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TMI Blog2023 (9) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... f the right to use goods is distinct and separate from the transfer of goods. Thus, it has to be held that in a contract for the transfer of the right to use the goods, the taxable event is the execution of the contract for delivery of the goods, and if that has taken place, it was immaterial whether the transfer was exclusively or to the exclusion of all others. In the instant case, the transferee obtained a legal right to use the goods for the period during which he had such legal rights, which had to be to the exclusion of the transferor - the Tribunal has clearly gone wrong in law while dismissing the appeals preferred by the State. The order of the Tribunal impugned before us is set aside. Case remitted back to the assessing officer to consider the question afresh and pass a speaking order dealing with the contentions of the assessee. The questions of law are answered in favour of the State and against the assessee - revision disposed off. - HONOURABLE DR. JUSTICE A.K. JAYASANKARAN NAMBIAR AND HONOURABLE MR. JUSTICE MOHAMMED NIAS C.P. For the Petitioner : By Government Pleader Sri. Mohamed Rafiq For the Respondent : By Advs. K.V. Vimal, Jaikrishna R, Naray ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in Tata Consultancy Services v. State of Andhra Pradesh [(2005) 1 SCC 308] and also the decision of the High Court in Malabar Gold Pvt. Ltd. v. Commercial Tax Officer [2013 SCC Online Ker 1162] to hold that so as to attract liability on transfer of right to use the goods, the transfer did not have to be to the exclusion of all others and even in the absence of an element of exclusive transfer, a deemed sale could take place. The assesse also had a contention that they are paying service tax and service is rendered as per the provisions of the Central Finance Act and relied on the decision of the Supreme Court in Imagic Creative Pvt. Ltd. v. Commissioner of Commercial Taxes [(2008) 12 VST 371 (SC)] to state that VAT and service tax are mutually exclusive. With respect to the assessment year 2005-2006, the assessee contended that the assessment sought is completely barred by limitation by Finance Act 2010; as all assessments pending, including that for 2005-06, were to be completed on or before 31/3/2011 and therefore, the proposed assessment is well beyond the time. The said contentions were not accepted by the assessing authority. 4. In the first appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them, was done on a revocable licence that was not exclusive to the transferee. Thus, it was argued that there were no elements of a sale. It was also argued that they were paying service tax, and in view of the judgment in Imagic Creative Pvt. Ltd. (supra), which held that VAT and service tax are mutually exclusive, they cannot be made liable to pay sales tax. The Tribunal considered the question as to whether the transaction in issue amounts to a transfer of right to use goods under Section 6(1)(c) of the KVAT Act and, therefore, liable to tax under the said Act. The Tribunal found fault with the assessing authority stating that the analogy drawn by the assessing authority with trademark was wrong and that going by the judgment of the Division Bench in Malabar Gold, it has been held that there is no transfer as the assessing authority could not hold that the ringtone was given exclusively to the transferor. Further, they found that the assessee had only given the licence to use the goods, which is not a transfer of the right to use the goods. Taking the said view, the order of the Appellate Authority was confirmed, and the appeals preferred by the State were dismissed. 7. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as regards the requirements of a transaction to qualify as a deemed sale in cases of transfer of the right to use goods were listed out in the judgment in Quick Heal Technologies (supra), after referring to previous judgments of the Supreme Court, and the same is extracted hereunder:- 54. From the judicial decisions, the settled essential requirement of a transaction for the transfer of the right to use the goods are: 54.1. It is not the transfer of the property in goods, but it is the right to use the property in goods. 54.2. Article 366(29-A)(d) read with the latter part of clause (29-A) which uses the words, and such transfer, delivery or supply ... would indicate that the tax is not on the delivery of the goods used, but on the transfer of the right to use regardless of when or whether the goods are delivered for use subject to the condition that the goods should be in existence for use. 54.3. In the transaction for the transfer of the right to use goods, delivery of the goods is not a condition precedent, but the delivery of goods may be one of the elements of the transaction. 54.4. The effective or general control does not mean always physical c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stoms, was heavily relied on by this Court. It was held: (TCS case, SCC pp. 329-30, paras 27-29). 27. In our view, the term goods as used in Article 366(12) of the Constitution and as defined under the said Act is very wide and includes all types of movable properties, whether those properties be tangible or intangible. We are in complete agreement with the observations made by this Court in Associated Cement Companies. A software program may consist of various commands which enable the computer to perform a designated task. The copyright in that program may remain with the originator of the program. But the moment copies are made and marketed, it becomes goods, which are susceptible to sales tax. Even intellectual property, once it is put on to a media, whether it be in the form of books or canvas (in case of painting) or computer discs or cassettes, and marketed would become goods . We see no difference between a sale of a software program on a CD/floppy disc from a sale of music on a cassette/CD or a sale of a film on a video cassette/CD. In all such cases, the intellectual property has been incorporated on a media for purposes of transfer. Sale is not just of the med ..... X X X X Extracts X X X X X X X X Extracts X X X X
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