9911796707
TMI Blog2016 (11) TMI 550X X X X Extracts X X X X X X X X Extracts X X X X ..... oration registered in Netherland, being P.O. Box No. 717444, 1008, DE Amsterdam, the Netherlands. It is engaged in the business of franchising Domino Pizza Stores. Such stores specialize in business of sale of pizza, feature carry out, delivery services and operate a uniform business format, specially designed equipment, recipes, methods procedures and designs. It entered into a licence agreement dated 17.04.2007 with Dominos IP Holder LLC, a limited liability company, organized under the State of Delaware, United States of America. Under the said agreement, Dominos IP Holder LLC provided to petitioner, right to grant franchises for Dominos Pizza Stores including right to licence, use of trademark "DOMINOS PIZZA", in certain areas, outside United States of America. Accordingly, petitioner entered into a Master Franchise agreement dated 23.09.2009 (hereinafter referred to as the "Franchise Agreement") with M/s Jubilant Foodworks Ltd. (hereinafter referred to as the "JFL") to develop and operate Dominos Pizza Stores and to grant sub-franchise of Dominos Pizza Stores in India, Nepal, Bangladesh and Srilanka. The franchise agreement dated 23.09.2009 was executed in Netherland. In lieu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of 'dealer' under Section 2(h) of VAT Act, 2008 nor petitioner's "franchise agreement" and service rendered thereunder is chargeable to VAT for the reason that it is a franchise service and petitioner is already subject to Service Tax which it is paying to concerned department. Reliance is placed on decisions in 20th Century Finance Corpn. Ltd. and another Vs. State of Maharashtra, 2000(6) SCC 12; Imagic Creative Pvt. Ltd. Vs. CCT, 2008(9) STR 337; Goa Carbon Ltd. Vs. Commissioner of Trade Tax, 2008(11) SCC 176; Idea Mobile Communication Ltd. Vs. C.C.E. & C., Cochin, 2011 TIOL 71 SC-ST; and, Bharat Sanchar Nigam Limited Vs. Union of India, 2006(3) SCC 1. 10. Learned Standing Counsel, per contra, submitted firstly, that writ petitions having been filed against orders of assessment, petitioner has a statutory alternative remedy of appeal and, therefore, must avail same. Secondly, it is contended that right to use goods is being exercised in State of U.P., therefore, it is taxable under VAT Act, 2008. It is said that "place of business" is defined as a place where a 'dealer' carries business and includes any place where a dealer execute works contract or whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.10.2009/ 02.10.2009 with a clear stipulation that it will supersede provisions of original Master Franchise Agreement and subsequent amendments and terms and conditions of such agreement (copy of agreement dated 23.09.2009/ 01.10.2009/ 2.10.2009 is Annexure-4 to the writ petition). 16. Now we propose to look into the relevant statutory provisions and judicial precedents relied by both sides. 17. The relevant terms for the purpose of present dispute are definitions of "business", "dealer", "lease", lessee", "lessor", "place of business" and "sale" as defined under Section 2(e), (h), (q), (r), (s), (x) and (ac) of VAT Act, 2008. Since basic contentions raised in this writ petition is that the agreement has been executed outside India, therefore, we reproduce hereat the "place of business" defined in Section 2(x) as under: "(x) "place of business" means any place where a dealer carries on business and includes- (i) any shop, ware-house, godown or other place where a dealer stores his goods; (ii) any place where a dealer produces or manufactures goods; (iii) any place where a dealer keeps his books of accounts and documents; (iv) any place where a dealer executes the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cannot so frame its law so as to convert an outside sale or a sale in course of an inter-State trade or commerce into a 'sale' inside the State. Interpreting Article 366 (29-A) (a) to (f) of Constitution, Court by majority held: (a) Sub- clause (a) to (f) of clause (29A) of Article 366 are not actual sales within the meaning of sale but are "deemed sales" by legal fiction created therein. (b) Where situs of sale has not been fixed or covered by any legal fiction created by appropriate legislature, location of sale would be the place where property in goods passes. (c) Where a party has entered into formal contract and goods are available for delivery irrespective of place where they are located, the situs of such sale would be where the property in goods passes, namely, where the contract is entered into. (d) Transfer of goods will be a deemed sale in the cases of sub-clauses (a) and (b), the delivery of goods will be a "deemed sale" in case of sub-clause (c), supply of goods and services respectively will be "deemed sales" in the cases of sub- clauses (e) and (f) and transfer of right to use any goods will be a "deemed sale" in the case of sub-clause (d). Clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appropriate legislature by creating legal fiction can fix situs of sale. In the absence of any such legal fiction the situs of sale in case of the transaction of transfer of right to use any goods would be the place where the property in goods passes, i.e. where the written agreement transferring the right to use is executed. (c) Where the goods are available for the transfer of right to use the taxable event on the transfer of right to use any goods is on the transfer which results in right to use and the situs of sale would be the place where the contract is executed and not where the goods are located for use. (d) In cases where goods are not in existence or where there is an oral or implied transfer of the right to use goods, such transactions may be effected by the delivery of the goods. In such cases the taxable event would be on the delivery of goods. (e) The transaction of transfer of right to use goods cannot be termed as contract of bailment as it is deemed sale within the meaning of legal fiction engrafted in clause (29A) (d) of Article 366 of the Constitution wherein the location or delivery of goods to put to use is immaterial." (emphasis added) 24. Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of business would be where right to use goods is exercised. Validity of aforesaid provision is not under challenge in this writ petition. The real issue is which is the place in present cases where it can be said that right to use goods has been exercised. 27. The view taken by Assessing Authority that place of execution of agreement so as to transfer right to use goods is not relevant and reliance placed on this Court's Single Judge judgment in Vysya Bank Ltd. Vs. The Commissioner of Trade Tax (supra) is not correct for the reason that therein the learned Single Judge found as a matter of fact that agreement was not executed at Delhi and, therefore, a finding of fact was recorded which was not found to be incorrect. There was nothing to show that agreement was executed outside the State of U.P. and it is in these facts and circumstances, Court decided the matter. 28. It does not appear from record, where agreement dated 23.09.2009/ 01.10.2009/ 02.10.2009 was actually signed. Copy of agreement shows that it is dated 23.09.2009 (Page 85 of the paper book) but page 119, which contains signatures of various parties but shows no date under signature of Chief Executive Officer- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Head Office at NOIDA. 33. Basic facts pleaded by learned counsel for petitioner that agreement dated 23.09.2009 was entered at Netherland is contrary to record. 34. In the present case, right to use goods constitute a brand name "DOMINO'S PIZZA". This right was transferred by agreement dated 23.09.2009/ 01.10.2009/ 02.10.2009. As we have already said, record does not show that agreement was executed at Netherland. On the contrary, it appears that an offer/proposal was made by M/s Domino's Pizza India Limited at NOIDA which was accepted by Franchiser/DPOF and IP Holder on 01.10.2009 and 02.09.2009 respectively at Amsterdam (Netherland) and Michigan (United States of America) and such acceptance was communicated to Proposer at NOIDA. Therefore, apparently agreement between parties concluded at NOIDA. Head office of petitioner is admittedly at NOIDA. It is neither its case nor material is placed on record to show that correspondence or whatever action it had taken, was at any other place than NOIDA. 35. In the entire writ petition the only pleading with regard to place of execution of contract is that it was entered at Netherland, i.e., outside India vide Master Franchi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is complete-- as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it; as against the person to whom it is made, when it comes to his knowledge. (emphasis added) 39. There is an illustration (b) under Section 4 of Act, 1872 to show, when communication of acceptance would complete and reads as under: "(b) B accepts A's proposal by a letter sent by post. The communication of the acceptance is complete, as against A. When the letter is posted; as against B, when the letter is received by A." (emphasis added) 40. When a concluded contract will come into existence and where, in our view can be adjudicated by taking recourse to a three Judge's judgment in Bhagwandas Goverdhandas Kedia Vs. Girdharilal Parshottamdas and Co. and others, AIR 1966 SC 543 wherein matter was decided by a majority judgment. The majority judgment was rendered by Hon'ble J.C. Shah, J. for himself and Justice K.N. Wanchoo. Therein, Court after referring to Sections 3 and 4 of Act, 1872, said, that it is acceptance of offer and intimation of that acceptance which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e second clause of Section 4, communication of an acceptance is complete as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor. This implies that where communication of an acceptance is made and it is put in a course of transmission to the proposer, acceptance is complete as against the proposer. As against the acceptor, it becomes complete when it comes to the knowledge of proposer. In the matter of communication of revocation it is provided that as against the person who makes revocation, it becomes complete when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it, and as against the person to whom it is made when it comes to his knowledge. 41A. Section 4 does not imply that the contract if is made qua proposer at one place and qua the acceptor at another place, it becomes complete as soon as acceptance is made by acceptor. Unless otherwise agreed expressly or by necessary implication by the adoption of a special method of intimation, when the acceptance of offer is intimated to the offeror. 42. Court in Bhagwandas Goverdhandas Kedia ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue was considered in the context of communication by email. Court, after referring to Section 13(3) of Information Technology Act, 2000, observed that acceptance communicated by respondents to petitioner by email will be deemed to be received by petitioner at Varanasi/ Chandauli which are the only two place where petitioner has his place of business. 48. In the present case there is no averment regarding mode of communication adopted by petitioner communicating its acceptance. There is not even a whisper as to how and in what manner communication of acceptance was made. In absence of any specific pleading so as to attract exceptions with regard to communication, we have no option but to hold that acceptance will be completed only when it is communicated to offeror and that communication obviously would be at a place wherefrom offer was made. That be so, the agreement can be said to become a concluded contract and executed when it is communicated to Proposer/ Offeror at NOIDA wherefrom offer was made. The ultimate result would be that the very foundation of argument that taxing authorities in Uttar Pradesh had no jurisdiction, disappears and vanishes. It cannot thus be said th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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