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TMI Blog2018 (3) TMI 1323X X X X Extracts X X X X X X X X Extracts X X X X ..... received by the assessee as brand franchisee fees from CBUs (Contract Bottling Units) in case of manufacture of beer. 2. All the petitions are directed against the common order dated September 26, 2014 passed by the Tribunal in respect of sales tax appeals whereby appeals of the State are dismissed. 3. The perusal of the order passed by the Tribunal and more particularly, the observations beginning from paragraph 12 onwards on the above referred question shows that the Tribunal has relied upon its decision in case of United Breweries v. State of Karnataka in STA Nos. 2456 and 2457/ 12 with Cross Appeal STA Nos. 1142 and 1143/13 and the said aspect is apparent from the perusal of paragraphs 12 of the said decision. 4. The aforesaid decision of the Tribunal in STA Nos. 2456 and 2457/12 with the cross appeal therein in case of M/s. United Breweries Limited v. State of Karnataka has been carried before this court by the State of Karnataka in S. T. R. P. Nos. 384 of 2014 and 1 to 3 of 2015 and the Division Bench of this court vide order dated October 1, 2015 (State of Karnataka v. United Breweries Ltd. [2016] 6 VST-OL 19 (Karn)) for the reasons recorded in the order has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under the definition of 'service' as provided under sub-section 55(b) of section 65 of the Finance Act, 1994. It is thus contended that since the payment received from CBUs as 'brand franchise fees' would not be termed as 'goods' within the meaning of transfer of right to use the goods, as such, no tax would be leviableunder section 5C of the Karnataka Sales Tax Act, 1957 (for short, 'the KST Act'). 12. The learned counsel for the parties have relied on certain decisions/case laws, which shall be dealt with at the time of considering their submissions. 13. The relevant provisions of the KST Act, Finance Act, 1994 and the Constitution of India, are reproduced below: Section 2(1)(m) of the KST Act: ' Goods means all kinds of movable property (other than newspapers, actionable claims, stocks and shares and securities) and includes livestock, all materials, commodities and articles (including goods, as goods or in some other form) involved in the execution of a works contract or those goods to be used in the fitting out, improvement or repair of movable property, and all growing crops, grass or things attached to, or form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (f) 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 (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made.' 14. There can be no doubt that sale of goods can be taxed under Constitution of India, which would include tax on transfer of right to use any goods for any purpose. The price of such sale is to be taxed. 'goods' is defined under the KST Act which may be tangible or intangible. In the present case, the transfer of right to use brand name/ trade name would be intangible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2000] 119 STC 182 (SC) has, after considering article 366(29A)(d) of the Constitution of India, held that the said provision shows 'that levy of tax is not on use of goods but on transfer of right to use the goods. The right to use goods accrues only on account of transfer of right. In other words, right to use arises only on transfer of such right and unless there is transfer of right, the right to use does not arise.' Therefore, only when there is transfer of right to use the brand name/trade mark belonging to the assessee, without any restriction, then alone it could be a case of transfer of right to use the intangible goods, which would be the brand name/trade mark. However, if no such right to use is given to the manufacturer, it would not amount to transfer of right. 18. In the case of manufacture of beer, the amount paid towards 'brand franchise fees' is to the assessee, and admittedly the assessee, has not transferred any right to the manufacturer of beer to exploit the brand name for its own use. The manufacturers (CBUs) do not get effective control of the brand name for full commercial exploitation. As such, it cannot be considered as 'sale' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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