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2014 (9) TMI 1147 - KARNATAKA APPELLATE TRIBUNALTransfer of right to use - sale or service - Whether in facts and law, the FAA is correct in deciding that the transactions between the appellant-company and the CBUs is one of technical service activity and does not involve the transfer of right to use the trademark or there is no deemed sale of trademark? Held that: - he appellant-company has granted only permission to use the trademark which means to say it is only the licence to manufacture the beer as per the terms and conditions of the appellant-company. The permission to use the trademark is inevitable as the beer so manufactured is for the appellant-company only as the label clearly stipulates that it is 'For United Breweries only' i.e., for the appellant-company only. The agreements are of composite nature which involves rendering of services, technical consultancy, monitoring of production and marketing and distribution of the beer manufactured on behalf of the appellant. It is the contention of the AA that there is transfer of right to use the trademark - the necessary concomitant of the plain language of the agreement proves that it is merely the licence to use the goods rather than the transfer of right to use as envisaged under the Act. This is explicitly laid down under Clause 2.2 which states that 'UBL hereby grants to BDL i.e. CBL's, the non-assignable, non-transferable and non-exclusive right during the term of the agreement. The sub-clauses 2.2.1, 2.2.2 and 2.2.3 makes it clear that it is only the licence to use the trademark in the composite contract transactions. The FAA is correct in deciding the issue that the transactions between the appellant and the CBUs does not involve the transfer of right to use the trademark or brand name and thereby the brand franchisee fee is not liable for tax - decided in affirmative. Whether, the State in cross appeals has established in facts and law that there is transfer of right to use the trademark as per the agreements and the FAA has erred in allowing the appeals in part? - Held that: - the trademark is first of all an intellectual property right and permission to use the trademark amounts to intellectual property services. The appellant-company has adduced copies of the returns in Form ST-3, the prescribed form under Section 70 of the Finance Act, 1994 to demonstrate that the service tax has been paid on the payments realised by way of economic surplus in the form of marketing fee during the impugned tax periods - the cross appeals of the State do not sustain and liable to be dismissed - decided in negative. Whether, the FAA is correct in deciding that the royalty realised by the appellant amounts to transfer of right to use the brand name "Kingfisher" to the licensees to manufacture and sale of packaged mineral water with that brand name? - Held that: - the law is clear to the effect if royalty received by the appellant has been offered to the service tax under Finance Act, 1994 then it cannot be construed as transfer of right to use the trademark 'Kingfisher' in favour of water bottling units. As the appellant-company has adduced proof by furnishing the copies of Form ST-3, the prescribed form under Section 70 of the Finance Act, 1994 wherein the entire royalty has been admitted to service tax right from April 2006 to March 2011 i.e. during the impugned tax periods of financial years 2005-2006 to 2010-2011 (six financial years) - decided in negative. There is no need to restore the orders of the AA - appeal allowed in part.
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