2003 (12) TMI 611 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction to challenge show cause notices.
2. Classification of trademarks, technical know-how, and non-competition agreements as sale of goods.
3. Entitlement to relief.

Detailed Analysis:

1. Jurisdiction to Challenge Show Cause Notices:
The primary issue was whether the petitioners could challenge the show cause notices issued by the second respondent under sections 29 and 31 of the Karnataka Sales Tax Act, 1957 ("KST Act"). The petitioners contended that the second respondent had no jurisdiction to issue such notices, arguing that the transactions in question did not fall within the purview of the KST Act. The court referred to the Supreme Court's decision in *Whirlpool Corporation v. Registrar of Trademarks, Mumbai* (AIR 1999 SC 22), which held that the High Court can entertain a writ petition under Article 226 of the Constitution if the authority issuing the notice has no jurisdiction. However, the court found that the second respondent had a legal foundation to issue the show cause notices, as complicated questions of fact and law were involved. Thus, the petitioners could not maintain the writ petitions challenging the show cause notices.

2. Classification of Trademarks, Technical Know-How, and Non-Competition Agreements as Sale of Goods:
The petitioners argued that the sale of trademarks, technical know-how, and non-competition agreements did not amount to the sale of goods under the KST Act. They contended that these items were intangible and incorporeal properties, incapable of having a local situation, and thus, not subject to sales tax. The respondents, relying on *Vikas Sales Corporation v. Commissioner of Commercial Taxes* ([1996] 102 STC 106 SC), argued that the sale of these rights amounted to the sale of incorporeal rights, which are treated as special property and attract sales tax. The court noted that whether these transactions constituted the sale of goods was a mixed question of law and fact, which needed to be determined by the authorities. Therefore, the court did not adjudicate on this issue, as it was premature to do so without the authorities' findings.

3. Entitlement to Relief:
The court dismissed the writ petitions as premature, directing the second respondent to examine all the contentions raised by the petitioners in their replies to the show cause notices. The second respondent was instructed to take action in accordance with the law, including providing a personal hearing to the petitioners if necessary. The court emphasized that the powers granted to the second respondent under the KST Act should be exercised by the second respondent alone, without the court usurping its jurisdiction.

Conclusion:
The writ petitions were dismissed as premature, with the court directing the second respondent to consider the petitioners' contentions and take appropriate action in accordance with the law. The court did not adjudicate on whether the sale of trademarks, technical know-how, and non-competition agreements constituted the sale of goods, leaving this determination to the authorities.