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TMI Blog2012 (11) TMI 927X X X X Extracts X X X X X X X X Extracts X X X X ..... is that what is transferred for use should be "Goods" as defined in the Act to come within "sale" as defined in the Act. Since the statutory provisions of the KVAT Act are similarly worded, this court is entitled to place reliance on these principles, which are also binding on this Court. For this reason, introduction of Service Tax is inconsequential. Trade Mark is "Goods" as defined in the Act - Royalty received by the petitioner is exigible to tax under the KVAT Act. Faced with this situation, counsel for the petitioner relied on the Apex Court judgment in Imagic Creative (2008 (1) TMI 2 - SUPREME COURT OF INDIA) and contended that Service Tax and VAT being mutually exclusive, since the petitioner is paying service tax on royalty received, the impugned demand for tax and penalty are illegal. - In this judgment, I have already held that royalty received is liable to be taxed under the Act and this Court is not called upon to decide the legality of the levy of service tax on the royalty received by the petitioner. Therefore, if the petitioner has a case that levy of service tax is illegal for any reason, it is upto them to challenge the levy in appropriate proceedings. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down in the Apex Court judgment in Imagic Creative (P) Ltd. v. Commissioner of Commercial Taxes and others {(2008) 2 SCC 614}, payments of service tax and VAT are mutually exclusive and hence not payable. 5. Thereafter, the 1st respondent issued Ext.P3 proposal notice, reiterating that the petitioner is liable to pay tax under the Act at 4%, which was also disputed in Ext.P4 reply submitted by the petitioner. Petitioner was granted an opportunity of hearing and finally Ext.P5 order was passed confirming the demand for ₹ 13,10,744/- along with interest of ₹ 2,78,009/-. This was followed by Ext.P6 order levying penalty of ₹ 13,10,744/- under Section 67 (1)(d) of the Act. It was thereupon, this writ petition was filed seeking to quash Exts.P5 and P6. Similar orders issued for the assessment years 2006-07, 2007-08, 2009-10 and 2010-11 are sought to be quashed in WP(C) Nos. 28376/11, 38524/10, 28351/11 and 20269/12 respectively. 6. I heard the learned counsel for the petitioner and the learned Special Government Pleader for Taxes. 7. On behalf of the petitioner, it was contended that, what is transferred by them to their franchisees is only the right to use it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place additional signs, posters, trademarks, trade names, service marks and logos on premises other than those authorized by MALABAR GOLD. For such usage of MALABAR GOLD trademark (s), trade name(s), service marks(s) and logo(s). 5.4.EXCLUSIVITY- The FRANCHISEE undertakes that the showroom and its infrastructure shall not be used for any purpose or activities other than that provided under this agreement. The FRANCHISEE shall also not conduct any business other than MALABAR GOLD business in the name of the entity that has taken up the MALABAR GOLD FRANCHISE. The FRANCHISEE shall offer the Businesses covered by this AGREEMENT and any other Business (s) that MALABAR GOLD may introduce from time to time and intimated by MALABAR GOLD. 5.5. The FRANCHISEE shall operate the Show Room in accordance with the standards, specifications and procedures set out by MALABAR GOLD from time to time. The FRANCHISEE agrees further that changes in such standards, specifications and procedures may become necessary from time to time and agrees to accept such modifications, revisions and additions which MALABAR GOLD in good faith considers necessary. The FRANCHISEE agrees not to deviate from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deferred payment or other valuable consideration shall be deemed to be a sale. 14. From these constitutional and statutory provisions, it is clear that a transfer of right to use any goods for any purpose, for cash, deferred payment or other valuable consideration shall be deemed to be a sale for the purposes of the Act. In the pleadings in the writ petition itself, petitioner admits that by virtue of the agreements entered into with their franchisees, the franchisees are authorised to use their Trade Mark and that in consideration thereof, they are receiving the agreed royalty. In such circumstances, it can be concluded that the Trade Mark of the petitioner is transferred to the franchisees for their use and the consideration received is the royalty paid to the petitioner. Such a transaction is a deemed sale as defined in section 2(xliii) of the Act read with Explanation V thereof. 15. Relying on paragraph 97 of the Apex Court judgment in the BSNL case (supra), counsel for the petitioner contended that to constitute a transaction for transfer of the right to use the goods, one of the attributes to be satisfied is that for the period during which the transferee has such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of the service rendered by BSNL to its customers, whether it is a sale or service. Further, as is evident from the judgment itself, BSNL was retaining physical control and possession over the entire infrastructure and there was neither any physical transfer of goods nor transfer of right to use any equipment to anyone. On the other hand, in this, petitioner themselves concede that their trademark has been transferred for the use of their franchisees and that as consideration thereof, they have received royalty. 18. As far as the requirement that transfer of trademark to the transferee should be to the exclusion of the transferor is concerned, if the petitioner had a case that the franchisee has no exclusive right within the territory allotted to it, it was for them to plead and prove this contention. There is no such plea and copy of the agreements have not even been produced by them. Further, the specimen franchisee agreement made available by the counsel for the petitioner shows that the franchisee has undertaken not to use the showroom for any purpose or activity other than that are provided in the agreement and to stock only products authorised by the petitioner. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court also had dealt with similar issues on various occassions. In the context of the identical provisions contained in the Kerala General Sales Tax Act, a Division Bench of this Court in the judgment in Mechanical Assembly Systems (India) Pvt. Ltd. v. State of Kerala (2006(1) KLT 947) held that technical know-how is goods and that its transfer constitutes sale as defined in the said Act. Following this judgment, in Jojo Frozen Foods (P) Ltd. v. State of Kerala {(2009) 24 VST 327}, it was held that royalty amount received from franchisees for use of Trade Mark is exigible to tax under the KGST Act. Again in Kreem Foods Private Ltd. v. State of Kerala {(2009) 24 VST 333}, this Court held that royalty paid by franchisee is liable to be taxed under the KGST Act. The Andhra Pradesh High Court has also held that royalty received from franchisee as consideration for transfer of Trade Mark for use attracts tax under the sales tax law prevailing in that State in its judgment in Nutrine Confectionary Co. Pvt. Ltd. v. State of Andhra Pradesh {(2012) 20 KTR 38}. These judgments unambiguously lay down the principle that Trade Mark is Goods as defined in the Act. 22. In this contex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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