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TMI Blog2010 (11) TMI 870X X X X Extracts X X X X X X X X Extracts X X X X ..... sion that the consideration received as royalty for allowing the assignee the use of trademark and logo, is realized in respect of the transfer of the right to use the goods. This does not call for any interference. Appeal dismissed. - 253, 260 of 2010 - - - Dated:- 3-11-2010 - RAO V.V.S. AND RAMESH RANGANATHAN, JJ. ORDER:- The order of the court was made by V.V.S. RAO J. The two tax revision cases under section 22(1) of the Andhra Pradesh General Sales Tax Act, 1956 ( the GST Act ) read with section 34 of the Andhra Pradesh Value Added Tax Act, 2005 ( the VAT Act ) are being disposed of by this common judgment. They are against common order dated March 31, 2010 passed by the Sales Tax Appellate Tribunal, Hyderabad, in T.A. Nos. 949, 953, 1038 and 1105 of 2005. By the impugned order, the learned Tribunal considered three questions. The questions (a) and (c) related to T.A. Nos. 949 and 953 of 2005 with which these revision cases are not concerned as those appeals related to the assessment years 1995-96 and 1996-97 were allowed. Whether the liability fixed under section 5E of the GST Act in respect of the royalty received by the appellant against the right to use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were dismissed holding that the royalty received by the petitioner from the assignees under different agreements is liable to tax as goods under entry 197 of Schedule I of the GST Act. The counsel for the petitioner submits that the assignee pays royalty for all multiple services including the use of the trademark and the logo and, therefore, there is no transfer of right to use goods as contemplated under law. He relies on Rashtriya Ispat Nigam Ltd. v. Commercial Tax Officer (RINL-I) [1990] 77 STC 182 (AP) and the decision of the Supreme Court in State of Andhra Pradesh v. Rashtriya Ispat Nigam Ltd. (RINL-II) [2002] 126 STC 114 (SC); [2002] 3 SCC 314, which confirmed the High Court. He nextly submits that when the agreement confers on the assignee more than one uses subject to payment of consideration based on tonnage, it cannot be split up use-wise to arrive at the consideration for the transfer of right to use trademark and logo. According to him, when there is no exclusive right to use the goods by the transferee, section 5E of the GST Act is not attracted. For this purpose he relies on State of Himachal Pradesh v. Associated Hotels of India Ltd. [1972] 29 STC 474 (SC); [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose, whatsoever, whether or not for a specified period, to any lessee or licensee for cash, deferred payment or other valuable consideration, in the course of his business shall, on the total amount realized or realizable by him by way of payment in cash or otherwise on such transfer or transfers of the right to use such goods from the lessee or licensee, pay a tax at the rate of eight paise on every rupee of the aggregate of such amount realized or realizable by him during the year. (b) the transfer of right to use any such goods entered into by any dealer, shall be deemed to have taken place in this State whenever the goods are used within the State, irrespective of the place where the agreement whether written or oral for such transfer of right is made: Provided that no such tax shall be levied if the total turnover of the dealer including such aggregate is less than rupees two lakhs. When it is the case of transfer of right to use any goods, section 5E of the GST Act overrides all other provisions of the GST Act. What is taxable is the consideration received by the dealer for transfer of the right to use any goods for any purpose, whatsoever to any lessee or licen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (rupees five hundred only) per tonne of production as royalty. 10. The royalty amount mentioned above shall be calculated on the monthly production and shall be paid to the first party within 15 days from and of the month. The agreement is without any title to give any indication as to nature of the agreement. But it is settled rule of interpretation of documents that every document or deed has to be interpreted keeping in view the intention of the parties. It is also well-settled that the intention of the parties to a transaction has to be determined with reference to the language and if there is any difficulty or ambiguity in so doing, it is always open to look to attending circumstances. In the absence of any evidence with regard to the circumstances that lead the parties to enter into the transaction or enter into a deed or document, such circumstances can even be inferred from the agreement itself. Clause 2 itself uses the terminology to the effect that, the party of the first part shall allow the party of the second part to use Nutrine trademark and bunny logo . . . . This is very clear and unambiguous and amounts to transfer of the right to use the trademark and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or intangible in character like copy right, patent, trademark, etc. In Rashtriya Ispat Nigam Ltd. v. Commercial Tax Officer [1990] 77 STC 182, a Division Bench of this court considered the test to determine whether a transaction amounts to transfer of right to use the goods was indicated as follows, whether the transaction amounts to transfer of right or not cannot be determined with reference to a particular word or clause in the agreement. The agreement has to be read as a whole, to determine the nature of the transaction. From a close reading of all the clauses in the agreement, it appears to us that the contractor is entitled to make use of the machinery for purposes of execution of the work of the petitioner and there is no transfer of right to use as such in favour of the contractor. We have reached this conclusion because the effective control of the machinery even while the machinery is in the use of the contractor is that of the petitioner-company . The above view was affirmed by the Supreme Court in State of Andhra Pradesh v. Rashtriya Ispat Nigam Ltd. [2002] 126 STC 114 (SC); [2002] 3 SCC 314, observing as under (page 116 in 126 STC): . . . On a careful re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CC 472; AIR 1972 SC 1131. The effect of these two decisions was neutralized by insertion of clause (29A)(f) in article 366 of the Constitution of India by the Constitution (Forty-sixth Amendment) Act, 1982, which defines tax on the sale or purchase of goods as including, inter alia, a tax on 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 . Article 366(29A)(d) was also added authorizing the tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. It is also needless to add that section 5E of the GST Act itself was inserted in the GST Act after the Constitution amendment. Karthik Eng. Works [2000] 119 STC 88 (Karn) is the case which dealt with an agreement between the assessee and licensee for the use of the premises and machinery of factory. The plea of the Revenue that there was transfer of right to use movable goods was rejected by the Division Bench of Karnataka High Court observing that, the machinery itself being an immovable property, it is beyond the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of the services to be included in the sale of goods or the price of goods in the value of the service. The law declared by the Supreme Court while dealing with the questions B and C as above is relied on by the petitioner. According to the counsel, when there is a discernible sale only, to the extent of such sale, the event is taxable and if there is a composite contract of sale, it cannot be taxed. We have perused the agreement between the petitioner and the assignee and are convinced that transfer of right to use Nutrine trademark and bunny logo is clearly discernible, which is dominant purpose and notwithstanding the provision of various supports and amenities, the transaction does not cease to be a sale. The counsel relies on para 98 of STC from the concurring judgment and contends that when there is no exclusion of the petitioner in the use of the goods, there is no transaction for the transfer of right to use the goods. We are afraid, we cannot accept the submission. Bharat Sanchar Nigam Ltd. [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 3 SCC 1 was dealing with a case of mobile telephone connections. It is not a case of assignment/tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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