for the purpose of determining the taxable turnover. 15. The above decision of the Allahabad High Court was followed by the Kerala High Court in C.M Hamsa Haji,... v. Sales Tax Officer, Tirur,...., Tirur. In that case, a person transferred his business or stock-in-trade to a firm of which he was a partner as contribution of his capital therein. The Kerala High Court held that such a transaction did not amount to a sale of goods in the course of trade or bus....
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....not intend to make a sale of itemized assets. It was observed that the purchaser never intended to purchase individual items and that apart from land, building, plant and machinery, the assessee had transferred business advantages like licenses, quotas, permission to use the corporate logo and a trade name. The Court observed that it was a case of a slump sale. Referring to the decision in CIT Vs. Narkeshari Prakashan Ltd., it was observed that mentioning of value / consideration in respect of land or building will not per se take the transaction out of slump sale. The nature of the BTA is not different from what was being considered by the Court in this case. Hence, the observations and conclusion on the principle of law that such transaction would be in the nature of a slump sale, is squarely applicable in the facts of the present case. 78. In Coromandal Fertilisers Ltd., Secunderabad Vs. State of A.P. and Ors. (supra), a Full Bench of the Andhra Pradesh High Court was considering a reference made to it by a Division Bench doubting the correctness of an earlier decision in Coromandal Lubricants Vs. Commissioner of Commercial Taxes A.P. 102 STC 274, the following was the questi....
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....s nature can be regarded as a sale incidental to the assessee's business. In other words, the sale of goods effected in furtherance of the object of disposing of the entire business falls within the second part of the definition of 'business', according to the learned Government Pleader. We find it difficult to accept this contention. When the entire movable property including plant, machinery, equipment and other capital assets are transferred together with its immovable and intangible assets, the assessee goes out of business. How can it be said that such a step is incidental to or connected with the manufacturing, trading or other business activity the assessee was hitherto carrying on? A step to close down and dispose of the entire business is obviously not incidental or complimentary to the business, that is to say, the manufacturing or trading activity which the assessee was carrying on. Hence, in our considered view, the second part of Section 2 (bbb) does not come into play at all. The second part of definition has art inextricable link with the first part. The transaction contemplated by second part should be some thing which takes place in the process and in t....
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....goodwill are excludes. It may be accepted that when a business is sold along with stock-in-trade, that is, the goods remaining unsold, proceeds of the sale of the latter should be included in the turnover, in the present case though the assesses has sold some stock-in-trade along with its business, the amount of the proceeds of the sale of it is not shown separately from the amount of the proceeds of the sale of the goodwill etc., and it is not possible to say that a particular portion of the proceeds of the sale of the business should be included in the turnover. Our reply to the question is that proceeds of sale of the business sold by the assessee are not to be included in the turnover over which tax is payable under Section 3 of the U.P. Sales Tax Act and that no question of goods being single point goods or multiple point goods can possibly arise. Further Rule 44 (f) is of general application and applies in all cases regardless of the question of goods being single point goods or multiple point goods. We direct that copies of this judgment shall be sent under the seal of the Court and the signature of the Registrar to the Judge (Revisions) sales Tax and the Commissioner of Sal....
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....ess transfer or a slump sale as an ongoing concern and that a Business Transfer Agreement was entered into by the assessee with the company. The Court held that the assessing officer had taken the consideration fixed, under the Business Transfer Agreement for every item of assets as the sale of individual items of goods including goodwill and confirmed the demand made in the show cause notice. The Court observed that the assessing officer was completely wrong in thinking that the sale of business as a whole was taxable simply because such a sale also involved a sale of several items used in the course of business. The relevant observations reads thus: "32. Therefore, we are of the considered view that the Assessing officer was completely wrong in thinking that the sale of a business as a whole is taxable simply because such a sale also involves a sale of several items used in the course of business. ... .... .... 45. In the case on hand, another important feature is that the petitioner which is a partnership firm, sought to transfer the entire business as a going concern under a business transfer agreement to a private limited company of which the partner....
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....amounts of sale price received by the petitioner on sale of goods, as would be understood in the usual course of business, much less considering that it is the sale of business in its entirety as comprehended under the BTA. For such reason, it was completely a flawed approach on the part of the reviewing authority to tax such part of the BTA considering the same to be petitioner's sales/turnover of sales, for the financial year 2010-11 qua the amounts of the intangible assets as set out in schedule 3.3 of the BTA. Thus, in the context of the BTA, the reviewing authority could not have regarded such intangible items to be in any manner "sale of goods", so as to fall within the petitioner's turnover of sales. We may also observe that merely for the reason that schedule 'C' of the MVAT Act under item 39 provides for "goods of intangible or incorporeal nature" that would not mean that de hors the context the BTA intended to achieve, the reviewing authority could not have arbitrarily singled out and/or picked up Schedule 3.3 and tax the items in question as contained therein to be the petitioner's turnover of sales for the said financial year. It would not be permissible for the rev....
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....226 of the Constitution and if he approaches the High Court would not entertain his writ petition. The law in this regard is well settled. We may refer to a recent decision of the Supreme Court in Godrej Sara Lee Limited (supra) wherein the Supreme Court has held that the mere fact that the petitioner before the High Court in a given case has not pursued the alternate remedy available to him, cannot mechanically be construed as a ground for its dismissal. It was held that High Courts bearing in mind, facts of each particular case, have the discretion whether to entertain the writ petition or not, this being one of the self-imposed restrictions evolved through judicial precedents namely that the High Courts should normally not entertain a writ petition, where an effective and efficacious alternative remedy is available and that mere availability of an alternative remedy of appeal and revision would not oust the jurisdiction of High Court and render a writ petition not maintainable. Such principles are borne in mind and applied by us in exercising the Court's discretion to entertain the present writ petition and for the reasons which we have adverted in detail hereinabove. 86. The....