AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 1432
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....and Acquisition Agreement dated 18/01/1996 in respect of trademark 'Crocin' entered into by M/s. Duphar Interfran Ltd. with M/s. SKB Play PLC, London is an agreement to sale and such sale is a sale within the State of Maharashtra liable to tax at 4% in terms of Schedule Entry C-I-26 appended to the Bombay Sales Tax Act, 1959?" 3. Apropos the above, an interesting point arises for our determination in the given factual complexion concerning the well-known trademark 'Crocin'. By this Reference, we are called upon to determine whether the sale of the said trademark has taken place within the State of Maharashtra or is deemed to have taken place during export outside India, under the canopy of Section 5(1) of the Central Sales Tax Act, 1956 ('CST Act' for short). Factual Matrix: 4. The facts relevant for adjudication of this reference are summarized as under:- 5. The Applicant is a Company incorporated under the laws of India having its registered office at Mumbai. It is engaged, inter alia, in the business of manufacture and/or marketing of pharmaceuticals, consumer healthcare products, etc. 6. The Applicant/Company owned and held the trademark "Crocin" registered under....
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....so decided along with the Appeal preferred against the Determination order dated 31 August 1998 passed by the Commissioner of Sales Tax, Mumbai. The Tribunal dismissed both the Appeals of the Applicant by a common judgment dated 26 June 2008 ('Impugned Judgment' for short) and held that the sale of the trademark - 'Crocin' which was effected in terms of the Agreement dated 18 January 1996 was eligible to tax, being local sale within the State of Maharashtra at 4% on the sale consideration, in terms of Schedule Entry C-I-26 appended to the BST Act. 13. From the above Impugned Judgment and order of the Tribunal, the Applicant filed a Reference Application which was decided on 5 May 2010, wherein the Tribunal framed the Question (supra) which is now before us, for consideration and adjudication. Rival Contentions: Submissions of the Applicant:- 14. Mr. Patkar would, at the very outset, refer to the question of law framed by the Tribunal (supra) for the deliberation of this Court. He would submit that primarily the issue is whether the taxation of assignment of trademark by the State of Maharashtra is prohibited as a 'Sale outside the State', by referring to Section 4 of th....
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....emark nor alters the one which is already existing prior to registration. In this regard, he has made reference to the judgment of the Supreme Court in Commissioner of Income Tax, Bombay vs. Finlay Mills Ltd. (1951) 20 ITR 475 (SC). (c) Mr. Patkar would further rely on the decision in the case of Parksons Cartamundi v. Suresh Kumar Jasraj Burad 2012 SCC OnLine Bom 438, where a coordinate bench of this Court held that the assignment of trademarks is not dependent on subsequent registration. The assignee acquires title by virtue of the assignment and the acquisition of title is not postponed to the stage of registration by the Registrar of Trademarks. (d) Mr. Patkar would submit that the decision of the Kerala High Court in the case of Lal Products v. Intelligence Officer 2018 SCC OnLine Ker 5304, has reiterated and duly followed the principle of "mobilia sequuntur personam" i.e. trademark follows the owner. He would accordingly submit that ownership of the trademark has changed across borders between India and U.K., in the given factual situation. As the owner of the trademark is situated in London, there is a movement from India to London, in the given facts, to c....
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....eived in Indian rupees and accordingly, the Applicant did receive such consideration in India. This is yet another factor to show that the situs of the said trademark never moved out of the Indian frontiers. 25. Ms. Chavan would submit that the sale of the said trademark-'Crocin' is very much characterized as goods of intangible or incorporeal character. This would be covered by Schedule Entry C-I-26 appended to the BST Act and hence governed under said Act. Accordingly, this is a case of Sale of Goods i.e. the Sale of the said trademark itself as against the right to use such trademark by way of transfer and/or assignment. 26. Ms. Chavan would draw support and adopt the findings of the Impugned Judgment of the Tribunal dated 26 June 2008. She would submit that there is no irregularity, much less illegality in the said Judgment of the Tribunal and the same, thus, ought not to be interfered with. 27. For all the above reasons, in her view this is a clear case where there is no movement of the goods i.e the said trademark - 'Crocin' outside India, in any manner whatsoever. Thus, there is no question of construing such sale as sale in the course of export as per Section 5(1) ....
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.... is introduced into the pipeline or system in one State and is taken out from the pipeline in another State, such sale or purchase of gas shall be deemed to be a movement of goods from one State to another. 4. When is a sale or purchase of goods said to take place outside a State.-(1) Subject to the provisions contained in section 3, when a sale or purchase of goods is determined in accordance with sub-section (2) to take place inside a State, such sale or purchase shall be deemed to have taken place outside all other States. (2) A sale or purchase of goods shall be deemed to take place inside a State, if the goods are within the State- (a) in the case of specific or ascertained goods, at the time the contract of sale is made; and (b) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation. Explanation .-Where there is a single contract of sale or purchase of goods situated at more places than one, the provisions of this sub-section shall apply as if there were separate contracts i....
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....ng whether the Agreement in respect of the trademark-'Crocin' was an Agreement to sale, to which Mr. Patkar does not dispute, is covered by the Impugned Judgment of the Tribunal in the affirmative. What requires determination is that whether the sale in respect of the said trademark is within the State of Maharashtra or would qualify as an export in terms of Section 5(1) of the CST Act. The implication being that in the event the transaction is construed as a sale within the State of Maharashtra, it would attract 4% tax, more particularly in terms of schedule entry C-I-26 appended to the BST Act. This is what Ms. Chavan would contend. However, in the event, the movement of the goods i.e. trademark - 'Crocin' in the given case constitutes as 'export', then there would be no tax leviable. In this context we refer to the relevant portion of the 6th constitutional amendment in Article 286, post 11 September 1956. Pursuant thereto, it becomes clear that the state shall not impose any tax more particularly on sale or purchase of goods when it takes place in the course of import or export, out of the territory of India. It is further pertinent to note that pre-amendment in the said Articl....
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....that the legislation must be read or understood as a whole." The decisions referred to in paragraphs 32 to 35 (supra) would be squarely applicable in the given facts, as we interpret Section 5 of the CST Act. 36. Mr. Patkar would submit that whether the transaction is of sale within Maharashtra or export, is covered in favour of the Assessee by the decision of a coordinate Bench of this Court in Mahyco Monsanto (supra). In this context, to appreciate the submission, it would be apposite to refer to the relevant portion of the said decision which reads thus:- "77. Once we arrive at this conclusion, then the argument on situs, which is really one of jurisdiction, is entirely irrelevant. If the franchise agreement is not liable to sales tax, then it is not liable to sales tax by any state agency anywhere, irrespective of location. Sales tax is under the purview of the State List, while service tax comes under the ambit of the Central List. Since this transaction is held to be a service, the service tax levied will be assessed and payable to the Central Government. Therefore, a detailed discussion of situs is unnecessary. In any event, had it fallen for decision, we woul....
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.... "22. Thus, the legislature, where it wanted to specifically provide for a particular situation, as in the case of shares, where the share derives, directly or indirectly, its value substantially from assets located in India, it did so. There is no such provision with regard to intangible assets, such as trademarks, brands, logos, i.e., intellectual property rights. Therefore, the well accepted principle of 'mobilia sequuntur personam' would have to be followed. The situs of the owner of an intangible asset would be the closest approximation of the situs of an intangible asset. This is an internationally accepted rule, unless it is altered by local legislation. Since there is no such alteration in the Indian context, we would agree with the submissions made on behalf of the petitioner that the situs of the trademarks and intellectual property rights, which were assigned pursuant to the ISPA, would not be in India. This is so because the owner thereof was not located in India at the time of the transaction." A bare perusal of the above would lead to an inevitable inference that the trademark - 'Crocin', in the given facts pursuant to its assignments has moved its....